On July 28, 2020, Synthetix, a prominent project in the decentralized finance (DeFi) sphere, announced that the ecosystem will now be formally governed by three decentralized autonomous organizations (DAOs).
The move by Synthetix that finally concludes the process of transitioning to a decentralized protocol, marks a very important milestone for the project in a road that commenced way back in 2018.
Last year, the company stated that they intended to become a case study for how cryptocurrency projects could successfully transition control from a core centralized group to token holder governance.
“We have worked hard to implement this transition, and with the help of a number of projects in the space and our community, we are pleased to be taking this next step towards token holder governance.” the Synthetix team noted.
Today’s announcement seems to have brought much-needed confidence back into the Synthetix community, as the protocol’s native token (SNX) surged by about 6% following the news.
Dissolving the Synthetix Foundation
From now onwards, the SNX network will be run by three DAOs: the protocolDAO, the grantsDAO, and the synthetixDAO. These DAO protocol control upgrades to the system and its actual configuration.
The grantsDAO operates as the body that finances public goods within the SNX protocol. SynthetixDAO, on the other hand, manages and deploys funds to product contributors and others involved in system development.
The protocolDAO features a multi-signature apparatus that regulates the implementation of proposed developments to the ecosystem via external oracles that authenticate real-time data. The protocol also computes various settings for hypothetical attacks to deter users or groups from corrupting SNX processes.
The community-powered grantsDAO will function as an economic catalyst that distributes rewards to the authors of positive Synthetix Improvement Proposals (SIPs), without relying on other parts of the system to advance the degree of SNX decentralization.
Synthetix Shows Trust in Decentralized Ecosystems
Taking control of the SNX ecosystem from the hands of the Synthetix Foundation is a significant step for the DeFi ecosystem in general.
After the notorious DAO hack in 2016, decentralized autonomous organizations were generally shunned by the crypto community. However, the remarkable explosion of the DeFi sector in the past twelve months has apparently brought DAOs back into the limelight.
According to Synthetix’s announcement, several ground-breaking security appliances have been integrated into the protocolDAO that will enable members of the protocol to pause the entire system to respond to a hack or bug, but only temporarily.