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DAO Governance As Circles of Consent | State of the DAOs
You're reading State of the DAOs, the high-signal low-noise newsletter for understanding DAOs.
DAO contributors come from all walks of life and contribute to all kinds of DAOs. No matter what the protocol, purpose, or profile pic, DAO life will involve decision making. Because DAOs value decentralized, non-hierarchical processes over the traditional corporate ‘chain of command’, the path forward will need to be agreed by the community.
So how does a community agree on how to agree? If you’ve ever found yourself ‘swimming against the tide’ in a group discussion, you’ll understand that when DAO dialogue turns to impasse the result can be frustration and stagnation. In this issue’s editorial, HiroKennelly examines the difference between aiming for consensus and achieving consent, and explains how the concepts of authority, autonomy, and agency intersect to form the basis of quality governance processes in DAOs.
Also in this issue, get acquainted with the latest Gitcoin Grants round (GG18) — the good news is that you can decide all by yourself which of the array of projects you’d like to support. If you’re interested in DeSci, read the survey report about Gitcoin Round 15 funding for decentralized science organizations. There’s also a look at what the data from popular DAO-voting platform Snapshot tells us about DAOs, a thought-provoking take on the evolution of social DAOs into social protocols, and a look at the pros and cons of decentralization in relation to network security.
Last but not least, don’t miss Other Internet’s report titled Web3 Work: The DAO Contributor Perspective. It’s a wonderfully informative deep dive that will tell you all you need to know about the State of the DAOs.
DAO Governance As Circles of Consent
One of the phrases that gets batted around in modern democracy is the idea that a government’s legitimacy and right to power is conferred by the consent of the people. In fact, this concept is found in one of the U.S.’s founding documents, the Declaration of Independence:
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed,...
But as anyone who has spent time trying to organize people knows:
If Benjamin Franklin thought consent could be a deal breaker, he would have been terrified of consensus. Wait, aren’t those the same thing? As it turns out, not in the least. In brief, consent means that no one is saying no, whereas consensus means everyone is saying yes. According to the helpful website, Sociocracy For All:
If you want to put a slogan on it that makes the difference clear, one could say that in consensus, we ask everyone “do you agree?”. In consent, we ask “do you object?”
The site goes on to say it’s all about the range of tolerance, and that finding the common ground where there are no objections is an easier task than aligning every person’s specific preferences.
Although the difference may make or break your organization, especially as you scale, most people think about these things like this:
Giving Consent, Building Consensus
My introduction to the distinction between ‘consent’ and ‘consensus’ began with an interview Ryan Anderson of Bankless Consulting did with Sam Spurlin of The Ready. In that interview, Sam discusses the distinction:
Consensus-based decision making involves a group of people agreeing it's the best thing to do…Consent as an alternative way to make decisions changes the bar of acceptance for taking a course of action. Instead of everyone agreeing it's the best course of action, we all agree it's safe to try.
While these notions of consent and consensus don’t map perfectly to organizational-wide decision making, Sam goes on to explain how they work in practice:
It's really about where you draw the line between what has to be brought to a larger group for a vote versus what we can trust people to take action on in their areas of expertise and allow folks who have the relevant context to actually weigh in on that decision.
One way to think about this is deliberately creating and delegating areas of concentrated authority within a self-managed organization. Can we carve out an area of decision making and have it be the property of the people who are in that team or circle? That way, as long as the decision is within that constraint, they can just go.
And if you can create these areas of concentrated authority, we trust that we have specifically carved out areas for people to be smart, use their judgment, and do what they need to do within guardrails that allow us to stay in a zone of safety. That's when you start to see the actual benefits of a self-managing organization. You don't need to continually bring everything back to a larger group to argue over things that people don't necessarily even understand.
To recognize the difference between consent and consensus is one thing, but to bring forth the fruits of this distinction is another. To be honest, it’s pretty easy to get stuck in the weeds right out of the gate:
It’s clear there is an operational component to these distinctions, one that implicates domains of authority, autonomy, and agency, the circles of consent on which effective DAO governance is built. I realized recently that an ongoing conversation with long-time BanklessDAO contributor links about (concentrated) delegated authority provides a framework for creating an organization that is built to decentralize and scale.
One of links’ operating principles is that you shouldn't delegate responsibility without also delegating the authority to carry out the actions necessary to effectuate the responsibility. This may sound obvious, but if you really think it through it’s actually extraordinarily unusual for responsibility and authority to be delegated together. On a local level, the police have the responsibility for maintaining the peace and the authority to arrest people, but that’s the outlier.
For many jobs, it’s all responsibility with no authority. Consider the service worker who has the responsibility to ensure customer satisfaction but not the authority to deviate from a standard script, or the salesperson who is responsible for facilitating your car-buying experience but has to check with the sales manager to give you a discount. What if you're a social media lead at a project but don’t have the authority to post content without the approval of the founder? Does your authority align with your responsibility?
The Circles of (DAO) Life
BanklessDAO is made up of organizational units: guilds, departments, projects, the Grants Committee, and the main DAO Vault multisig signers, as detailed in the BanklessDAO Constitution. Each of these organizational units can be represented by a circle.
By the social consent captured in the Constitution, there is an understanding as to the responsibility of each organizational unit in relation to the DAO. The Grants Committee is “responsible for vetting all funding proposals and ensuring funded organizational units provide ongoing transparency” while guilds are to focus on “onboarding, education, and community building”.
At the time of formation, the consent of the DAO defined the size of the circle and the purpose of each organizational unit. Over time, the consent granted to a particular organizational unit may change. For example, the Governance Department is in the process of asking for Snapshot-posting privileges, which will be approved or denied on the basis of token-weighted voting, a form of consent-based decision making. If approved, the domain of responsibility and authority granted to the Governance Department increases and the circle grows larger.
Defining the Circles
Authority influences the other two factors: autonomy and agency. Autonomy is only possible when authority and agency are aligned; it’s the idea that an organizational unit or individual is free from outside coercion to effectuate anything for which they hold the delegated authority. Agency though, is more complex.
Agency concerns both delegated authority and autonomy. In a legal sense, agency is a relationship between two parties where an agent has delegated authority from a principal to act on their behalf. In some ways, the Grants Committee is an agent of the BanklessDAO Vault, with the authority to disburse BANK tokens. In other ways, it’s an instrumentality of power, an agent that has both responsibility and authority. In either case, this agency is also determined by consent.
Agency gets really interesting when we look at how circles of consent operate within organizational units. Ideally, the domains of authority are so well defined, and the person within that circle so well empowered, that the DAOist can’t help but discover — or feel brave enough — to pursue their true passion, to unlock their secret heart. It’s been so long that we’ve forgotten just how many hearts bull-market vibes unlock. But that’s an article for a different time and place.
Delegated Voting as Consent-Based Governance
In DAOs we talk about reaching consensus, but what we’re really doing is asking for consent, the chance to try something, to experiment, to discover the frontiers of what is possible, together.
I’ve been around DAOs long enough to know that consensus is not only a rare outcome of decision making, but much like the snowbound Yeti, the facticity of its existence may rest on thin ice. There are ‘No’ votes to accompany many Forum posts, and importantly, most governance tokens lie dormant in a wallet, ungoverned, out of circulation from the decision-making process. How can ‘everyone agree’ if they’re not voting? This brings us back to delegated voting.
If you believe that DAOs are better when governed by consent, in fact best governed only by consent, then delegated voting is a logical way to increase the amount of consent and — paradoxically — the amount of decentralized decision making. The paradox has its limits, of course, as too much delegation becomes a centralization attack vector. One must only look at the grave concerns over Lido, let alone fiat political systems, to understand what’s at stake when we consider token-delegated voting systems.
To help ensure that no single entity controls more than a socially acceptable amount of voting power we can limit the percentage of circulating tokens allocated to a particular delegate and implement basic Sybil defense measures. Having recently become BrightID verified, I can tell you that strong Sybil defense takes little more than 15 minutes, and requires no doxxing. That seems a small price to pay to become a delegate for one of the world’s most widely held social tokens (BANK), currently at over 6,000 HODLers strong. And while I have no illusion that it will be possible to achieve consensus on this idea, I’m hopeful that BanklessDAO finds the experiment is safe enough to try, that is, to have the community give its consent.
🔥 and 🧊 insights from across the DAO ecosystem
🔑 Insights: The article discusses the findings of a survey conducted by talentDAO and DeSciWorld, which explores the impact of Gitcoin Round 15 funding on decentralized science organizations, particularly DeSci's capacity to address the funding and publishing challenges of traditional science research through open access, inclusivity, and decentralization.
The report details results from 41 of 82 DeSci projects funded by Gitcoin Round 15, showcasing achievements relating to publications, partnerships, education, events, and product/service launches. The need for funding and specific talents at different project stages are challenges.
There is a strong correlation between community-building projects and educational efforts. Projects focused on community building demonstrated a high event participation rate, while projects with fewer goal accomplishments achieved more partnerships.
DeSci actively promotes sharing knowledge and collaboration among its projects, aiming to counter the competitive nature of traditional science. Half of the projects provide resources to enhance understanding, and there is a strong desire for open collaboration and partnerships in the future.
As the DeSci ecosystem matures, its focus includes transparent definitions, demographic representation information, collaboration guidance, and impact measurement. DeSci is poised to significantly influence the scientific landscape, with opportunities for involvement and contributions across various skill sets and stages of project development.
🔑 Insights: Crypto leverages cryptography, blockchain, and smart contracts to enable innovative applications like DeFi, NFTs, and DAOs. Snapshot, a prominent off-chain voting platform, aids DAO governance. Analyzing data from Snapshot reveals trends in DAO activities.
The article provides figures gathered since late 2020 for the number of Snapshot spaces (nearly 20 thousand), proposals (~130 thousand), and voters (more than 2.6 million). While growth is evident, there are still many times more corporations registered than there are DAOs formed.
The authors assert that the data shows that DAOs are resilient and are not affected by intense market cycles and “black swan events”.
Included in the data are a number of “nonsensical DAOs” — Snapshot spaces formed for meaningless proposals which have fewer than 100 voters. The authors say the number of actively engaged DAOs is approximately two thousand.
The data also provides insights into voters, blockchain networks, voting systems, and strategies in use. Notably relevant for this issue of State of the DAOs is the observation that “the percentage of voting power using delegation strategies has seen a significant surge over the past year. … In the long run, delegation is likely to become the default choice for DAO voting strategies.”
🔑 Insights: The author argues that DAOs should build on value-generating protocols before cultivating broader community engagement. Social protocol design is an approach that pursues trustless coordination systems while expanding our imagination of what a protocol can be.
Social DAOs can also be called tokenized communities. The typical structure of tokenized communities usually revolves around roles, multi-signature wallets, and some kind of grants program.
The article proposes a 4-step approach to progressively transforming a community into a protocol, beginning with a handbook, then designing a game cycle, identifying game phases, and breaking the system into components.
The author asserts the ultimate advantages of this approach are scale, efficiency, and capture resistance, which are aspects that social DAOs must begin to take seriously.
🔑 Insights: Despite its benefits, the author believes decentralization is merely a means to an end. Corruption and censorship resistance need to be increased but not through decentralization, as it is inefficient.
Public blockchain seeks to increase corruption resistance, censorship resistance, and permissionless access.
This can be done effectively by gaining high economic security and implementing proofs. These proofs ensure that people running validators don’t need to verify lots of data but a small proof.
Some novel cryptography and mechanisms can make corruption or censorship resistance harder, for example, smarter slashing deterrents and enshrined PBS.
DAO Spotlight: Gitcoin Grants Round 18
Gitcoin Grants Round 18 is now open with some significant updates and changes to the platform. This round will provide $1M in matching funds for Core Rounds, which include Climate Solutions, Ethereum Infrastructure, Web3 Community and Education, and Web3 Open Source Software.
Gitcoin Grants Stack is the first-ever decentralized, customizable, smart-contract-enabled solution that is designed for communities to collaboratively fund projects that make a difference in the community. GG18 will predominantly run on Optimism in order to manage gas fees, but the Core Ethereum Infrastructure round will operate on Public Goods Network (PGN). Featured Round managers can choose their network preference.
Gitcoin Passport has also recently been upgraded with 6 new stamps and a new scoring algorithm. Passport was created by Gitcoin to defend its grants program from Sybil attacks, ensuring that only real people can allocate funds to projects. To be eligible for the matching pool, you need a Passport score of at least 20.
Support BanklessDAO in the Web3 Community and Education Grant Round
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BanklessDAO: By funding educational initiatives and nurturing a culture of decentralized governance, BanklessDAO paves the way for global adoption of web3 technologies and principles.
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