To Ban, or Not To Ban a Whale ($100 million on the line) - The Governance Vote To Seize a Whale's Crypto Assets (Juno)

By CryptoCelt97 | Other | 13 Mar 2022


 

Recently, there's been some big drama surrounding the Juno network - which is a sovereign public blockchain in the Cosmos ecosystem. 

Juno is self-described as a community-driven initiative, that serves as the world's first permission-less, designated interoperable smart contract network. It was initially distributed as an airdrop to Atom (Cosmos) stakers, on a 1:1 ratio. To maintain the integrity of the chain as being community-driven, there was a hard cap of 50 thousand Atom for the airdrop. 

Unfortunately, this is where the drama comes into play which has led to the most recent and controversial governance vote. Some blockchains detectives discovered that one address had split his Atom into 50 different wallets, and then sent all the Juno into a single wallet. This whale managed to amass 2.5 million Juno - which amounts to almost $100 million dollars! 

Therefore, this whale owns a massive amount of the network and can greatly affect the voting and price of Juno. Criticisms include that this has increased centralization, and there has been evidence of consistent dumping of the Juno by the whale. The community is angry since they believe this whale gamed the system to make an incredible amount of money, and now cashing out using those gamed funds and could dump their whole bag and crash the price. They believe that the whale gamed, and essentially stole 2.5 million Juno from the community and are now holding the following controversial governance poll;

Proposal #16 - Correcting the gamed stakedrop

This vote proposes to reduce the amount of Juno in the whale's address to 50k Juno - which was the cap in the initial drop. Essentially, they want to seize the whale's assets, who they believe is a malicious actor to the network. If it passes, the funds will be re-distributed and sent to the Juno community pool; 

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With the team claiming the risks of not seizing his assets being;

* High risk to on-chain governance (already has half of quorum)

* Potential of buying validators with delegations in order to bribe them away from acting

* Whale gamer can single handedly wipe out the entire DEX liquidity in 10 min or less (Should his funds be unbonded)

* Fear in the community on a daily basis

Though, as you can imagine, this proposal has split the community since many think that the principle of seizing a user's crypto is not a very good one to set and is very unethical.  What's stopping the masses from having another vote against a different whale? It could set a bad precedent of which hunts.

On the other hand, advocates of the vote state that it's a necessity to secure the network and have dived into the background of the whale...

 

Who is the Whale?

The story gets even more interesting when looking into who this whale is - they're a Japanese investing firm called DEBO, who runs the 'GAME' validator throughout the Cosmos ecosystem. They started investing their clients' funds into Atom back in 2020, and have a portfolio of at least $100 million in it. So, the Juno is actually held on behalf of many clients by DEBO (so they claim), meaning the confiscated assets would be from many different investors. The Whale actually spoke out, and wrote the following in-depth reply to the allegations;

https://medium.com/@WhaleJuno/our-statement-on-juno-prop-16-5a06b26e6cff 

It's a pretty long read, but very interesting. Some of their main points of defence are;

  • Assets are held on behalf of clients, and not individually;
  • The bad precedent it would set for other whales;
  • Refutes being a ponzi;
  • They didn't purposely game the drop.

As mentioned, there are rumours that they are running a ponzi scheme. They claim that they simply have an affiliate program, but DEBO certainly are dubious. They have also been accused of seed farming and have actively been banned as a validator from some other airdrops. So, they definitely don't seem like a 100% innocent party.

 

Did they actually game the drop?

Initially, the consensus was that the whale intentionally gamed the drop since they had split their wallets in a seemingly strategic way. Suggesting that they had insider knowledge of the upcoming Juno drop, which would have been very problematic and was one of the driving reasons behind the vote.

But, an article came out recently that suggests that DEBO didn't intentionally game the drop and have always held their millions of cosmos across multiple wallets;

https://jabbey-io.medium.com/game-ing-stakedrops-d02a826ff791 

With no seemingly foul play to blame, the vote to seize their assets falls on weaker legs in my opinion.

They didn't change their behavior to purposely game the drop, but they still benefited unfairly so many are still voting 'yes'.

There's also evidence that the Juno team retroactively changed the wording for the rules of the drop. Initially, it stated that there was a cap of 50k for each wallet. After news of the whale came out, they changed the wording to a 50k cap for a single entity. So, despite it being arguably very unfair to split their wallet to maximize the drop, it technically wasn't against the rules at the time. 

They're retroactively applying and enforcing the new rules for the whale, which again seems unfair. 

But, as mentioned, even if they didn't intentionally game the airdrop - they still benefited unfairly from it. And, at the end of the day, this whale didn't buy the Juno but was given it all for free. So, it's not like the vote is stealing any investment.

 

The Dilemma

Generally speaking, this is a very complicated situation where there doesn't seem to be a truly good resolution.

On the one hand, it could be healthy to get rid of the whale who could be a malicious and unethical actor who benefited massively and could harm the network - but does this mean that the masses should have the power to simply liquidate most of their holdings? Isn't that against the ideals of decentralization and the idea that your wallet and tokens should be safe from interference and confiscation. 

It seems to set a bad precedent that's against the ideals of crypto, that the masses can decide to take someone's funds through a vote. There's a lot of misinformation and misunderstandings, who's to say that votes like these can't be manipulated to serve ulterior motives. 

Ultimately, I don't think it's fair that this whale benefited this much from the airdrop, and it seems unhealthy for the network for this whale to hold so much sway over its future. And the intentions of the airdrop certainly wasn't for one person to get that much Juno, despite the wording initially saying each wallet. But, at the same time - mob rule and the seizure of assets doesn't feel right. So, it ends up being a very complicated situation where it seems like there's no good resolution. 

 

There's a lot of information and misinformation surrounding this, and 100 million on the line. So, I'm sure I've missed some information and people are free to agree/disagree with some of the points. I can understand both the people who vote 'yes' or 'no' to the seizure. 

The vote ends in a few days and will have some interesting implications whatever happens, not only within the Juno network but perhaps on DAOs and governance votes across other blockchains. 

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