Introduction

In the physical world, buying votes is illegal. In DeFi, it is a Business Model.

Governance Tokens are not “Stock”. They are Utility Keys that control the “Money Printer” (Emissions). Therefore, the value of a Governance Token is the Net Present Value (NPV) of all future bribes and extracted value. This lesson explores the cold, hard physics of Plutocracy.

---

The Physics: Vote Buying (Bribes)

Why is the CRV token valuable? Because it controls which pool gets the reward inflation. If I own a Stablecoin protocol, I must buy CRV votes to direct rewards to my pool.

The Physics: It is an Auction.

• Bid: I offer $1 in Bribes.
• Ask: You vote for my pool.
• Outcome: My pool gets $2 in Emissions.
• Profit: $1.

Platforms like Votium and Hidden Hand automate this market. It is not corruption; it is Efficiency.

---

Deep Dive: Governance Extractable Value (GEV)

MEV is extracted by validators. GEV is extracted by Voters.

The Mechanism: A large holder (Whale) proposes to allocate 50% of the Treasury to “Marketing”. The “Marketing Agency” happens to be owned by the Whale. They vote “Yes”. Buying enough votes to stop them costs more than the Treasury value. Result: Legal theft via Governance.

---

Defense: The Timelock Controller

How do you stop a Flash Loan Governance Attack? With Time.

The Timelock:

1. User Proposes Action.
2. User Votes.
3. Proposal Passes.
4. Timelock: The contract waits 48 hours.
5. Execution: The action occurs.

Physics: Flash Loans last 1 block (12 seconds). Timelocks last 48 hours (14,400 blocks). Therefore, you cannot use a Flash Loan to pass a proposal. You must own the tokens for 2 days, exposing you to price risk.

---

Architecture: Optimistic Governance

Voting on-chain is expensive ($20 gas). Optimistic Governance (Optimism, Arbitrum) flips the model.

1. The Veto: The “Security Council” or “Citizen House” can Veto.
2. The Default: Proposals pass automatically if not vetoed.
3. Physics: Friction is removed for benign actions, but retained for dangerous ones.

---

Code: Governor Bravo (The Standard)

Compound’s GovernorBravo is the industry standard.

function castVote(uint256 proposalId, uint8 support) external {
    // 1. Get Voting Power at the snapshot block
    // We check the PAST to prevent Flash Loan attacks (if no Timelock)
    uint96 weight = Comp.getPriorVotes(msg.sender, proposal.startBlock);
    
    // 2. Tally Votes
    if (support == 0) {
        proposal.forVotes += weight;
    } else if (support == 1) {
        proposal.againstVotes += weight;
    }
}

---

Practice Exercises

Exercise 1: The Bribe ROI (Beginner)

Scenario: You pay $10,000 in bribes. You get$15,000 in emission value. Task: Calculate ROI. ($50\%$). Is this sustainable? (Only if the token price holds).

Exercise 2: Timelock Bypass (Intermediate)

Scenario: The Timelock Admin key is compromised. Result: The attacker can set the delay to 0, then execute a malicious proposal instantly.

Exercise 3: Sybil Resistance (Advanced)

Task: Why doesn’t Quadratic Voting work in DeFi? (Answer: Because 1 person can split their tokens into 1000 wallets. Identities are not unique).

---

Knowledge Check

1. Why do protocols bribe voters?
2. What prevents Flash Loan governance attacks?
3. What is GEV?
4. Why is Quadratic Voting broken in anonymous systems?
5. What is a “Snapshot”?

Answers

1. Liquidity Direction. To funnel rewards to their own pools.
2. Timelocks & Snapshots. Both requiring holding tokens for time.
3. Governance Extractable Value. Profiting from controlling protocol parameters.
4. Sybil Attacks. Trivial to create multiple identities.
5. State recording. Recording balances at a specific block height in the past.

---

Summary

• Votes: Are for sale.
• Time: Is the only defense.
• Governance: Is War.

---