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Posted on Jun 12, 2022Read on Mirror.xyz

Fundamental Insights Weekly 2022.06.10

Fundamental Insights

#1 How Decentralized Organizations Win (And Lose)

Here are four very different kinds of organizations that have something to teach us about building DAOs:

By looking at the commonalities in their principles, we can understand what makes decentralized organizations successful. Here are a some of the principles they all have in common:

  1. Recruit the best people

    Companies like Valve and Amazon, elite military units like the US Marines, and co-living environments like intentional communities all draw boundaries around themselves and carefully evaluate who they let in. By constantly attempting to raise the bar, they can keep scaling without the need for more structure and rules.

    DAOs often attempt to be permissionless, allowing anyone to join the community. Maintaining openness, permeability, and an inclusive approach to newcomers allows DAOs to grow quicklyincrease diversity, and progressively decentralize. But there’s a clear tension between bringing in the best people and maintaining an open and accessible community:

  1. Maybe the best solution we have to solve for this balance is contributor proof-of-work. Proof-of-work, in this context, refers to the ability for new community members to demonstrate their capabilities and increase the scope of their work as they build trust within the community. By creating systems for self-organizing teams to publicly accomplish the organization’s goals, DAOs can build feedback loops for strong contributors to succeed and positively reinforce the organization's culture, capabilities, and scalability.

  2. Help members self-organize

    Once you are surrounded by great people, you can work together to build systems for effective collective action. In order to self-organize, people need:

    • Clearly defined missions
    • Small groups executing at the edges
    • Information accessibility
    • Minimum viable self-governance
  3. Empower mission-driven leaders

    There’s no such thing as a leaderless organization. Separation between decision-making and executive power is uniquely possible within capture-resistant structures. DAOs offer a unique solution to this problem: put direct executive power in the hands of all individuals in an organization.

    When we say mission-driven leaders, we mean it in two ways. First, it means that the best leaders are missionaries, not mercenaries. They believe in and are dedicated to the greater mission of the organization. Second, it means that leadership is a temporary, transient role designed to solve for a specific mission.

  4. Have a bias towards action

    When everyone has an equal voice in everything all of the time, groups end up talking a lot and accomplishing nothing. One antidote to this problem comes from co-living communities, which are often organized around a principle called do-ocracy.

    This principle states that, generally, whoever actually does the thing makes the rules. The goal is to minimize governance and consensus decision-making by empowering individuals to make autonomous actions as long as they are reversible and inexpensive.

  5. Play infinite games

    Vibes, reciprocity, and trust are infinite games. They are not played to win, but to keep playing. Infinite games are played for intrinsic rewards:

The most potent DAOs will follow a similar path—they will create intrinsically motivated communities that self-perpetuate memes and culture while simultaneously developing protocol hyperstructures that live indefinitely and create value without necessarily extracting profits.

Each of these organizations operates in decentralized ways that result in better outcomes than more centralized peers. They have created flexible, adaptable, creative, and capable evolutionary systems that can outperform more rigid hierarchies in rapidly changing environments.

Hot Topics

#1 Azuki set up their own Discord bot to minimize hacking risk targeting Azuki community

After several significant hacks happening in NFT communities, Azuki set an example and led the NFT communities by starting its own Discord bot to minimize hacking risk towards its community. Azuki has been a project trying to introduce innovative approach and create greater good to NFT communities, for example, the introduction of ERC721A, and we expect to see projects continuously setting rules and innovative measurements influencing the broader communities prevail and hold a strong position in NFT market.

#2 STEPN’s Active User Numbers Contract

StepN daily active users started to show contraction after hitting 100k. Daily new users also declined since end of May, which follows the price trend of $GMT and $GST.

Except from declining new users, StepN faced several headwinds, including DDOS attacks and blocking Chinese players. The decline of new user addition is a key challenge for StepN since the in-game economy will be hard to sustain considering what has happened to Axie Infinity.

Week's Recap

Indicator Tracking

Indicator Tracking

MVRV

source: Coin Metrics

Crypto Fear & Greed Index

source: Alternative

Data of NFT Market

source: NFTGo

Total Value Locked of DeFi

source: DeFiLlama

Total Value Locked All Chains

source: DeFiLlama

Protocol Total Revenue

source: Token Terminal