This week’s top story — Moloch(DAO) Rises
Read the full weekly crypto recap here.
Moloch DAO was launched on the Ethereum mainnet during ETH Denver. Moloch is an experiment targeted at solving “tragedy of the commons” coordination problems in deploying funds towards core Ethereum development, specifically ETH 2.0. Moloch was inspired by the text “Meditations on Moloch” which portrays Moloch as the God of coordination failures. In the context of this project, Moloch refers to “the category of problems associated with collective action, where individual incentives are misaligned with globally optimal outcomes.” Moloch DAO was developed by Ameen Soleimani, Arjun Bhuptani, James Young, Layne Haber, and Rahul Sethuram.
ETH 2.0 progress has been slow, led by a small group of participants with limited funding, despite the benefits 2.0 stands to provide the entire ecosystem. Moloch DAO was created in response to this problem. It uses a DAO structure to pool and lock funds in it’s “Guild Bank” smart contract, streamline fund allocation, and spread costs and benefits more evenly across stakeholders. The initial goal is to speed up the process of providing grants and expand funding towards Ethereum improvements. Longer term, Moloch DAOs could apply to more general coordination problems.
People can apply to the DAO by providing a “tribute” in wETH. The contract currently has over 1K worth of wETH locked up. Existing members then vote on whether to admit the applicant. If admitted, members receive voting shares proportional to their share of the total tribute pool to vote on different Ethereum proposals. Shares are non-transferrable to prevent the buying and selling of votes.
Simon de la Rouviere says “Moloch DAO incentivizes coordination by collapsing traditionally separate parts into one process, and by creating additional incentives for defectors to defect and exit.” If a member does not agree with the outcome of a vote and voted “no” or does not want to participate anymore, they have a post-vote grace period during which they can “ragequit”. To ragequit means to redeem voting shares for a proportional share of funds in the Guild Bank. If all shares are liquidated, the participant is removed from future decisions of the DAO. To rejoin, the participant would have to reapply and undergo another vote by all members. The idea is that members won’t re-admit applicants unless they deployed their funds for a worthy cause.
Grant seekers must apply for membership to submit proposals (which requires a 10 wETH deposit). And within a proposal, potential recipients request new shares relative to the amount of funding needed. If the proposal is approved via a member vote, the grant seeker can then redeem a certain amount of shares to receive proportionate funds. In this interview with Ryan Selkis at ETHDenver, Ameen also recommends that grant seekers hold on to at least one share to remain in the guild, so they can submit future proposals without having to reapply for membership.
Moloch DAO is an experimental concept, which its founders recognize. While participation is intended to be open, the members-based model might result in existing members cherry picking new members. Ameen believes Moloch disincentivizes such behavior because it would shrink the pool as members who disagree have the option to instantly exit, or fork and create a separate DAO with separate rules around membership, voting, and funding. Moloch has an impressive roster of founders who deliberately chose a simple design to reduce the attack surface, but security is always a risk, especially when significant funds are involved.
This is an interesting experiment that, if successful, could provide an alternative way to raise and distribute funds in open source projects and communities.
Read the full weekly crypto recap here.
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