Money 2.0 Stuff: Common ownership

As index funds continue to soar in popularity, questions have emerged as to whether shared ownership across industries has reduced competitiveness. If I own shares in McDonalds and also own shares in Burger King then I’m incentivized to see them both do well. A price war between the two will not work out particularly well for me. Rather, I might suggest that, as something akin to a duopoly, they both keep their prices quite high and not make any aggressive moves against each other. This may not be to the direct benefit of McDonalds or Burger King or to customers of either company but it is to my direct benefit and I am the shareholder and that is what matters. Harvard Law School professor Einer Elhauge has called common ownership “the greatest anti-competitive threat in the economy today”.

Common ownership is a recurring theme in cryptocurrency land. Investment funds invest in other investment funds and then co-invest in protocols. It is not unusual to find funds that have stakes in protocols that are quite obviously direct competitors: a recent example, Polychain Capital incubated DerivaDEX while serving as an early backer of dYdX. In the current ‘yield farming’ climate, we find funds providing liquidity across competitive protocols: Aave and Compound, Uniswap and Curve, and so on. DeFi index products, like those offered by FTX and Synthetix, only further entrench common ownership.

Naturally, the same questions arise — is common ownership of cryptocurrency protocols anti-competitive?:

On Tuesday, @equivrel formally begins a signal request around a suggestion that had been discussed over the weekend. Namely that Dai be exlcuded [sic] from recieving [sic] COMP rewards on the Compound platform. Naturally this is not within the power of Maker Governance to change, but members of Compound Governance indicated that such an action may be possible, if it was desired by Maker.