Venture capital giant Andreessen Horowitz (a16z) is not on board with the founder’s vision to break up MakerDAO, one of crypto’s largest decentralized finance protocols, into smaller units.
A16z, an investor in Maker with power to sway votes in decision-making, laid out its own vision for the protocol’s path forward, pushing back against some arguments of MakerDAO founder Rune Christensen’s “Endgame” manifesto on how to make Maker more decentralized and censorship resistant.
Maker is a cornerstone of decentralized finance, where users withdraw and lend crypto in an automated manner. It also issues DAI, the $6 billion decentralized stablecoin backed by some $7.8 billion in assets locked up by investors.
As a decentralized autonomous organization (DAO), the platform is governed by blockchain-based codes and votes by maker (MKR) token holders, who discuss all proposals and decisions in the protocol’s forum. A16z owns a significant amount of MKR tokens as an investor and therefore boasts voting power and influence on which proposals will eventually gain approval.
Ongoing debate
The platform is in the middle of a makeover, and the debate between proponents of prioritizing decentralization versus boosting growth touches on a fundamental dilemma for cryptocurrency protocols.
"Currently, MakerDAO is wrestling with the trade-offs between growing the protocol or hardening it against regulatory risks,” Dustin Teander, an analyst at crypto intelligence platform Messari, told CoinDesk. “Decentralization has to play a part, of course, but a small, decentralized product doesn't actually solve the market problem for the people that need it."
Read more: Is MakerDAO Becoming ‘a Company Run by Politics’?
The note, authored by Porter Smith, a partner at a16z, advocates for changes that would improve decentralization without impeding growth and comply with the current legal and regulatory environment. This includes improving the current system based on Core Units, instead of breaking up the protocol’s governance structure into smaller units called MetaDAOs.
“The Core Unit structure is arguably already legally decentralized,” Smith wrote. “Introducing MetaDAOs likely does not change this analysis, nor lead to more organizational resiliency from a strictly legal perspective.”
The note said a16z would support “experimentation through smaller, self-contained proposals to get a baseline for how proposed changes might work (or not) in practice.”
“Maybe experimenting with one MetaDAO (or one per type), iterating, and then rolling out an organizational change with real data and live experience could strike the balance here,” Smith wrote in a comment on the forum.