‘Forking Systems’ as a Governance Mechanism for DAOs.

This is a continuation of the article “On Risks, Rewards and The Evolution of DAOs”, where I explored problems related to the scaling and evolution of DAOs.

The main point was that if the DAO achieves any level of success, the late adopters are actually more incentivised to fork the existing DAO rather than to join it.

Why would that happen? It’s related to how the evolutionary process in public blockchains works. If you have an idea for a substantial improvement, you then have to go through the internal politics of the established consensus, fight the power structures and community values to implement your idea. Most likely, you’re not a stakeholder in the system so you don’t benefit from the price appreciation if your idea works. It is way easier technically and more rewarding financially to take all the open source learnings from the parent DAO and start your own thing.

Let’s use some genetic metaphors to illustrate the evolutionary process in cryptos.

If you consider Bitcoin a parent DAO organism, this is how its DNA is spreading:

  1. Internal evolution. There’s a slow and painful internal process of Bitcoin Improvement Proposals, followed by politics and power games. This conservative model ensures stability and consistency of the network but discourages radical innovations. The recent blocksize discussion shows how hard and slow this process can be. The entire mechanism is optimised for gradual, incremental improvements that don’t threaten core values and preserve the existing stakeholder & talent pool.
  2. External evolution. And there’s a fast and chaotic land of Bitcoin forks. Things tend to are wild here— both ‘get rich quick’ scammers and genuine innovators operate in this area. Both PayCoin and Ethereum emerged here. Forks can be done quickly and don’t require the lengthy political process of the internal evolutionary model. Each fork introduces a radical mutation of the original ‘Bitcoin DNA’ and brings a new set of early adopters and with them — new values, new talents and a new set of vested interests that help the fork succeed.

Both mechanisms are necessary — we can compare the #1 to the evolution of a single organism during its lifetime. Once it goes past adolescence, it’s personality is more or less fixed and only incremental changes are possible.

The #2 is like an offspring of a parent organism — it’s a fresh start, a reshuffling of a genetic pool. Some properties of the parent organism that proved to be beneficial for survival are transferred to the child, but a new genetic mutation is introduced. Depending on the mutation, the child either evolves and passes its traits to the next generation or it dies and its genes exit the gene pool.

We can think of the Bitcoin’s whitepaper as a genetic blueprint for a certain type of a network-like organism. The original Bitcoin network is a parent organism that proved to be fit to the environment in many ways. While it’s still evolving internally, it’s DNA is already spreading faster via ‘offspring networks’.

‘Offspring networks’ can pull in new resources (talent, capital, attention) and exploit new environmental niches (market verticals) faster than the parent network. Most importantly, they can be individually priced and evaluated by the markets, separately from the parent. This crypto-Darwinian process is quite unforgiving though. The child mortality is high as many clones don’t really survive the first year.

But every now and then — the prodigy kid like Ethereum emerges. And as soon as it shows some positive survival traits, it immediately gets cloned again.

You can go to coinmarketcap.com and have a look at all the coins. Each one of them contains the DNA of the parent Bitcoin. Some of them are genetically close, others evolved to be quite remote. On the fundamental level though, each one of them is built on the common design pattern of public/private key cryptography, distributed consensus and peer-2-peer architectures. And because of that shared foundation, value can easily flow between them using services like Shapeshift or other relaying technologies.

For the experts, it’s all separate networks under the hood.

But for the end user, it increasingly becomes one value-network, the Internet-of-Chains, where they can easily hold many coins and bet on the evolutionary success of individual branches of the crypto-tree.

What I described is, in fact, an emergent governance model for blockchains. The blockchain organism governs itself as it evolves in multiple directions.

Once the internal evolutionary forces of a particular network are not sufficient, the network just forks itself into a new branch.

This phenomenon is autonomous and unsupervised, driven by human egos, imagination, greed, sense of community etc. Once a new branch is established the same human emotions help it grow or let it die. It’s an endless cycle.

What Ethereum does with DAOs is that it abstracts this crypto Darwinian, evolutionary process from the underlying delivery mechanisms. So now the evolution can continue much faster, as it will take place on the common shared infrastructure.

We can expect that DAOs will experience the same evolutionary pressures as the blockchains did.

So let’s start a discussion on how we can anticipate forks, how to embed them into the governance models and what they mean to the crowdsale investors.

Voting systems are the internal evolution mechanisms (the equivalent of BIPs, EIPs) and without a doubt they are a necessary component.

But let’s not forget about the ‘forking systems’ which will allow the external evolution of the DAO.

To be continued….

Ideas presented in this article were developed in collaboration with Kuba Kucharski. We spent many hours discussing Ethereum, DAOs and ways to scale attention marketplaces described in the Userfeeds article. We’ve realised that the model we design for Userfeeds can be applied more generally to other types of DAOs. Most of the ideas presented here are as much his as mine.