Decrypting DeFi is Decrypt’s DeFi email newsletter. (art: Grant Kempster)
One of the more interesting considerations in the world of crypto—one championed as a bastion of transparency and open-source code—is whether a decentralized platform qualifies as a public good.
If it’s a public good, then the service should be open to anyone and everyone. What’s more, using such a service doesn’t make it scarcer for others, and, usually, a public good is beneficial to just about everyone. Examples include clean air or the Internet.
The opposite of a public good is, well, a private good: a slice of pizza from the Italian restaurant on your corner or a ticket to the movies. You have to pay for that. There are only so many pizza slices and tickets to “Top Gun.”
In crypto, specifically DeFi, this distinction is a bit less clear.
Lido turns down Terra
Take, for instance, Lido Finance’s recent move not to host the new Terra chain.
“Following a discussion on the launch of Lido on Terra v2, the Lido DAO has voted to NOT support the Terra reboot,” the project tweeted on Wednesday. Here’s a link to that discussion.
Lido offers a staking service for several proof-of-stake (PoS) blockchains like Solana, Ethereum, Polygon, and, formerly, Terra. Anyone with an Internet connection can use it, and the networks that have integrated with Lido also enjoy more stakers (and thus more security).
Right now, for example, the platform promises a rate anywhere between 4% and 22.6% for staking with the service. Those yields are paid out in native staked tokens too, meaning you can earn 4% in ETH rather than a dumpy altcoin.
Anyway, the platform delisted Terra amid its implosion and has now voted not to re-integrate upon its reboot.
It has blocked access to its platform, or rather the Lido community has voted to block the relaunch.
Now, does this mean that Lido Finance is or isn’t a public good? Well, it depends on how you look at it.
Cui bono?
Most public goods, like water fountains and parks, are paid for by tax dollars from local citizens. But they can be enjoyed by anyone, even tourists from other countries. You might not be a LDO tokenholder, Lido’s native governance token, but you can certainly enjoy its staking service.
So, who pays for Lido? Users, of course.
The platform takes 10% of your staking rewards and divvies them up between node operators (i.e. those Solana and Ethereum validators running machines 24/7 to keep Lido up and running), the project’s DAO, and the project’s insurance fund.
Now, if those tourists who enjoy public goods wish to help enact changes, well, they’ll need to expatriate. And in crypto terms, in this case, that means scooping up LDO tokens and joining the project’s DAO, because while anyone could join the informal discussion on the Terra vote, only LDO holders could vote on it via Snapshot.
In this arrangement, you have all the components of a public good: a service available to (mostly) everyone that arguably serves a greater good (keeping PoS-based crypto networks secure) and is maintained by “taxes.”
Perhaps crypto is private money, but the internet economies it engenders look a whole lot more like national parks.
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