Ethereum Community Conference 5: How can DAOs fight against hostile takeovers?

Web3 Advisor Hilary Kivitz discussed countermeasures DAOs can use against hostile takeovers during her EthCC keynote 5.

At the Ethereum 5 Community Conference in Paris, France, a presenter explored Decentralized Autonomous Organizations (DAOs) and the countermeasures they could use against hostile takeovers.

Hilary Kivitz, Web3 Advisor and former partner at a16z crypto, discussed hedging concepts in traditional finance that can potentially be applied within DAOs to help combat the growing risk of hostile takeovers.

Within the governance of the DAO, Kivitz argued that there are risks, including vote buying to control votes so that attackers can exploit the DAO. According to Kivitz, these can allow exploiters to plunder DAO treasuries and take their locked assets. She also shed some light on the empty vote, explaining:

"The mechanics are that the exporter would borrow the token, run the vote, and pay the token back the loan on the token."

Because of these risks, Kivitz noted that the traditional financial toolkits used to combat these risks can also be applied in the context of Web3. One of the solutions she presented is "poison pills", a mechanism in traditional finance that can increase the cost of acquisition and discourage hostile takeover attempts.

Kivitz said these poison pills could be embedded in smart contracts and governance documents so they cannot be removed by a vote. It could "create massive dilution for the exploiter," she said.

Besides poison pills, the speaker also talked about vote reduction. With this, limits on voting power will be given to holders regardless of how much they own within the network. This ensures that the vote will be fair for other holders with lower ownership.

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