Why NFT Governance?

There are lots of problems existing in token governance as discussed in "Moving beyond coin voting governance" by Vitalik. The most serious problem originates from the excessive liquidity of ERC-20 tokens. If the governance tokens of DAO are in ERC-20 standard, then the attackers can swap it from DEX, borrow it from Lending protocols like Compound, or even synthesize it using Synthetix. The cost of attacking DAO can be calculated and it is much cheaper compared to the profit if the decision is important for the DAO.

The blog proposed by Vitalik contains three solutions: “limited governance”, “non-coin-driven governance”, and “skin in the game”. The first solution is temporary because we should not give up eating for fear of choking. The second and third solutions point to NFT governance.

The NFT governance provides less liquidity and more flexibility. It’s hard to establish reality identity in the blockchain system, but various NFTs can be used to establish the identity system.