# Democracy, Governance & Attack Vectors Workshop Pre-Reading **URL:** \ **Category:** Governance\ **Created:** [3 September 2021 11:05 UTC](https://gov.indexcoop.com/t/democracy-governance-attack-vectors-workshop-pre-reading/2556 "2021-09-03T11:05:08Z")\ **Posts on this page:** 1\ **Showing post:** 2
**Author:** ![Thomas\_Hepner](https://yyz1.discourse-cdn.com/flex027/user_avatar/gov.indexcoop.com/thomas_hepner/32/111_2.png) [@Thomas\_Hepner](https://gov.indexcoop.com/u/Thomas_Hepner)\ **Post date:** [4 September 2021 18:03 UTC](https://gov.indexcoop.com/t/democracy-governance-attack-vectors-workshop-pre-reading/2556/2 "2021-09-04T18:03:23Z")
@afromac and team - thank you for putting this together! I’m excited for the first workshop on this topic. I am going to leave some high-level thoughts and questions on the topic. Firstly, I would amend this bullet: > [@afromac](#): > > - Unfavourable tokenomics has created a system that is extremely vulnerable to capture. **Amendment:** Set Labs and DFP have both hard and soft power over Index Coop by design from launch with the goal of progressively decentralizing over time. Regardless, the present state is control by two legal entities. See my comment [here](https://gov.indexcoop.com/t/is-it-time-to-stop-using-external-methodologists-for-new-products/1978/8) for more detail. This details of that analysis have changed somewhat after the investor sale, but the overall conclusion is still the same. I would also amend this bullet. > [@afromac](#): > > - Too little of our governance happens on-chain, and this creates a roadblock towards true decentralization in the future. **Amendment:** _Too much of our governance happens on-chain._ It is crazy that [hiring, strategy, product, and mechanism design decisions](https://twitter.com/hasufl/status/1432339386176315396?s=20) are subject to a democratic vote of tokenholders. In my view, one of the primary reasons Index Coop is the market leader for decentralized indices/ETFs is because of _governance minimization_. Unlike Indexed.Finance, PieDAO, PowerPool, etc. the token weights within our products are determined by a single accountable entity, a Methodologist, rather than a democratic vote of tokenholders. **Overall View on Index Cooperative Governance:** When I first joined Index Cooperative, and sought to become a Methodologist, I viewed it as a _true cooperative of methodologists._ I have learned in the past 10 months that this is an aspirational goal, not a present reality. _Index Cooperative succeeds or fails by the quantity and quality of the methodologists it attracts and retains to build the best decentralized indices/ETFs in crypto._ **As a Methodologist, why do I choose to build and launch a product with Index Cooperative instead of somewhere else? Why is a Methodologist willing to give up some portion of their product’s revenue instead of keeping 100% for themselves?** From my perspective, it boils down to the just 3 reasons: **1. Distribution from Community:** Get preliminary data on product-market-fit from contributors and _direct distribution to a large community of crypto index investors._ **2. Rebalancing-as-a-Service (i.e. [Control as Liability](https://vitalik.ca/general/2019/05/09/control_as_liability.html)):** _Methodologists are solely data providers._ They determine which tokens are included or excluded as well as the token weights for their product, but do not have [custody or access control](https://twitter.com/hasufl/status/1432329852347158529) so are not liable for product failure (i.e. funds being drained) or regulatory risk (i.e. methodologist is not a custodian). **3. Protocol-level Engineering Enhancements:** Engineering work on various feature enhancements (i.e mint & redeem fees, intrinsic productivity, etc.) benefit more than just a single Methodologist’s product. Cost and benefits of engineering enhancements are spread across Methodologists and their products. **TL;DR: Index Cooperative mechanism design should seek to minimize and delegate governance decisions to facilitate onboarding and retaining Methodologists and their products.** **CC: Leadership and Working Group Accountability Group:** @Metfanmike, @anon10525910, @mel.eth , @LemonadeAlpha , @jcooper **Resources:** - [Hasu - I Don’t Believe in Decentralized Governance for DeFi](https://twitter.com/hasufl/status/1432329852347158529) - [Scott Lewis Response to Hasu](https://twitter.com/scott_lew_is/status/1432339101655748612?s=20) - [Naval: Republics \> Democracies](https://twitter.com/naval/status/1434001756564774912?s=20) - [Vitalik: Control as Liability](https://vitalik.ca/general/2019/05/09/control_as_liability.html) - [Thomas: INDEX Governance Centralization Analysis](https://gov.indexcoop.com/t/is-it-time-to-stop-using-external-methodologists-for-new-products/1978/8) - [Vitalik: Moving Beyond Coin Voting Governance](https://vitalik.ca/general/2021/08/16/voting3.html) --- _[View the full topic](https://gov.indexcoop.com/t/democracy-governance-attack-vectors-workshop-pre-reading/2556)._