Architecting the Cyber-Physical Commons
An Evolution From DAOs to Commons Ecosystems
This article is part of a series on cyber-physical commons. If you would like more background on the importance of the commons and the definition of cyber-physical systems, check out our first article here. Continue reading if you are interested in how these technologically augmented community structures challenge and augment traditional for- & non-profit modes of value creation, and present a new approach to scalable human collaboration.
As decentralized technology spreads globally, we are witnessing a collective re-examination of traditional organizational structures. The dominant approach to human coordination (i.e. nation-states & corporations) is being challenged by those who are underserved and disempowered by the current system in a search for more open, adaptable, and representative solutions.
This thinking is not new. This paradigm shift has been embodied through cooperative, global commons and open-source movements, which have been growing in popularity with the development of new tools to facilitate these kinds of value sharing networks. In the blockchain space, the cooperative economy is being revisited with the emergence of decentralized autonomous organizations (DAOs), alternative governance mechanisms (quadratic voting, conviction voting, futarchy, etc), and funding through novel token economics (block rewards, bonding curves, Harberger taxes, #DeFi mechanisms like rDai etc). Advancements in the blockchain ecosystem provide a new lens through which to view the future of human collaboration, and we believe cyber-physical commons infrastructure can offer communities a toolkit to operate like co-owned and peer-governed platform cooperatives. But before we get into this, let’s zoom out and look at the playing field.
In general, cryptoeconomic systems offer a new interdisciplinary design space that allows us to use token engineering to design incentives and mechanisms that coordinate group behavior towards desired outcomes.* The complex systems that emerge are sociotechnical integrations of networked computation and human input, aided by estimation, signal processing & decision making tools adapted from existing engineering practices. This opens up a new frontier of community collaboration towards shared goals.
(source: Voshmgir, Zargham, 2019)
While current blockchain networks like Bitcoin could be considered digital commons, our plan is to extend the purpose of these networks into the management of real-world public goods, in a cyber-physical commons. The killer application of these systems lies within their capacity to restructure the way we incentivize, monitor and govern shared resources. Because of the trustful nature of blockchain technologies, they are uniquely able to sustain commons-based peer production within communities of incentive-aligned people at scales that extend beyond physical trust networks. By bridging the impact of these systems to the physical world, we can improve the way we collaborate, make decisions, and manage shared resources as a collective.
Building on Cyber-Physical Systems
As defined in our first article on cyber-physical commons, we propose to build our Commons on the existing literature of cyber-physical systems. These systems challenge the traditional modes of value creation by presenting a new approach to sustainable human organization in which communities manage and grow shared resources, aided by integrations with automated networks and processes. This could add value to a wide spectrum of use cases, from open-source knowledge-based projects to the provision of physical public goods. We foresee a future of networked webs of cyber-physical commons, and we aim to empower communities by providing the customizable infrastructure necessary to realize this vision. We will use the capitalized ‘Commons’ to refer to cyber-physical commons, in shorthand.
“Examples of existing cyber-physical systems include power grids or large scale transportation systems which share the property that behavior of uncontrolled human actors can create undesirable or even unsafe conditions in entirely counter-intuitive ways.”
- Voshmgir, Zargham, 2019
Networks of digital cooperatives are the future of human collaboration and can be scaffolded by cyber-physical ecosystems. Projects like Aragon, DAOstack, Colony, Decred, Fairmint, Metacartel, Gnosis, Gitcoin, MolochDAO and more are all experimenting with new mechanisms to fund and govern organizations. Analyzing current approaches, it seems there are some common system components that can be pieced together to form technical and cultural frameworks for these kinds of cryptoeconomic networks. However, this composition of mechanisms is not trivial, and can lead to unintuitive effects that need to be modeled with token engineering processes and simulated in cadCAD to validate designs before deployment. Our proposal is to create a library of token engineered components to provide a cyber-physical commons framework, a trellis on which community platform cooperatives can grow. Our definition of a Commons template is meant to spark discourse and discussion in the ultimate goal of crafting a vision of decentralized human organization that we can all build towards.
Evolving Beyond DAOs to a Cyber-Physical Commons Framework
Using this infrastructure, community-focused organizations can be spun up that are continuously funded, self-governed, and live within their own cryptoeconomies. They have their own community token, with guaranteed liquidity to solve the convertibility problem of local currencies. Their communities are held socially accountable, duly represented, and financially sustained. These structures reduce stakeholder misalignment and scalability limitations seen in current cooperative models. This is because they align incentives between contributors, creators, and consumers, which enables a regenerative cooperative economy. The token price becomes a metric that everyone can use to align their personal incentives with the success of the community, and the tokens themselves allow for trusted value exchange and shared ownership of organizations, under proper design considerations.
We believe that designing open frameworks for new organizational models is necessary if we want to transition to more regenerative and sustainable human behavior. The Commons Stack framework can provide guiding examples and test-beds to define the actualization of broader, more complex global visions, but we must start where we are today. DAOs face several pressing issues that need to be overcome before they can be effective for widespread use cases. We propose to focus on the following 4 layers in our early Commons to address the immediate challenges facing DAOs today.
1. Economic Layer
Commons include continuous streams of income, provided for by a crowdfunding mechanism with clever mechanism design. We call this the Augmented Bonding Curve (ABC): an automated market maker that acts as a boundary between the outside economy and the internal, cause-focused token economy that creates a shared pool of funds. This tool aligns stakeholders by providing contributors of both capital and labor with tokens representing fractional ownership of the Commons ecosystem producing the public good. When agents within the system behave in ways that negatively impact the economy, mechanisms are in place that benefit the community to lesson the overall impact and internalize the externality. For example, the Exit Tribute on the ABC could be seen as a tax on speculation, turning trader arbitrage into a useful community funding mechanism.
Additionally, revenue can flow back into the system with the inclusion of components like a Harberger tax, as exemplified in Simon de la Rouviere’s This Artwork Is Always On Sale. Discount tokens could also be an added mechanism that allows members to offset fees or access resources within that community. Smart Impact Bond payouts from governments or NGOs could provide funds based on reaching targeted goals. The landscape of fund generating mechanisms is open to exploration, offering us the opportunity to add to and augment the standard funding strategies used today. The Commons Stack’s modular component approach will allow communities to sustain themselves in various ways, by applying any funding mechanisms that are appropriate for their individual contexts on top of a token engineering foundation.
2. Governance Layer
A key function of these organizations is to manage and allocate a pool of funding towards community goals, with collective decision making by community members (i.e. token holders). With tokens continually accruing to workers completing proposals within the community, we aim to balance labor and capital within a Commons to reflect a reasonable distribution of decision-making power between contributors of time and contributors of capital.
Again, we see the modular approach as a necessity to enable appropriate governance options for specific contexts. In our iterative build approach, early modules will be based on standard DAO governance models we have today (i.e. 1-token-1-vote). However, to improve the collective signal processing of our communities, we aim to quickly integrate Conviction Voting for ordering and allocating funds to tabled proposals. Conviction Voting is a continuous voting mechanism that aggregates member preference signals in real time, with preferences accruing more voting power the longer they are held, thus deterring last-minute vote swings by large token holders. This mechanism aims to protect long-standing token holders against last minute ‘whale’ swing voting, solving a recognized problem in on-chain voting systems today. Conviction Voting is one step in an exploration of novel real-time decision-making tools enabled by the rich temporal data streams provided by blockchain technology. A Conviction Voting application is currently under development for the Aragon ecosystem by the amazing team at 1Hive. Other examples of future composable governance mechanisms include quadratic voting (to balance the power of wealth in an electorate), liquid democracy (to delegate votes and form webs of trust), holographic consensus (to groom a large list of proposals and select the best to table) and more. A Commons will likely use multiple governance tools for different types of decisions, with important research and experimentation into these governance structures already underway by teams like DGov and MetaGov.
Beyond the basic governance of community funds, this layer also serves as a human-driven adaptive feedback loop on the Commons itself, capable of upgrading system policies to stay in line with the changing needs of the community using them. This layer must include low-cost dispute resolution systems (Ostrom’s Commons Principle #7), similar to Kleros and Aragon Court, although these systems will eventually need to be integrated with real-world legal systems (Ostrom’s Commons Principle #4). Dispute resolution is an often forgotten but critical governance tool, which can be greatly facilitated in a cyber-physical commons by the accountability of blockchain technology.
3. Accountability Layer
Many potential disputes can be mitigated with proper accountability and transparency, which are among the most discussed functionalities provided by blockchain technology. In ecosystems like MolochDAO today, approved proposals receive funds without much accountability regarding task completion. This may work well enough in small communities where reputation exists on a person-to-person basis, but as we scale these economies to larger numbers, we will need to implement payouts based on milestone completion. The second component in the Commons Stack roadmap, the Giveth Proposal Engine, is an accountable, transparent proposal & escrow system that rewards work as completed on a milestone basis. This is similar to escrow services offered by Gitcoin or Atstake, with an emphasis on mechanism composition within a larger CPC framework. An additional benefit of the Giveth Proposal Engine is the open & interoperable proposal framework, which allows proposals to be funded by multiple Commons, individuals, or even outside groups, avoiding the duplication of work on behalf of proposers.
When the Giveth Proposal Engine is combined with Conviction Voting, a similar dynamic as Gitcoin’s CLR matching could easily be created where direct donations to individual proposals are incentivized as they are “matched” by a larger pot of community funds. This is just one example of the many harmonic interactions that will emerge between holistically designed economic, governance and accountability layers of a cyber-physical commons.
4. Monitoring Layer
To close the loop between performance of these Commons ecosystems and the governance over their future improvements, we need an informed and engaged community. It is important that human discretion remains at the top layer of these cyber-physical systems, to ensure they continue to provide value to the people participating in them. This information comes from effective monitoring tools, not in a top-down surveillance paradigm, but rather as a peer accountability system. It is for this reason we need sophisticated feedback tools that respect complexity, like the Commons Dashboard, the fourth component on our roadmap. This component is enabled by open-source data science tools like cadCAD, data services from Ocean Protocol, real-time data streams from Streamr, and queryable blockchain data from the Graph, all fed into a continually improving system model.
Using cadCAD to validate the design of a Commons has the added benefit of being a ready-made holistic representation of the entire cyber-physical system. This will enable a future of Computer-Aided Governance, creating a digital twin of our socio-economic systems (as is standard practice with cyber-physical systems) and providing us with a far more accurate, real-time understanding of the impact of our decisions on the systems we are trying to govern. The Commons Dashboard will give stakeholders an easy-to-understand interface where they can view the real-time health metrics and effectiveness of their Commons (impact measurement could be sourced using tools like ixo or Alice). A significant upside to this digital twin is the ability to simulate & evaluate potential Commons upgrades and governance decisions, a revolution in computer-assisted decision making.
Bringing it Together: A Minimum Viable Commons
When combined, these layers of tools form an elegant collaboration framework that addresses some of the biggest challenges in DAO functionality today. We propose the synthesis of these layers as the Minimum Viable Commons, the smallest fully functional cyber-physical commons. This is a logical next step in the evolution of DAOs towards co-owned, community-governed Commons ecosystems.
Along with a growing community of experts, we aim to build a library of composable mechanisms for the diverse functionality needed by varied communities. The above layers are just the first steps taken in the direction of defining this kind of community infrastructure, with much more to come as token engineering patterns and standards begin to emerge that allow us to further explore the design space available. We invite you all to join us in establishing this important cyber-physical commons infrastructure, to contribute to a future of equitable decentralized collaboration.
Co-authored with Abbey Titcomb and Michael Zargham, with contributions by Griff Green, Kris Decoodt, Adam Reese, Stephen Young, and Ravi Patel.
Footnotes:
* There is much research into the dangers of optimizing for specific metrics, particularly when AI is involved. Algorithmic fairness and AI ethics in the context of behavioral economics and decision theory are critical considerations of sociotechnical systems. By prioritizing human discretion through peer governance, we are designing second-order cybernetic systems with streamlined social signal processing channels to allow them to upgrade themselves to meet the changing needs of their communities. While one could use this open source software to create oppressive economies, the opt-in nature of these commons ecosystems will ensure the choice to participate in economies that align with your personal values. As always, there is much more to be said on this topic.
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