The Human Side of DAOs

Photo by Perry Grone on Unsplash

[A note to the reader: I am most familiar with the Alchemy platform, and GenesisDAO in particular. While all DAO platforms have their nuances, a majority of what is written below, and particularly the takeaways are applicable to all DAOs, regardless of technology choice].

For the last several years, programmers have focused on the core software and underlying smart contracts facilitating the technical functioning of a DAO. As these frameworks and software for running a DAO emerge, so too do challenges in employing DAOs for meaningful purposes.Radical experimentation in the space is now possible by non-programmers, but there are social hurdles to overcome. To move forward now, the human side of DAOs must mature.

AN ENGINE FOR DOING STUFF

In order to better understand the nature of both the software and the human challenges DAOs now face, we must keep in mind what utility the current DAO platforms actually provide.

While a naïve and hopeful futurist may hear the term “Decentralized Autonomous Organization” and swoon at the possibilities an automated, trustless, code-based, unbiased and distributed entity may achieve, in the real world, DAOs haven’t been able to avoid the messy nature of human interactions. The DAO of today, through interfaces like Alchemy, provides a few simple functions, with a majority of activity still happening on the human side of the system.

A DAO integrated into a software framework currently has the ability to:

· Take proposals written by participants and expose them to the group for voting. Proposals often take one of two forms;

1. Governance (aka Signaling) — A proposal that calls for a rule to be established. “We should take on action X or rule Y, as a DAO” (e.g. We only give *REP [see footnote] if a user has done something particularly useful.)

2. Payment — A proposal for an action to take place in return for payment of some sort. “I will do (or have done) M and would like N payment(s)” (e.g. I will set up a DAO meeting to recruit new enthusiasts for 2 ETH and 50 REP.)

· Accept and tally votes. Votes are weighted by the reputation of the voter (represented as REP, a token that is distributed in several ways such as a reward for submitting a successful proposal, or as one form of payment after a deliverable is provided [See “Payment” above] )

· Control a set of crypto wallets that distribute payment automatically for proposals that pass. Payments can be in REP and/or tokens the DAO controls, such as ETH or any ERC-20 token.

That’s basically it.

Make no mistake, there are plenty of other functions being worked on, and DAOs promise to be much more than glorified accountants and virtualized program managers. But for now, that’s enough functionality to lay bare a whole host of tricky human problems that are well worth exploring.

When you have a raw platform, fresh out of the box, you need to determine just what you are going to do with it. Beyond the initial question of what a particular DAOs actual purpose will be, a host of other sub-questions surrounding the DAO arise:

· What should a proposal look like? How thorough does one need to be to be acceptable? How do we get the proposals to embrace some uniformity so that they are more easily comparable?

· What social or behavioral rules are needed for the DAO to function meaningfully? How do we propose rules?

· How do we distribute reputation? Do we give REP away to early adopters to jump start voting? If yes, for how long? How much REP?

· Do we expect participants to identify themselves, or only use a single pseudonym, or do we care?

· What is work (labor) worth, if we decide to pay for it?

These questions, along with many others are required for a DAO to have some semblance of order and direction. A free-for-all, without guidance, where proposal formats vary from glorified tweets to term papers or where payment proposals swing from generous to miserly is a recipe for a disjointed, inefficient disaster. However, DAOs are so new that there are not yet templates available for employing an off-the-shelf solution of a known solid and well-tempered initial configuration crafted to generally meet the needs of a collective. These basics are not yet established.

A QUESTION TO THOSE INVOLVED

As a testament to this early state of the DAO universe, a recent tweet by Matan Field (co-founder of DAOstack, a company building Alchemy, an open-source software stack for running DAOs) asked an important question:

While he posed it as “decentralized governance” in general, his roots (and the answers he got) suggest an implied “within DAOs”. Several answers came through, with each person answering from their own angle. I considered the question myself, and sketched out my ideas on the back of a napkin while out for a beer. When I later reviewed the responses that had come in, I saw that many of them clustered around the two areas that I had independently imagined.

[I ask all the authors whose tweets are reproduced here to forgive me if I misinterpret their meaning in order to unceremoniously stuff it into my own take.]

While this set of responses does not represent all answers to Matan’s question, it represents a majority of them (at the time of this writing). By clustering the common themes these responses provided, I was generally able to map them directly to two core concepts described below.

THE ANSWER(S): CULTURE AND STRUCTURE

In considering Matan’s question (before reading the input of others) I immediately thought big picture. I imagined all that a DAO that uses people as central contributors would need to run smoothly, especially considering that many of the contributors interact virtually, in wide ranging time zones, and who are otherwise unknown to each other. Matan asked what the hardest problem in decentralized governance is, and my take was, in short; setting it all up correctly to promote the right behaviors at or soon after launch. The idea of creating a basic set up to define and promote behaviors suggested two related areas of focus: culture and structure.

CULTURE

The culture of a DAO is the spiritual side, the what and the why, that guides proposers and voters to play a role that is aligned with the greater cause. Culture reduces ambiguities around morality, ethics, personal fit, and purpose. Culture is created through artifacts made by the collective and includes blogs, conversations, mission statements, actions, core values, and more — even proposals that fail. Culture tells us who we are and why we are. It is especially crucial to establish some purposeful base culture from the outset of a project or else culture will form itself out of the first, potentially undisciplined contributors and their more loosely related interactions. A void will always be filled, so it’s best to approach the establishment of culture with intention.

CULTURE ISSUES

There are several issues that will arise in a weak or ambiguous culture within a DAO:

• Participants will not have a common understanding of the purpose and goals for the DAO that they can look to for guidance on making decisions. Instead they will create their own understanding that may be innocently misaligned
• Participants may be more likely to look for social signals from high reputation individuals, suppressing their valuable but separate judgement
• Participants may refuse to participate in core functions like voting out of a concern for making a bad decision or truly having no idea if a specific proposal is aligned with the DAO
• The void that a weak culture maintains creates an attack vector for strong and charismatic personalities, giving them undue influence within the collective

CULTURE SOLUTIONS

Early proposals should establish norms (which can shift over time) in order to help form culture and structure by concrete example. Some of the earliest proposals should establish the following:

• Define the purpose of the DAO in objective, concrete language
• Define guiding principles for the DAO such as social justice, transparency, and education
• Define early goals for members of the DAO to rally around and accomplish such as growth, recruitment, funding, or other specific actions
• Once defined, align internal and external communication, materials, and outreach using the language of the purpose and guiding principles. Be consistent.

This early work will serve to jump start effective and cohesive governance and make later contributions more likely to be higher quality due to known rules. The reduction in ambiguity early in the life cycle of the DAO will promote the creation of additional proposals that are well-aligned with the original intentions, thereby cementing the culture earlier. This establishment of culture provides anchors for rational decisioning when it comes to voting and the creation of appropriate proposals. No longer is the collective left to guess whether an interesting proposal fits the intention of the DAO.

STRUCTURE

The structure of the DAO is its physical side, the how, the basic rules. Structure, like culture, tends to be emergent in a collective. Beyond the configurations, or how the software behaves, it is the sets of rules and expectations that help the DAO move from a “raw engine” of random proposals and votes to something more efficient, expected, and functional. Structure dictates how to make a proposal that is likely to pass, and promotes soft rules for what is important, necessary, and worth voting on. Structure is often a formalization of cultural norms that make it easier to govern and to know what to expect in being governed.

STRUCTURE ISSUES

A lack of structure:

• Wastes time as proposal creation is irregular and arbitrary, making voting mentally taxing and time consuming
• Promotes a wide range of proposals for various rewards, confusing voters as to whether the proposal is a fair trade of work for pay
• Results in large amounts of ambiguity, inefficiency, and potential frustration as norms have yet to be defined in any way. Many potential contributors will sit back, waiting for signals on how to properly interact
• Makes on-ramping new participants difficult, especially non-technical and less seasoned DAO members as there are few obvious patterns to mimic and learn from

STRUCTURE SOLUTIONS

• Decide what is expected in a proposal — its depth, breadth, clarity, and specificity. Enforce this structure by downvoting, with explanations, proposals that fail to meet these rules. Encourage structurally flawed proposals to be fixed and resubmitted
• Decide common payment structures such as REP and tokens. Reject proposals that do not align with this approach
• Determine how to onboard a new contributor — imagine you are joining the collective and formally make available whatever you would need to know in order to be useful as soon as possible
• Take time, especially when first getting started, to stick to the structural agreements. If they don’t work, are unwieldy, or fail to make sense, adjust them by proposal. This creates a clear set of rules for the collective to use in engagement
• Carefully consider the purpose and principles of the DAO when creating and voting on proposals. Argue the merits and shortcomings of the proposals from the lens of these defined anchors

The upfront work of taking a first pass at defining a culture, and the structure required to maintain that culture may seem onerous and in some ways overkill. This is likely true when an established group migrates to a new technology and does not expect to grow, but is definitely needed when starting a potentially open system such as a DAO, which may contain unfamiliar people from several cultures and subcultures. An initial set of defined beliefs and methods helps to align the participants around the “why”, the “what” and the “how” of the project. Keep in mind that none of these rules are set in stone if you don’t want them to be. They merely help jump start the system in order to help everyone first decide if they want to participate, and then (if yes) how they can and should participate. If rules don’t work, a governance proposal to change them can be made, voted on, and implemented if passed. A weak culture and poor structure creates confusion, redundancy, inefficiency, and unnecessary friction amongst members. It is better to use your collective energies for executing plans and building amazing communities, instead of butting heads on basic interaction and process. Energy is zero sum, harness it wisely.

MOVING FORWARD

Since DAOs are now becoming usable by various interested parties, it’s worthwhile to translate the wisdom the bleeding-edge adopters provided to Matan’s important question. From my learnings so far, my background as a social psychologist, and through interpreting and re-contextualizing the answers I saw, I have described two broad classes of challenges, culture and structure, as well as proposed solutions to meet those challenges.

One of the hardest problems in establishing an effective group is getting them to speak the same meta-language and behave in ways that allow for meaningful interaction. Understanding the goals of the organization, and the norms for meeting those goals are key. Proposals made within a defined framework are more meaningful and provide for robust discussion. Proposal makers who are properly aligned with the culture and who understand the structure can craft useful, valuable suggestions through governance proposals or can propose and execute meaningful work. By understanding norms and expectations, voting becomes much easier and of higher quality. It’s important to understand that REP holders do not have to be experts in everything they are voting on, they just need to determine if a proposal appears fair, useful, and appropriate to the goals and the culture.

In closing, the establishment of a rich culture and sound structure may be the hardest and most important social challenges in decentralized governance, and as such they are key problems to solve in the creation of a successful DAO. Future collectives would do well to take this into account as they utilize this powerful technology. After the technical configuration of the software comes the technical configuration of the social part of the DAO, the human side. Robots and Earthlings unite.

*Footnote: REP is the tokenization of reputation, awarded to individuals for a number of reasons specific to the DAO. REP may be granted to someone as payment for work done, or as a sign of appreciation for ongoing participation. It is a non-fungible measure of voting power that is also subject to constant dilution as the total amount in existence grows over time. In this way, a member contributing value regularly receives a greater say in proposal voting.

Want to reach out? Have an opinion you’d like to discuss? Feel free to email me: ivanthinking@gmail.com

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