Discover more from Bankless Publishing
Social Networks And Their Impact | State of the DAOs
You're reading State of the DAOs, the high-signal low-noise newsletter for understanding DAOs.
Where do you fit within your social networks? Not just the online communities, but all of the various groups you’re part of. Is there someone ruling with an iron fist, or one team that never checks with another team? Are you the one who picks up the slack? Chances are, each community or small group you’re involved with has a different network dynamic.
In this issue, read about the impact of social network structures on DAOs with insights from Tjitse van der Molen, who writes that understanding the different architectures of such networks — how people interact, how information spreads, and how influence is exercised — enables a DAO to take proactive steps to optimize communication and decision making.
Stay current with insights from across the DAO ecosystem, including an overview of governance at the Optimism Collective, a look at legitimacy in the context of various DAO governance patterns, musings on DAO data transparency, and an insider’s view of City DAO's community-governed city on the blockchain.
If you’re interested in the idea of taking financial planning onchain, don’t miss the spotlight on PlannerDAO, the first decentralized community of financial planners promoting economic freedom and permissionless access to financial services.
As we head towards a network state, keep up to date with the State of the DAOs.
Social Networks and Their Impact
Author: Tjitse van der Molen
Social networks are part of every area of our lives, from friend groups to international trading routes. With the advent and development of technology, the complexity and variability of social networks has increased substantially. Just a couple of decades ago, only the people in your village or neighborhood were part of your social network. Now, it can be every living human being with an internet connection. Before, you'd get your dream job from a friend of your parents. These days you’ll land it thanks to the connection of a recent follower. Social networks are now bigger and broader than they have ever been and they impact every area of our lives.
In this article, we will explore the concept and definition of social networks, their different architectures, and how DAOs can benefit from knowing the shape of their social network. Finally, we will introduce you to TogetherCrew, a tool to visualize the social networks of online communities you inhabit.
What Is a Social Network?
Social networks reflect the way in which human beings interact. The complexity of interpersonal relationships can easily become overwhelming for large groups of people. However, we can learn about how people interact by visualizing all relationships as a network graph.
The Architecture of Social Networks
Because the number and strength of relationships between individuals vary, networks of a similar size can look and impact people quite differently. In some networks, a few individuals will be involved in the majority of the relationships. They're at the center of the network, which looks like a star. For example, the network of an influencer and their followers. Meanwhile, in other networks, the number of relationships is distributed more equally, like among a group of friends. This looks more like a mesh or spider web.
In addition to the distribution of numbers of relationships a person has, these relationships can be strong (e.g. best friend, partner, parent, team member) or weak (e.g. acquaintances, friends of friends). In most cases, frequent interactions signal strong relationships (e.g. the close friends we speak with on a regular basis) and infrequent interactions show weak relationships (e.g. the distant cousin we speak with only at family gatherings).
These differences in the way that people are connected to each other, namely the number of relationships and frequency of interactions, make up the architecture of the network.
The Impact of the Network Architecture
The architecture of the network drives the function, volume, and quality of the interactions people have in their daily life. When fans of a celebrity meet, their topic of conversation is often the celebrity, the person at the center of their network. Conversely, distributed networks will have more distributed topics, for instance in friend groups where everyone has unique interests and perspectives to share. Our interactions shape the network but the network also shapes our interactions.
Understanding the architecture of a network can help you understand how news and information travel through the network (or not), why individuals make certain decisions and how individuals form subcommunities.
For example, in dictatorships, the network is often hierarchical and authoritarian, with the leader at the top of the hierarchy and limited interaction between different branches of the network. To preserve power, the leader makes sure there isn’t too much interaction between departments, ideally creating rivalry between subgroups to limit others from gaining a holistic understanding of the situation. The star-shaped configuration allows the dictator to exercise control over the members of the network and limit their influence.
Meanwhile, in democracies, the network architecture is more diverse, with a wide range of relationships between people, and greater freedom of movement and information across the network. This network architecture allows for more collaborations between individuals, and encourages them to take part in social activities and strengthen relationships amongst each other, facilitating the exchange of ideas.
Not every architecture is good for achieving every goal. Swift action and decentralization often don’t happen together. On the other hand, the exploration of ideas or solutions and centralization tend to be mutually exclusive. Your network architecture should be aligned with your current goals.
Social Networks in Work Environments
In traditional corporate settings, the architecture of the social network is carefully planned and negotiated. For example, job titles are used to signal who can attend certain meetings or access information. The intended network architecture is often hierarchical and centralized, with greater levels of authority and responsibility at the top of the hierarchy. You can easily see this in the thousands of organizational charts posted online. However, the actual network, reflecting with whom employees really talk, exchange ideas, and forge alliances, is often less centralized and less hierarchical. Teams and individuals use other conduits and shape the network to bypass constraints of the intended hierarchy, and get work done or advance their personal goals.
The alignment between intended architecture and the way people actually interact can determine whether a specific strategy will function or not. For example, a strategy relying on strong collaboration across departments will only work if such interactions are actually happening. More granularly, we have seen that high-performing teams are not consistently noisy or quiet, but rather they alternate, going through periods of calm and then bursts of communication. By analyzing the difference between the intended network architecture and the actual network, we can understand what outcomes are likely and be proactive.
The Impact of DAOs on Social Networks
DAOs are changing the architecture of social networks in work environments. First of all, the DAO working environment is different — most of it is digital; there are no physical offices. DAO contributors are spread across different time zones; there is no formal hierarchy; decision-making and actionability is decentralized; and modes of working are highly community-driven, amorphous, and interest-driven. Compensation models also differ greatly from those in traditional working environments. All of these characteristics make DAOs a very different model of working.
While corporations try to constrain the social network through an artificial hierarchy, DAO members are free to access information and decide who to meet, and then what to propose, vote on, or contribute towards.
By taking the decision-making power out of the hands of a single individual or small siloed group and distributing it among a large group of DAO contributors, DAOs are creating more decentralized and distributed networks. These networks encourage greater collaboration and resilience. However, there are challenges too. If a DAO becomes too enmeshed and chaotic, members can feel overwhelmed and lose focus due to all the energy spent managing a large number of relationships.
To ensure that DAOs can optimally reach their potential, TogetherCrew has developed a tool to keep track of the social network structure of the DAO. In that way, DAOs can take action and design their own social networks, in order to effectively advance towards their goals. Below, we’ll describe how.
Design Your Network
To proactively design social networks, we need to understand how the network currently looks and work from there. For this, we use various metrics that provide insight into the current architecture. These metrics enable us to make targeted changes to enable the community's goals, and allow us to evaluate whether or not any changes have had the desired effect.
We primarily use three key metrics:
Decentralization: How distributed are the relations in your network? Are a few people involved in the majority of the relations or are the relations distributed more equally?
Fragmentation: Are there smaller subgroups within your network or not?
Small Worldness: How connected are the different subgroups in your network to each other?
Once we have these metrics, we can then contrast the goals of the community with the current shape of the network, and take targeted action.
Example scenario: The DAO has too many silos. Members only vote on their narrow proposals and there is no progress on the DAO’s mission.
If we have too many silos in our community and we want to increase collaboration and alignment, we'll want to create opportunities for people to meet and create relationships across clusters (improving Small Worldness). Use tools that help members get to know each other like AMAs, intro.ai, randomized coffee trials, or cross-cluster problem solving.
Then we can monitor Fragmentation to ensure we don't go too far and end up with a hairball of a network where people are overwhelmed, and new members struggle to make sense of what's happening.
Finding the right balance for a community requires continuous improvement, and regularly checking the network metrics allows the community to plan effectively and adapt as needed.
Improving the Health of Social Networks
Social networks are an integral part of our lives, impacting our careers and the success of organizations. By understanding the different architectures of these networks, we can gain insight into how people interact, how information spreads, and how influence is exercised. With this knowledge, we can improve these networks and create environments that foster collaboration, resilience, and positive outcomes for everyone involved. With TogetherCrew, web3 community managers and community leaders can now analyze and improve the health of their social networks.
🔥 and 🧊 insights from across the DAO ecosystem
🔑 Insights: Optimism is a Layer 2 scaling solution for the Ethereum blockchain which first launched in January 2021 as Optimistic Ethereum.
In April 2022, Optimism launched the Optimism Collective, which is built to drive sustainable growth and experiment with governance of a decentralized ecosystem.
The governance structure of the Optimism Collective comprises the Citizens’ House and the Token House. OP Citizens vote on the Collective’s retroactive public goods funding allocation, and OP Holders vote on proposals.
Token House proposal votes happen in five-week blocks. Proposals that make it through a three-week feedback and review process are subject to an onchain vote in weeks four and five, while proposals that fail to be approved for a vote can be resubmitted in the next five-week cycle.
The Optimism Foundation takes on the role of collecting feedback during a designated Reflection Period and developing a special set of proposals that address the issues raised.
The Collective DAO Archives, which is an open-source library of policies and governance processes from 20 different DAOs is another huge body of work to come out of the Optimism Foundation.
🔑 Insights: The article explores the importance of legitimacy in DAOs and how various governance patterns contribute to or threaten the legitimacy of these institutions. The main point is to advocate for multistakeholder governance as a better model for large DAOs, promoting the representation of diverse viewpoints and the protection of different stakeholders' interests.
Legitimacy is crucial in DAOs, just as in societies, but recent events have challenged the legitimacy of traditional institutions and governance mechanisms.
Existing DAO governance patterns, such as coin voting, delegates, and workgroups, have shortcomings and often lack true legitimacy due to voter apathy, lack of accountability, and high transaction costs.
Multistakeholder governance is a more promising approach, already prevalent in traditional political and economic organizations. It allocates voting power to different stakeholder groups (operators, consumers, and producers) to ensure diverse perspectives and minority protection.
Each stakeholder group can use different consensus mechanisms to determine their voting preferences, based on their role and contributions to the DAO.
Multistakeholder governance provides a more inclusive and legitimate approach for large DAOs, promoting collective ownership and agency, while avoiding centralized control and predatory behaviors common in centralized platforms.
🔑 Insights: The promise of DAOs lies in data transparency, where every person, decision, and resource is visible on an open, programmable ledger. However, this vision is not yet fully realized, and various challenges need to be addressed to bridge the gap.
DAOs aim for data transparency but face hurdles in making data legible and understandable.
DAOstruct's verification system aims to promote transparency and security by verifying onchain operations of DAOs.
🔑 Insights: City DAO made history in July 2021 by becoming the first to own land on the blockchain and govern it through DAO. City DAO boasts of personalities like Vitalik Buterin and Brian Armstrong who became citizens by purchasing Citizen NFTs. In this article, Deepa, with the help of Eric (MemeBrains), revisits the founding of City DAO, the next steps to be taken, and DAO trends in recent years.
In July 2021, a new legislation took effect, granting the DAO LLC legally enforceable rights in Wyoming, recognizing it as a decentralized autonomous organization.
Shortly after the DAO Act took effect, Scott Fitsimones tweeted about buying and tokenizing land in Wyoming. This tweet gained traction and attracted an investor who supported his experiment.
City DAO released NFTs which were sold to the public. These NFTs didn’t represent ownership but gave citizens the power to vote and participate in the decision-making process.
With the capital raised from the sale, City DAO explored various directions and established guilds focusing on education, operations, mission, media research, and grants.
🔑 Insights: This article discusses pain points in the DAO ecosystem and explores potential paths forward to address these challenges. It summarizes a recent BanklessDAO Twitter Spaces conversation involving contributors from various reputable DAOs and organizations, aiming to continue the discussion for these critical issues within the DAO ecosystem.
There are limited laws and regulations worldwide specifically addressing DAOs and uncertainties regarding governance token classification. The complexity of legal and regulatory issues poses significant challenges in the DAO ecosystem.
Challenges related to centralized infrastructure and lack of Sybil resistance create vulnerabilities in token-voting systems. This highlights the need to explore solutions like the Internet Computer and zero-knowledge identity solutions.
More clarity of processes is needed in the DAO space, necessitating the creation of user-friendly DAOs and broad acceptance of onchain entities without the need for specific legal entities in jurisdictions.
Sustainability model and retention challenges in DAOs mean it’s important to establish a well-defined business model, incentivize full-time commitment, and foster an engaging environment for consistent productivity.
Voting is mistakenly equated with decision making, while in reality, decision making involves fluid and dynamic processes. Moving forward requires adopting a first-principles-thinking approach and exploring innovative methods like weighted decision-making tables to improve the process.
DAO Spotlight: PlannerDAO
PlannerDAO created the first decentralized community of financial planners promoting economic freedom and permissionless access to financial services. Members are certified digital asset advisors (CDAAs) who are trained to provide guidance and education on digital assets and decentralized finance (DeFi) to investors of all levels.
PlannerDAO is committed to establishing fiduciary standards for financial planners in the digital asset space. They are actively involved in regulatory matters, including providing views and comments to proposed SEC rules that could impact the digital assets space (e.g. the recent custody rule SEC proposal).
How It Works
To become a member of PlannerDAO, you are required to complete eight steps (link your wallet to see the steps). These steps include completing an educational course, passing a test, and proving yourself onchain via a set of blockchain challenges. Once you earn your CDAA marks and become an official member of PlannerDAO, you will be able to create a public profile and help others with their investment and adoption of digital assets.
After successfully completing the membership steps, you will receive a CDAA Membership NFT through the Unlock Protocol. This NFT is used for PlannerDAO community governance and decision making. Additionally, PlannerDAO’s native token, PLAN, is used for experiments like member rewards and non-profit initiatives.
Contributors who join PlannerDAO can access a variety of resources, such as courses, events, podcasts, newsletters, and research reports. They can also network and collaborate with other CDAAs and industry experts. If you are interested in joining PlannerDAO and democratizing access to wealth-building strategies around the globe, you can visit the website or follow them on X.