Decentralization 2.0
A plan of action for moving past the buzzwords.
DAOs. Decentralized Autonomous Organizations are defined by Wikipedia as
“A decentralized autonomous organization (DAO)… is an organization that is run through rules encoded as computer programs called smart contracts.[1][2]:229 A DAO’s financial transaction record and program rules are maintained” on a blockchain.”
Decentralization is what many of us claim to love about blockchain. The idea that our information is not controlled by a centralized server. The idea that a public ledger can be safely maintained without a central entity. The idea that something of value can cross boarders digitally and in only a matter of second or minutes. Blockchain is decentralized already, but what about the teams.
Everything referenced above regards the decentralized nature of the blockchains themselves. But what about the decentralized nature of the organizations that maintain them.
All current cryptocurrencies have one thing in common, the initial team holds an inflated portion of the wealth. It’s all the same, whether it is 10%, 20%, or 50% retained for the founding team. The fact is that many times significantly less and even occasionally 0% retained for the founding team can still lead to a successful project. It is important to outline to token purchasers exactly why the teams need the portions that they do, whatever that percentage might be. Imagine engaging VC for a business, and telling the investor you needed 100 million USD to launch, 20 million of which is for you and your buddy from college and your cousin ted to split yourselves. They would laugh you out of the room.
As ICO contributors, we simply accept this pillaging of our initial investments. This creates a myriad of problems; founding teams becoming too greedy, forced holding limits on when ICO investors can buy and sell and downright scams and get rich quick schemes meant to benefits only the founders of that particular token.
A True DAO
What if the token holder’s were the controlling organization. Blockchain via the use of smart contracts enables much more than the decentralization of a ledger. Think of it as breaking down every aspect of running a blockchain organization into definable “contracts” as opposed to job description. These true DAOs would function like the baseball team from the movie “Moneyball”. In the movie a mathematically inclined manager uses specific parameters to establish a team that at first glance does not appear to be a rival to the traditional teams in the league, but soon proves otherwise.
The token holders of a DAO 2.0 can be this mathematically inclined project manager and utilize blockchain contracts and agreed token compensation for each unit, team member, and task. Remember by being decentralized this “scattered” team actually provides security for the token holders. No national residence or location on earth holds the majority of the team, just like no singular location holds the blockchain.
Some projects are already starting to embrace this philosophy.
Consider the recent news release from Luis Cuende Project Lead @ Aragon. :
“That’s why we will start to decentralize the development of Aragon during 2018.
Splitting the Aragon Foundation and the Core Developer Company
Funds were raised in the token sale in order to best serve the interests of the Aragon project.
For the project to be as resilient as possible, the development of the project should not be controlled by a single central entity. It should be in the hands of the community and multiple different development teams.”
A Universal Template for DAO Community Management Plans.
Although each decentralized team will be unique, we have established a baseline compensation plan used for a token we are developing to outline a potential team member breakdown. Remember this is designed for a scalable token not a closed-end hard cap token. So the amount of compensation per team grows based on the number of tokens issued. Many DAOs have the ability to offer scalable tokens which are rarely available from corporate owned blockchains, due to their desire to take so much profit off the top of the ICO. This DAO concept has no need for an ICO although some may require one.
Pre-sale fund distribution. Pre-sale Goal
Total Trades in Ethereum. 20,000.00
Chief Executive Officer (0.025%) 5.00
Chief Operations Officer (0.025%) 5.00
Chief Technology Officer (0.025%) 5.00
Chief Financial Officer (0.025%) 5.00
Legal Unit (0.025%) 5.00
Legal Unit 2 (0.025%) 5.00
Accounting / Auditing Unit (0.025%) 5.00
Community Chair (0.0125%) 2.50
Community Unit (0.0125%) 2.50
Management Unit (0.0125%) 2.50
Operations Unit (0.0125%) 2.50
Media/Advertising Unit (0.0125) 2.50
Network Security Unit (0.0125%) 2.50
Blockchain Development Unit (0.0125%) 2.50
Technology Unit (0.0125%) 2.50
Web Unit (0.0125%) 2.50
Transaction Processing Unit (0.0125%) 2.50
Financial Unit (0.0125%) 2.50
Trading Unit (0.0125%) 2.50
Operation Fund (0.05%) 10.00
Total: 0.375%
As you can see this breakdown provides a small incentive to every member necessary to establish a fully functioning DAO. And this is just a baseline, other team members and smart contract parameters could be added based on the issues each specific DAO is trying to fix.
This incentive doesn’t guarantee the founding team millions of dollars. It incentivizes them to get paid as they work on, improve and grow the project. DAOs could use this structure to compensate the team for getting through the presale. They could even double the rates after the pre-sale and still be charging less than 1% for team management.
If the fund is successful and eventually does several 100 million USD a year in sales, at that point the team may start to see more substantial compensation as the small percentages add up. This incentivizes the DAO team without awarding them an unfair share of token purchasers contributions.
The Importance of Binding Voting Rights in a DAO.
The voting mechanisms help enforce one of the most important aspects of a DAO. If the board of directors or team members fail to deliver for the community, the community has the right to replace them. This is one of the main differentiators between blockchain tokens issued by a true DAO organization and signing up for the majority of existing blockchain projects which are owned and controlled by a company.
Let’s all help and make decentralization more than a buzzword.
