How a Tribe DAO Revote Shows the Flaws in DAO Governance

Back in April, a lending and borrowing protocol called Rari was hacked for approximately $80 million across seven different pools.

Called Fuse pools, they basically let anyone create a lending market for any asset and “spin up their own Compound,” according to Jai Bhavani, Rari’s former CEO. Compound Finance was one of the very first lending and borrowing markets in crypto.

It was a novel idea, but quite clearly full of risk.

Following the $80 million exploit, the communities involved came together to hash out a response. The three options that emerged revolved around whether to make affected users whole, not make users whole, or propose an alternative.

The issue was put to a vote on DAO voting platform Snapshot.

After the polls closed on May 16, the community had overwhelmingly voted in favor of reimbursing affected users, with roughly 34 million votes cast.

With the community’s wishes voiced and a direction established, the next steps were pretty clear, right?

Not quite.

A second vote on June 12 vetoed the initial proposal to reimburse the hacked funds.

Jack Longarzo, a member of Rari and key contributor to the Tribe DAO, argued that the original May vote was unclear “about how that repayment would be implemented.” (Tribe DAO is the result of the merging of the Rari and Fei protocols in December.)

Roughly a week later, a third vote was cast, essentially asking the same question: Should the community repay victims of the Fuse hack? This time around, the community strongly voted against the idea.

Naturally, the revote has sparked some hefty criticism with so much money on the table.

“There’s CeFi drama stuff, but this is a new low for DeFi,” tweeted Frax Finance founder Sam Kazemian. Frax was an early backer of Fei and Rari, and also lost roughly $13 million in the hack.

What’s more, it appears that there was plenty of money to give victims a full payout. Kazemian cited additional data referenced during discussions that showed that the project would have plenty of money (and then some) to repay victims entirely.

It’s certainly complicated. But drama aside, there’s another clear victim here: DAO governance.

By overturning the initial will of the community in that initial May vote, the Tribe DAO leadership has essentially said “your first votes don’t count, because you didn’t vote for the outcome we want.”

And besides the reputational damage to these individuals in leadership positions—which, admittedly, is worth its weight in digital gold in this industry—there is very little recourse for the community members.

What can you do when you find out your vote doesn’t count?