Speaker: @Niels | BuidlerDAO Initiator
Editor: @Coucou
Three challenges found in mainstream DAOs
DAO can be traced back to Vitalik's Ethereum whitepaper in 2014. At first, it was not very successful. The first DAO, The DAO, failed due to a hacker attack and led to Ethereum's fork.
But innovation is like this, right?
DAOs have only recently developed in the past few years. Many great practices of DAO organizations have brought this concept to us, but it is still in its early stages.
After conducting systematic and in-depth research on well-known DAO organizations and reviewed their proposals on Snapshot. We can feel the difficulties of governance and the challenges they are facing. I summarized the challenges faced by DAOs from three perspectives.
The first is governance. DAOs and companies are always compared, and people often ask whether such a loose organization is inefficient. Yes, there is indeed a conflict between efficiency and decentralization. But we can still find a balance point, which I will discuss later.
The second one is value, which determines the upper limit of DAO. After reviewing dozens of proposals of some DAOs, we found that some DAOs have found direction and strategic issues at a certain stage, but it is very difficult to adjust. It's like a group of people rowing a boat. Although the direction is not exactly the same, they are still moving forward. But when a change of direction is needed, some people will inevitably become a force in the opposite direction. The community is both the success and the failure.
The third one is risk, which determines the lower limit of DAO. We have heard too many examples of governance attacks. Choosing transparency and immutability also means that you will face the risk of someone studying your rules, finding vulnerabilities, and arbitrage from it.
When a Traveler joins a DAO, he/she may ask:
Before discussing how to solve these challenges, let us first answer the three questions raised in the title. These are the classic three questions in philosophy, and they are the same in DAOs.
When a person comes to a community, he will ask three questions:
Who am I? What am I doing? Where am I going?
Who am I (in the community)?
member because you have purchased an NFT Pass or Token, which meets the criteria for community membership.
Perhaps you have made contributions to the community and have been recognized and obtained identity.
Or you have been elected as a representative to lead the team and support the community.
All of these should exist in various communities. Maybe you have heard other names, such as Whale from BanklessDAO... or you have heard of these organizational structures: Squad...
With so many roles, which ones are necessary?
According to the principle of Occam's Razor, entities should not be multiplied unnecessarily. So, which ones are necessary?
Today we are discussing SocialDAO, although there is no accurate definition of this yet, but I will define what we are discussing today as a DAO that requires communication and collaboration among many members before it can be established. Because some types of DAOs do not even have interaction between people, only protocols.
So what are the key roles? Vertically, I think there are three or four: the first is Guest. You can easily obtain this role. Generally, you join a community, click an icon, or complete certification to prove that you are not a robot. At this time, you are not fully included in the community and can only see part of the content.
The second one is Member. After you meet the requirements of community membership, such as completing tasks, purchasing NFTs or Tokens, the community will accept you as a member.
The third one is Contributor. Sometimes becoming a Member is already considered a Contributor, because your behavior of buying tokens can be regarded as funding the treasury and providing liquidity. Here, it is emphasized that after becoming a member, you are still contributing to the development and growth of the community with your energy and time.
Usually, this is the end, but sometimes the community will also stratify among the contributors. I call them outstanding contributors, and there may be many layers here.
Horizontally, there will be multiple functions divided. For the operation atmosphere, become a steward; for governance services, such as committee; for financial and treasury services: multisig wallet holder; and external advisors.
What am I doing?
The second question is, what am I doing? We usually say that web3 realizes that users own their own data. In the community, users are usually both members and owners.
I divided it into two layers. One layer is "You are the owner", which is related to governance and decision-making. You will participate in discussions, proposals, voting, and elections. Common platforms include: discourse.
The second layer is "You are the member", which is related to tasks and contributions. There are generally multiple types: operation, coding, etc. Common platforms include: notion.
Where am I going?
The third question is, where am I going. Or, why did I come here? I think it can be divided into two categories. One is spiritual rewards, such as personal influence, personal growth, reputation, happiness, etc.; the second is material rewards, that is, income.
Every member will ask this question, so if you are a community founder, you need to think from the perspective of users, whether you can meet their needs and meet which level of needs.
Among these three questions, the most important one is this question. Just like the product is more important than the economic model, where to go is more important than how to go.
You can row a boat, fly a plane... as long as it is attractive enough, members will find a way by themselves, even make strategies.
Do not spend a lot of time on governance, but think about creating value and how to create value.
How to solve the three challenges above?
Balance efficiency and decentralization
Let us return to how to solve the three challenges mentioned earlier.
The first one is to balance efficiency and decentralization. I think there are three aspects.
The first is the combination of guilds and squads. Of course, you can call them by other names.
Guild represents professional fields in a community, such as technology guild, investment research guild, etc.
Team refers to a flexible, small-scale team that focuses on executing specific deliverables and goals to ensure efficiency.
The second is a multi-level decision-making mechanism. After I reviewed the discussions and voting rates of these DAOs, I found that many DAOs are facing the problem of voter apathy and ignorant voting. Therefore, different voting mechanisms should be established for different types of scenarios.
I think there are three: All-hands decision (the entire community makes decisions), internal consensus (decision-making within the team), and personal judgment (granting individuals the right to make decisions within their scope of responsibility, and this person is democratically elected).
The third is progressive decentralization. At this stage, the DAO governance paradigm has not been fully established, and different DAOs are suitable for different organizational methods and processes. These all require a team with strong execution force to promote the establishment of mechanisms, missions, and visions. Otherwise, many members may join and leave quickly, after all, they have too many choices.
Progressive decentralization will go through three steps: centralized initiation, weakly centralized cooperation, and decentralized governance. In this process, gradually establish mechanisms, missions, and visions, and spread these consensuses to establish influence.
Making good decisions
The second solution is how to make good decisions.
In Web2, we may have heard stories like everyone opposed the founder's decision, but the founder made the decision with casting vote and succeeded in the end. Or an investment partner decided to invest in a company, which was opposed by others, but the startup eventually became a unicorn and went public. Such things are almost impossible in DAO. In Chinese, there is a saying "守正出奇，keep to the right path and strike out in a surprising way", and the DAO organizational form is naturally suitable for making stable decisions, while entrepreneurship itself requires "ingeniousness". Therefore, it is best to have the team figure out what they want to do on the first day, then attract people who recognize it to participate, and be prepared for the difficulty of changing direction. Doing this on the first day is the easiest, and it's hard to change it later.
Nevertheless, I believe that there are three points that can be suggested. (Today there are a lot of "3"s.)
The first is to ensure the flexibility of mechanism iteration. Here, I recommend adopting upgradable contracts, and the non-code part will be recorded as a constitution in the form of text, with rules and space for amending the constitution.
The second is to use leverage. The community itself is easy to attract talents and projects, so a consulting committee can be established to seek advice and help from project founders, investors, and partners.
The third is delegated governance. Professionals do professional things. Many people do not participate in voting and lack decision-making ability, but they can choose to trust someone who has the ability to make decisions.
Bad behavior
The third one is to reduce the risk of malicious behavior and attacks.
Some organizations use veto power to prevent this, which is a veto power, not a decision-making power. They can only decide what not to do, not what to do. A well-known organization is Nouns.
The second is the election of multi-signature individuals. We often say that there is only one way for a startup to die, which is to run out of money. Therefore, the selection of multi-signature individuals in the treasury needs to be careful, with a long-term perspective, tied to interests and the community, and with reputation and decisiveness.
The third is community norms. Through institutional means, large and small malicious behaviors in the community are constrained to prevent risks.
Three elements of building law of attraction for DAO
We now know some ways to solve these challenges. In addition, I would like to emphasize that when addressing these issues, it is based on three principles:
The first is compatible incentives.
This can attract users. Think about what users need, how to align with the organization's mission and vision, and achieve a harmonious state of compatible incentives. At the early stage, there is no need to invest too much material cost.
The second is effective governance.
When you attract users, onboarding and subsequent governance participation should be as smooth as possible, avoiding excessive governance and consuming users' early enthusiasm. And do a good job of risk control and stay above the minimum.
The third is sustainability.
This is related to the organization's commercialization capabilities. It is difficult to generate power with love and maintain it with emotions. At a certain stage, early contributors need to be given sufficient incentives, after all, most people still need to face real life. If this is not a public welfare DAO or a DAO doing public goods, we need to consider how to bring positive externalities to the organization.
Going where? BuidlerDAO Mission & Vision
The above is our in-depth research on DAO and the summary of BuidlerDAO's one-year practice.
Next, we will take BuidlerDAO as an example to introduce our own practical experience.
First is "Where are we going", as mentioned just now, this is the most important question to consider.
BuidlerDAO became BuidlerDAO because we wanted to truly create value for this industry. From day one, we have gathered people with similar ideas: operators, developers, and researchers. Recently, we are announcing our white paper, and we currently summarize our mission and vision as:
Mission: Empower Web3 Builders to establish reputation, expand connections, and create truly valuable projects.
Vision: An interconnected and collaborative network of builders, driving mass adoption and value realization of Web3.
Who? BuidlerDAO Identity
Who are we?
As analyzed just now, our community identity has four layers, which is added to the outstanding contributor layer here, called Buidler, taken from the name of BuidlerDAO.
The first layer is Traveller, who can claim tasks in the community, participate in the process, and judge whether to become a resident here.
After meeting certain requirements, become a Member, which is the citizen here, enjoying the right to vote.
After starting to contribute, become a Contributor, and voting has identity weighting.
When the contribution, especially the contribution in the field, reaches a certain level and is evaluated by peers, it will become a Buidler, which is a valuable honor. We have divided it into multiple types here. Steward for governance, Voyager for incubated project founders, Evangelist for those who teach lessons.
Doing What?
he last question is what are we doing? These things are based on specific practices under the mission and vision. tactics
We hope to create this value:
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Drives industry development through education
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Cognition accumulation by research
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Governance Paradigms exploration
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Innovative projects incubation
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Builder culture promotion
These are respectively undertaken by our five guilds. At the same time, in the governance process, we are based on the three principles just mentioned.
What we have achieved？
The content direction mainly includes technical education, collaboration with industry leaders, and specialized groups, such as tokenomics.
Here, talents can establish their reputation. DAO will also empower contributors through its resources and connections, achieving a win-win situation.
This is the embryonic form of our talent network.
Many DAO Tools lack tangible understanding of governance or they choose the wrong direction
According to first-hand research and experience, we believe that future DAO governance will still be diverse. Therefore, composable DAO Tools should be the correct direction.
For example, status granting, voting, PoW recording, should be combined by relatively flexible components and used like LEGO.
Vitae3, on-chain reputation system
We have launched the first component, Vitae3, at the end of last year.
It helps organizations issue native digital identities and contribution certifications based on SBT, and each talent can have their on-chain resume.
We reached 20,000 users within three days and won the first prize of Tsinghua Hackathon.
Many of them are willing to offer tokens to be incubated and seek for community support like recruiting, branding, coaching, etc.
Here is why we launched the acceleration business.
We can provide high-quality talents, founders network, solutions, community influence and resource partnerships, and that’s what an early-stage project is urgent for.
Projects
We have received more than 50 project applications and have approved 12, three of which have obtained investment. Furion, for example, is an NFT lending platform. It’s a project of the HKUST, which you may have heard of.
Business Model
The content brand, in-house products and accelerated projects, will be our sources of value, which will be fed back to our community, the network of buidlers and projects.
MOVE OVER HODL,
IT'S TIME TO BUIDL!