This is What Shareholder Voting in Crypto May Look Like

Hello defiers and happy Friday :) Here’s what’s happening in decentralized finance:

• Anchorage launches platform for institutions to participate in on-chain governance
• Compound Finance takes steps to reduce centralization
• Aave launches on testnet with DeFi’s first attempt at uncollateralized loans

Institutions are Coming to the MakerDAO Voting Booth

Anchorage, a digital asset custody firm, yesterday unveiled a governance platform for its institutional clients and MakerDAO’s MKR is the first token it supports.

It promises to combine the accessibility of hot storage with the security of cold storage to incentivize institutions to participate in on-chain governance. Currently only about 5 percent of MKR holders join weekly votes on interest rate moves. The goal is to push that number up by making it safer for crypto funds to vote, as the'y’re probably the biggest token holders, or “whales.”

On-chain voting usually requires that investors hold tokens in hot storage (online), rather than in safer, cold storage (offline). Anchorage uses something in between those two options called “hardware security modules,” or HSMs, which hold private keys securely, but can use those keys to sign and approve transactions.

The firm’s innovation is to require a quorum from its clients before it can sign transactions for them. This is to avoid approving malicious transactions and also to make sure it’s voting according to what the client wants, not to what one single employee wants.

Institutional MKR token holders a16z and Polychain Capital are among Anchorage’s clients. The company’s statement said,

Given Anchorage clients’ significant Maker holdings, we expect this new feature to have a meaningful impact on future voter turnout.

Not having a say on key decisions such as interest rate moves (which impact token supply) because of security concerns should be a big drawback for any investor. It’s like being a major shareholder, but too scared to participate in the company’s decisions. If Anchorage eases those concerns then it’s a big deal for Maker and other platforms with on-chain governance.

[Also, read about the debate for token holders to delegate votes, here.]

The MakerDAO community was recently discussing the possibility of adding so-called “non-trustless assets” as collateral to increase liquidity and make Dai more stable by increasing diversification. Non-trustless assets, for example, fiat-backed stablecoins and stocks, are those where third parties are required to custody and verify holders.

Non-trustless assets would strengthen Maker’s ties with traditional finance, and a governance platform to facilitate participation from institutions has the potential to do this too.

Compound Upgrades to Reduce Admin Control

There’s more governance related news. Compound Finance, the second-biggest DeFi platform, announced upgrades aimed at reducing the administrator’s ability to make rapid changes to the protocol.

Aave Lending Protocol Launches on Testnet

Aave lending protocol launched on a public Ethereum testnet with features such as short-term uncollateralized loans that differentiate it from other DeFi lending platforms.

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About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.