Ethfinex (Diversefi)

Decentralized Cryptoasset Exchange

Decentralized cryptoasset exchange.

Purpose of governance system:

  • Token acceptance to the Ethfinex exchange (2019, this is the decentralized governance system discussed below)

  • Nectar 2.0 DAO (in development) Management of the Deversifi funds and the code for the exchange still under development

Technology used

  • Communication: Telegram, discussions within Kleros

  • Debate: Kleros

  • Voting: Proprietary web 2 system using a voting-only token that was airdropped based on NEC tokens. Login through metamask.

  • Reputation/ weighted voting: Based on holdings of NEC token, airdrop of voting tokens (1 token 1 vote).

Reason we chose that technology

Governed objects and mechanisms

For 14 rounds of token listings, Ethfinex created a discussion/debated process to determine whether a token could be listed on the exchange.

Ethfinex team listed 20 criteria for listing.

  • Token issuers applied with their proofs or documents that they met the criteria.

  • Any community member (trader) could attest for or dispute the claim of the tokens.

  • Debate went for a fixed period, then there was vote. Voting was anonymous and based a one-token-one-vote system for Nectar holders.

Unlike all the other DAOs in this study, the focus of the EthFinex system was on the debate and proposal process, rather than the voting. Voting was a small part of the process and the democratic process was mostly implemented through the rich discussion and presentation of facts and arguments regarding the credibility of the tokens and the claims made. One of the interesting side effects was that this process actually was able to improve the quality of the tokens themselves. In one case, a token was rejected in one round and the team worked to improve their product. In other words, the democratic process chosen by EthFinex didn’t just provide a yes/no decision; it provided a basis upon which the industry as a whole was able to mature and provide better technology.

Findings

  • The community participated mostly based on feeling a sense of belonging and ability to influence. Although there were some rewards based on votes for listings, the main motivation seemed to be the desire of the participants to have power in creating their platform.

  • Outstanding participation: 68.7% token turnout for votes.

Nectar 2.0: Fully decentralized system.

DeversiFi (formerly EthFinex), based on the success of this system, will be moving to a fully decentralized organization over the next 2 years.

  • System for distribution of funds to be built on DAOstack

  • 50% of the trading fees from the last 2 years of the exchange are to be managed by the community. Initial holdings are $3.7MM held in ETH

  • necDAO will create a mission statement. Funds can be used for whatever the community decides: platform development, marketing, new features, bounties, competitions, etc.

  • The decentralized exchange will continue to function, continuously providing funding in trading fees into the necDAO

Researcher’s note: Over the course of the interviews, the Deversifi team stood out as a true pioneer in going from a centralized to a fully decentralized system. Currently, all other organizations have stuck primarily with the governance systems that were initially created. While the promise to become more decentralized over time, Deversifi is the first to actually do so. This is not the first or largest release of funds for community management (DASH and Aragon have notably released millions of dollars to the community’s discretion). However, it is the first example (please update the wiki if you know of others) where an founders group has released control of the project to the community.