Presently Maker governance is modeled on the role of shareholders in a private company. The MKR token is similar to a share, and with this you are allowed to participate in Maker governance voting, similar to the use of shares during the annual shareholders gathering.
This was the theory back when Maker was conceived, but experience has shown us that Maker governance does not correspond to this model. There are two major differences.
First difference - tokens have more use cases compared to shares
Shares used for voting are registered in a company share registry. You as a shareholder are listed and you vote with your listed shares, but what you actually do with your shares is up to you. This means you may hold or trade your shares and still vote with them, as it is the company share registry that matters, not your Etrade account.
MKR tokens are different, there is no registry you vote with what you have in the governance contract. The downside is that since MKR has several other use cases, some of which are quite profitable, this creates a competition for tokens and the token holder’s attention.
In addition to passive holding and governance there is also competition from market making, defi participation and active trading.
Holding - just buy and hold. The vast majority of MKR is in this position.
Market making - this can be attractive option as the MKR token has a tendency to vary in price from DAI 400 to DAI 800, practically no matter the internal or external circumstances. Mental effort is low, profit quite good.
DeFi participation - this option was not even on the drawing board when Maker was conceived. Mental effort is low to medium depending how hard you want to farm. Last time I checked MKR-WETH on Uniswap it had 18.4% annual return.
Active trading - nothing beats active trading. Picking up some MKR in the post Black Thursday fire sale and netted a nice 100% profit. The mental effort is however very high.
And finally Maker governance - high mental effort, significant weekly workload and 0% annual return. Basically hard work for free. Especially when compared to the DeFi choices available it is basically a small miracle there is any MKR voting. If Maker ever found itself in the situation where the efforts of the founders and one handful of diehards and early investors needed replacement, the entire Maker project could potentially be in danger of abandonment.
Second difference - the MKR lifestyle
In the above table there is a comparison of the respective situation of a shareholder versus a MKR holder. As you may have noticed the only similarity is that none of them are compensated for their effort. The similarities end there, otherwise every aspect of their situation is different. Fully submerged participation in Maker governance is in late 2020 very similar to being on the management team of a startup company. There is enormous energy, vast promise and interesting people, but also the feeling that Hell has fewer fires to put out.
I will hereby argue that change is needed.
Some notes on this article:
This is not a MIP.
It is not a pre-MIP or a poll.
I am not proposing anything.
It is a description of the as-is situation.