Backfeed is currently working on a comprehensive governance proposal for The DAO, addressing most of the concerns expressed on forums by The DAO token holders, the media and members of the ethereum community in general.
For the last year and a half we at Backfeed have been developing governance schemes and economic models for the empowerment of a decentralized and collaborative economy. Creating the necessary means needed to operate a decentralized organization, without any point of central control, is and has been our main goal and purpose. We are thankful for the opportunity to demonstrate to ourselves and the rest of the world that a distributed entity can be at least as agile, efficient and profitable as a traditional organization, led by a professional management with central ownership and control — if not more so.
The DAO’s potential modes of failure revealed in numerous blog posts and statements, as well as the most predominant fears and doubts regarding The DAO’s governance scheme, brought forward by several sincerely concerned individuals, are very well known to us and can, in our view, be adequately addressed by the solutions developed by Backfeed specifically to that end.
The following items constitute a partial list of problems, inherent to The DAO’s current mode of operation. These problems can and should be solved in order to ensure The DAO’s long term resilience and efficient operation. Our proposal, which will address these and a few more, will be submitted to The DAO’s token holder’s audition in the coming week. A press release describing the full proposal will be announced simultaneously.
- The DAO’s current governance model is not suited for the solving of complex problems. Our Crowd Wisdom could and should be much wiser.
Assessing investment proposals is a task which requires skill, expertise, time and effort. For this reason traditional, centralized shared stock companies delegate this function to appointed experts with whom the company shares revenue. We firmly believe that it is entirely possible to distribute this function effectively among a “crowd” in a decentralized fashion. Currently however, The DAO relays solely on a simple shareholder democracy to make its decisions, which holds the potential to produce mediocre results and to encourage scam attempts.
Our proposal will include a meritocratic governance scheme which will promote more benevolent crowd wisdom dynamics and deliver better results than the traditional “board of experts” on the one hand, and simple shareholder votes on the other. The full scheme of things will be specified in our proposal, but for the time being it should be stated that our governance proposal incentives token holders to participate in the assessment procedure of proposals, rewards the contribution of knowledge and skill and reinforces the influence of individuals who perform best in this process. This way, our aggregated skill and merit can be exploited to its full potential and create synergy among our different viewpoints, rather than canceling each other out and diving into mediocrity. - Influence is bought, not earned.
Like in the traditional corporate model, influence and voting power within The DAO are solely determined by capital invested. This of course has its reasons — capital invested represents the amount of risk one took and hence should, traditionally, determine one’s influence on the organization’s decisions. However, in a decentralized organization, the amount of tokens one holds can’t be the only measure of influence if this organization is interested in fully exploiting crowd wisdom and incentivise positive bottom-up engagement.
Our proposal will introduce a public reputation system to The DAO’s governance process — reinforcing positive influence, while filtering out the noise and preventing:
- Majority attacks and hostile takeovers, and
- The leakage of The DAO’s funds towards intelligently designed scam proposals
- Dictatorship of “stupid money”
- Discouragement of contributions by minor token holders with good insight
3. The Participation Problem:
As past experience has shown, participation in shareholder votes tends to drop to ridiculous lows if the system does not provide incentives for participation. Given this reality, the minimal quorum of 20% for The DAO’s decisions will be seldom achieved, let alone higher participation rates for major investment proposals. This is a serious issue that might bring The DAO to stagnation, and eventually disintegration, at a very early stage. This too will be solved by our reputation system and the incentive mechanisms included in the Backfeed protocol.
4. The DAO preserves a single point of failure in form of its Curator board
The DAO’s current board of Curators consists of highly respected and reputed members of the ethereum community, and there’s absolutely no doubt that they will execute this vital function in the most professional and attentive way possible. However, in order to ensure long term resilience, and in order to preserve the autonomous and distributed character of the DAO, this system of personal trust should be replaced by an algorithmical and decentralized version of itself, which creates a trustable environment relying on the dynamics which arise from a hardcoded, auditable and predictable protocol, rather than from the respectability of certain individuals.
Our proposal will be divided into two separate submissions:
The first, which will be announced in the coming fortnight, will predominantly address The DAO’s curation mechanism. In this first proposal we will specify a sybil-resilient public reputation system, which will gradually delegate the curating authority from the current board to a much wider audience of trusted agents in The DAO community. Under such a regime, the curation process will be constituted on a human web of trust, permeating through the entire community, which will be much more resilient to potential conflicts of interest than one based on an appointed board.
The second submission, which will be announced thereafter, will include a full, comprehensive governance scheme for The DAO, addressing all modes of failure presented above. This second proposal will be an advanced version of the first and expand the reputation system to the entire community, while presenting an incentive mechanism for participation and mutual evaluation.
The first proposal will be released at end of this month and include a comprehensive description in english and solidity. We hope to spark an enlightened debate and to produce together with your insights not only an ad-hoc solution for The DAO, but the prototype for decentralized cooperation at large.
