Key lessons learned about DAO: creation, practice and culture

Published on 9/29/2022   236 views   0 Comments  

Author: Linda XieΒ 
Compiled by: Translation Association Gink, The SeeDAO

Decentralized autonomous organization (DAO) is a group organized around a specific mission. DAO cooperates through a set of sharing rules executed on the blockchain. DAO itself is just a specific organizational structure, which is used to control shared economic resources and organizational protocol rules. Therefore, each DAO operates in different ways. Some DAOs are closed, while others are open, and anyone can join and contribute. In some DAOs, active contributors can get paid for their work.

DAO has always been one of my favorite areas in web3. People from all over the world can come together to work for a common mission. This feature is very exciting, especially when this group cannot be formed under the traditional company structure due to many barriers (such as location, age, part-time, non-traditional education/work experience). For more information about the development potential of DAO, please see my beginner's guide to DAO(https://linda.mirror.xyz/Vh8K4leCGEO06_qSGx-vS5lvgUqhqkCz9ut81WwCP2o)。

This article covers some of my main gains in the work of DAO. Most of them come from my experience as a representative of Gitcoin DAO, but I also participated in and observed many other DAOs. I don't think there is a perfect DAO structure, because every DAO has its own culture, so what one DAO believes in is not necessarily useful for another. The following content reflects my personal experience and views, and other people are likely to disagree with me. The whole industry is also iterating to find out what is feasible and what is not.


When creating a DAO:


  • Define the mission of the DAO.A clear mission is critical to maintaining a diverse and evolving community like DAO, which ensures that community members' consensus is consistent over a period of time and guides decision-making. For example, if someone submits a funding proposal that is beyond the scope of affordability to the DAO, the DAO should be able to easily reject the proposal. However, if the priorities of the DAO are not clear, it will be very challenging for the DAO to focus on its mission.
  • Consider progressive decentralization.Although the intention of many DAOs is to completely decentralize operations and decisions, putting a community into a fully decentralized DAO structure without guidance or leadership often leads to a lack of efficient communication and collaboration. The founding team usually knows the situation best, so they are the most suitable candidates to set a route for the DAO and gradually empower the wider community over time.
    For example, the newly established Optimism Collective has a work charter, which defines the role of the Optimism Foundation as a steward in the early stage, and how the Foundation will help guide the community, and plans to increasingly decentralize this role over time.

3. Optimism Foundation will become the steward of Optimism and its early governance model。 The Optimism Foundation is registered in the Cayman Islands and is responsible for guiding the growth and development of Optimism Collective. The Foundation, through its Board of Directors, will:

  • Promote and supervise collective governance.
  • Allocating treasury assets to finance public goods, motivating active contributors to the Optimism community, or otherwise promoting foundations and the Optimism community.
  • Revise the Articles of Association; as well as
  • Take other measures conducive to its management role.
  • The Foundation will assume all these responsibilities in a way consistent with the mission of Optimism, and is committed to gradually decentralizing this role over time.


Implementation level:


  • Smaller workgroups are more efficient.Not all DAO members need to vote on every decision, big or small, in the DAO. It is impossible to follow up everything, which is also a waste of everyone's time, especially when the scale of the DAO is expanding. Therefore, I like the delegation mode of DAOs such as Gitcoin and ENS, which allows token holders to delegate their voting rights to a person or group who can invest the necessary time to make wise decisions.
    Similarly, the entrusted representatives do not need to participate in every aspect of the daily operation of the DAO. The representatives will not become experts in financial investment, technology research and development, economic design and other fields, and may not care about highly specific audit details. The establishment of a small working group can focus on a specific area, which will be more efficient.
    For example, in Gitcoin DAO, each quarterly working group will share the work results of the previous quarter and the financial budget required for the next quarter, and then the representatives will vote on this proposal. The ENS DAO uses Orca to advance its work. Orca is a governance tool designed for DAO, which is specially used for small working groups to work together. Each such group in Orca is called a "pod".
    Another example is Aave V3, which allows white list address holders to update parameter settings without passing governance voting. However, the governance voting will have the ability to revoke these whitelisted addresses or add new addresses.

Gitcoin DAO workflow for budget request (picture source: Annika Lewis)

  • Explore ways to establish accountability.The participation of each representative and team contributor in the DAO proved to be very important. Gitcoin DAO is trying to use the representative health card to measure the participation of representatives. The representative health card will count the forum activity, voting participation and so on.
  • At the same time, Gitcoin DAO is building a workflow health card, and is also beginning to quantify the contribution degree in the DAO, so that some contributors in the workflow can become representatives with more voice by participating in the DAO. These indicators should be improved over time to ensure their seriousness and impartiality, so as to reduce wrong behaviors, such as voting only for the sake of voting, without considering relevant knowledge or professional experience.
    The representative evaluation system can help the members of the DAO determine the ownership of the governance they want to deliver. Sometimes people may just entrust to someone they know, but in fact that person may not be an active representative. I am also open to the idea of representative election cycle, which can be a way for people to gradually quit the DAO when they don't want to continue working, and let delegates think about whether the DAO is an organization they want to continue to pay time and energy to.
  • Β Discuss the incentive system.When members or representatives need to make significant contributions or contributions, they should openly discuss the compensation structure. Not everyone can afford to work part-time on the DAO for free, so they should be compensated for their work. In the model entrusted to representatives, I believe that all major representatives should at least get the handling fees they spent on voting and submitting proposals on the chain as compensation. This will provide each delegate with a relatively equal opportunity to participate. Ideally, the DAO will also strive to standardize compensation mechanisms to ensure that the DAO does not significantly underpay or overpay.
  • Take precautions for the long-term sustainability of DAO.Consider diversifying the treasury funds of the DAO, whether it is a round of public fundraising or changing the funds into more stable assets, such as USDC or DAI (such as Forefront's diversified public fundraising of treasury funds). Cryptocurrency is an area prone to fluctuations, and like companies, it is important to ensure that DAO can operate for a long time. This requires strict control over the expenses incurred from the DAO, especially for the expenses that are frequently incurred and have no clear supplementary funds.


Culture:


  • Cultivate a kind of ability to freely say" No; And a culture of difficult dialogue。 Since there is no CEO who is the final decision-maker and can quickly say no to things that do not meet the company's goals, the members and representatives of the DAO are responsible for maintaining the resources of the DAO (time, attention, treasury, etc.). When anyone can launch a financing proposal, the DAO treasury will soon get out of control.
  • When you work with many friends and people you respect, it's hard to say "no"; When a proposal requests resources for some projects that are not in the best interests of the DAO, the whole discussion process will become difficult. Therefore, it is necessary to cultivate a culture of saying "no" at an early stage. In this culture, everyone knows that decisions are made for the best interests of the DAO, and the rejection is not for a specific individual or for whose personal interests.
  • Establish the architecture so that members can rest.The world of encryption is 7x24, and the DAO is asynchronously coordinated by people from all over the world. If a DAO does not have a standard of rest or rest, it will make people tired and lead to burnout of members. Therefore, the DAO needs to give clear guidance to members to let them know that they should rest. Forefront, for example, even takes a vacation as part of their compensation.
  • After 3 years of full-time work in Forefront, contributors can get up to 6 months of paid leave for rest, travel, research or training. In the representative voting system of the DAO, if there is liquidity voting, it will be the best. In liquid voting, if the representatives are not active for a period of time (or the field of voting is not their specialty, allowing them to vote will lead to lower efficiency per unit time), they can delegate their voting rights to others. This is no different from letting a colleague take over someone's work in the company when they are on vacation.
  • Experiment as early as possible.Experiment with different systems and processes to see which are effective and which are ineffective for DAO. The cost of early experiments is relatively low, and only the openness and transparency of the communication process need to be ensured. However, the larger the DAO, the more difficult it is to experiment, change, or introduce processes. One area worth exploring is the governance Lego building blocks from the Element voting library, which can meet many application scenarios, such as providing voting rights to GitHub contributors or allowing those members who pledged tokens to vote.

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