DAOs and Stakeholder Dartboards
How decentralised autonomous organisations’ governance could build upon the expertise acquired via stakeholder management techniques.
A decentralised autonomous organisation (DAO), is an institution governed by algorithmic1 rules which are controlled by stakeholders and deposited in a distributed ledger (a “blockchain”). A DAO is enshrined in a “smart contract” which “is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible.”2
To put things very bluntly, the only fully functional DAO is Bitcoin, although some people will not consider it to be a DAO. Other operational examples are Augur (a decentralised autonomous prediction market) and Dash (decentralised autonomous digital cash). This is not the place to discus the differences in detail, but Bitcoin is the most autonomous institution of the three examples because it is the most basic (its smart contract is enshrined in the very fabric of its proof-of-work protocol) its design is to be immutable (any change in the contract is a weakening of its purpose) and it has few contact points with the “real world”, hence it can function pretty much independently from changes in day-to-day activities and events.
Other — smart contract based — DAOs operate much more complex processes than Bitcoin and are much more vulnerable to changes imposed by the “off-chain world”. The purpose here is to explore the possible added value of stakeholder management in formulating universal self-management concepts and rules that could be used by DAOs in general.
Some organisations are specifically involved in DAO governance research. Aragon proposes to empower the individual by facilitating the creation of and the participation in decentralised collaborative organisations. DaoStack is more loftily looking for a technological solution to the problem of “voluntary servitude”3. Colony is proposing to dynamically structure environments in which — what is commonly called — “work” can be organised in a decentralised manner.
These initiatives are — to a large extent — distributed ledger technology (DLT) inspired. And although they are developing very interesting ideas and solutions, it seems to me that they share the common weakness of lacking intuitiveness. Their respective approaches do not immediately connect with how non-tech-savvy-people usually conceive of concrete forms of collaborative work.
Like any institution, DAOs are confronted with the difficulty of coordinating the expectations of a wide variety of different participants in their activities4. A common way in mainstream organisations of tackling this issue is by applying stakeholder management.
A standard manner of looking at stakeholder communities is to categorise them in different root-classes of stakeholders. In my consulting days I usually subdivided them in six groups and presented them in what I call a “dartboard model”:
Further subclasses can then be added to reflect the specific relational environment of the organisation under scrutiny.
The dartboard can be further refined by adding more specific identifiable groups sharing similar interests.
Ultimately, the dartboard can be extended to individual stakeholders. And this model can then be linked to a performance measurement system. The quality of the stakeholder relationship can thus continuously be monitored and rendered in various types of reports.
This is an example of traffic light style stakeholder dartboard painted by Teri Toria (2006).
I see three main reasons why stakeholder management could be an appropriate starting point for a contribution to the DAO governance challenge.
First of all, it seems to me that the fundamental assumption of stakeholder management — that an organisation becomes dysfunctional if one or the other group acquires too much influence — is very closely linked to the fundamental rationale of DAOs. The idea of looking for a dynamic equilibrium of power is common to both modes of thinking. In DAOs the challenge is similar: how to build a set of auto-regulatory rules that can be applied as a dynamic smart contract in a changing environment and with a permanent state of equilibrium between the stakeholders’ interests as sole objective.
Secondly, stakeholder management is a mainstream business management tool and many people are acquainted to the concept. It is relatively self-evident and graphical reports make it easy to communicate which stakeholder groups’ concerns should be attended in priority, thus helping to build consensus. It may be more easier to initially apply this conceptual framework to DAOs rather than to directly trie and introduce more unfamiliar and sophisticated procedures as proposed by the projects mentioned above.
Finally, the ease of introduction of stakeholder management methods would probably benefit from the know-how already at hand in existing centralised stakeholder management softwares (of which there are plethora). And although I am not a software engineer, I suspect that building a decentralised stakeholder management environment — combining existing solutions with AI and innovative insights such as developed by DaoStack for instance — may yield a quick and pragmatical (albeit probably partial) solution to the DAO governance conundrum.
Christophe de Landtsheer (°Belgium, 1960) is the finance professor at the Marbella International University (MIUC) in Spain. His academic research is currently geared towards the emerging fintech — specifically towards the applications of blockchain technologies.
– DISCLAIMER — This article has been written for vulgarisation purposes only. It does reflects the author’s insights or opinion which are not necessarily endorsed by MIUC’s International Business Management Department.
Copyright © 2019 by Christophe J. J. de Landtsheer. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the author.
1An algorithm is a step-by-step description of an activity accomplishing some end.
2Cfr. Wikipedia
3In the “Discours de la servitude volontaire” (1574), Étienne de La Boétie raises the question of the legitimacy of any authority over a population and tries to analyze the causes of it’s submission (the “domination-servitude” relationship).
4Just to take the example of Augur. Going through its glossary I have identified the following types of stakeholders: reporter, designated reporter, first public reporter and market creator. I am sure there are many more, such as the obvious, punter, developer, founder, administrator, … But on the Discord page of Augur some other terms are also used, such as “parasitic user” or “censor”.
