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The rights protection-style buy-in, Bear Market's profit strategy has reached a new height of internal circulation.

Author: 0x26

In the crypto world of 17, what is the main way for retail investors to safeguard their rights when the project behavior does not match the contract or commitment?

The relationship, the police, the rights protection group, the dichlorvos, and the team's conscience.

However, since experiencing the Decentralized Finance Summer, governance tokens have become the primary use case for new issuance tokens in the crypto market, riding the bull market trend and accompanied by the rise of DAO concepts. What is the actual situation of governance? Each participant has their own answer.

Interestingly, in the Bear Market, with the continuous low price and community activity, a trend of 'acquisition-style' governance using the RFV (risk free value) strategy has begun to emerge.

Rook relies on dissolution proposal big pump

Everything about Rook's recent outbreak started with a proposal worth $6.1 million.

The Rook core team submitted a salary proposal to the governance forum. The proposal has sparked dissatisfaction within the community. The community believes that, considering the team's previous actions and the current market background, the team should not receive such a high incentive.

Coincidentally, prior to this, some community users have been following Rook based on the RFV strategy. With the dissatisfaction caused by the Rook team, the clever community member Wismerhill started a governance counterattack on March 22. He carefully listed the reasons for dissolving the Rook DAO, including:

• Mismatched interests between project team and DAO community;
• The team has the right to reject all unfavorable proposals from the community;
• In the case of a sharp decline in Tokenvolume and slow product development, 22 community members need to take a compensation of $6.1 million from the treasury, of which only 10% is ROOK Token, and the rest is mainly stablecoins;
• The community treasury holds about 44 million US dollars in Token, but the current TokenMarket Cap of ROOK is only 10 million US dollars, mainly due to the team's inaction.

Therefore, the proposal calls for the dissolution of Rook DAO and the proportional distribution of the treasury to ROOK Token holders, with each Token receiving compensation of approximately $54.9. At this time, the price of its Token ROOK is only around $13.

After multiple debates over the course of three weeks, the community and developers finally reached a preliminary protocol around April 5th, during which the price of ROOK also experienced a noticeable rise. Ultimately, the 'freedom' movement initiated by Rook DAO holders was declared successful as the core proposal for the establishment of the RFV entity Incubator DAO was approved. Incubator DAO indicated that Tokenholders can unlock their ownership of the treasury, while the Rook Labs team can continue with their project without bearing the burden of worthless governance tokens.

From the community's buyback proposal on March 22nd to the final approval of the DAO proposal, ROOK has increased by about 230%. At the time of writing this article, the increase is 329%, reflecting the value of the treasury in the ROOK Token.

What is the RFV strategy?

RF stands for 'risk free', while RFV stands for 'risk free value'. According to the actual situation in the industry, the RFV strategy can be simply understood as: when the project treasury is not limited to its own Token, and the treasury's market capitalization is significantly higher than the project Token's market capitalization, the use of the treasury funds can be decided through governance proposals. These uses mainly include: direct token repurchase, dividend distribution, or project dissolution.

This governance-style purchase is not new on Wall Street. Carl Icahn was among the first activist shareholders, and established his reputation as a master of hostile acquisition through the shocking global aviation acquisition and asset divestiture event in 1985. Throughout his career, he has never given up using hostile acquisition methods.

Although the market has mixed opinions about his actions, his behavior has indeed improved the capital efficiency of some companies and dealt a blow to the management of some companies who are just going through the motions. Fortune magazine once praised him as 'he may have made more money for shareholders than any other activist investor on this planet'.

Following the malicious acquisition event by Carl Icahn, Hollywood once created the classic movie 'Wall Street'. In the film, Michael Douglas' character uttered the iconic line: 'Greed is good. Greed is right. Greed works.'

In the crypto world, when it comes to the application scenarios of the RFV strategy, it is generally aimed at projects that have raised large amounts of public funding and can be truly governed. Users can query the project's treasury situation through Token Terminal.

Failure is the norm

If you think that retail investor in the Secondary Market can easily dissolve a project using governance Token, or make the protocol return funds. Then you are totally wrong.

As encryptionSeasoned Trader who delves deep into each potential project, focuses on project progress and governance proposals, RFV hunters are just losing more and winning less. The main reasons include: the founding team does not recognize DAO, turning DAO funds into their own "treasury"; the founding team gains absolute control through various implicit conditions; and evades proposals for various reasons (such as legal reasons).

Solana lending and stablecoin issuance platform Parrot raised over 69 million during Solana Summer, with the community treasury reaching a total of 85 million US dollars, far exceeding its TokenMarket Cap. An introduction from CM (9,5) showed us why profiting from RFV cannot succeed on Parrot:

• In the past year and a half, the project has lost 8 million dollars due to bad debts, poor investments, and Hacker attacks;
• The co-founders will also invest 10 million in the multi-signature Wallet of ETH, but the team not only refuses to disclose the specific details of the transfer of this amount as an investment, but also does not want to disclose the Address of this multi-signature.
• Founder bought a large amount using the treasury at a high price of ETH without approval from DAO;
• On April 2, transferred $300,000 without the knowledge of the community.

At the same time, communication between team members and the founder is also very difficult. They only have one hour of communication time per week, and all actions need to be instructed by the founder. This has led to an absolute disconnect between the community treasury and Token price. It can be said that the community funds are completely at the founder's disposal. Similarly, the Olympus fork project Hector from Fantom on-chain is also facing the same situation.

The most controversial RFV governance event recently is the attempt by Aragon to transfer governance rights. Considering Aragon's historical status, Token Market Cap, and the activity in the DAO field, this has attracted widespread attention. Not only did all the mentioned RFV hunters appear, but also a proposal led by the well-known asset management institution Arca was launched, which mainly provides funds to Token holders based on RFV.

Aragon is a DAO governance pioneer project started in 2017. Its initial response was to blacklist the relevant proposers and active users, attempting to transfer governance rights from Token and suspecting itself of being under a 51% attack by the RFV organization.

For the overreaction of the project party, some community users describe it as: Arca and some other ANT Token holders walked into Aragon with a note saying "We are considering withdrawing $80", and the response from the Aragon bank teller was to sound the alarm, steal money from the vault, set fire to the bank, and threaten to open a new bank in a new country, but the original clients cannot access it.

Aragon's announcement has sparked strong dissatisfaction within the community. As a result, Aragon had to issue a further statement to demonstrate its fundamental principles guided by DAO organization and lift all bans to appease the community, and has engaged in further communication with all parties. Furthermore, Aragon founder Luis Cuende has also released a preliminary proposal for a $30 million buyback, and the community is in close communication.

Governance Myth

Ironically, projects that can use the rfv strategy are considered 'conscience' projects in some cases. Compared to well-known projects like Rook and Aragon, the market is filled with projects that have already disappeared, as well as teams that tightly control the community treasury, gradually consuming funds in one way or another, and many users are no longer surprised.

Not defending rights naturally leads to a happy situation for everyone, and it is only natural for the project party to focus on development without following the price. But when necessary, is the team willing to fulfill their past promises, and regard the governance token as important, or as worthless?

No industry or startup company can guarantee 100% success. When a project fails, how the team can balance the interests of all parties and gracefully let go is something that the industry should actively explore in the current market situation. It is obvious that tokens have brought huge wealth to various project parties, but the accompanying responsibilities are rarely mentioned. A large number of homogeneous projects are being launched in batches during the bull market, and after multiple rounds of market baptism, it is obvious whether it is worth continuing to operate. It is regrettable that the governance token born from this has little say in the major development direction of the project.

Whether you are a degen who rushes without asking for the source, or a rational buyer. How to ensure that the team can continue to implement the roadmap after financing, listing, and getting rich, and fulfill the promises made when releasing Token, instead of facing the sea in spring, or starting over? What should users in the Secondary Market rely on to maintain their legitimate rights?

At present, for the unarmed retail investor in the Secondary Market, whether in terms of the number of Tokens or personal influence, it may not be the best choice to emulate Carl Icahn by exercising 'rights' through governance.

During the dissolution of Rook, community members left messages on 0xWismerhill's Twitter. I wonder if it can represent the true voice of the governance token holders?

Reference:

Aragon Open Letter

「That』s Our 2 Satoshis」 —DAO Dilemmas: Unraveling Aragon's Governance Controversy

Aragon Association Takes Action to Safeguard the Mission of the Aragon Project and its Community of Builders

Carl Icahn Wikimedia

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