An Explanation of DAOstack in Fairly Simple Terms

Abstract

DAOstack is designed to catalyze the future of collaboration. It’s a platform for decentralized governance that enables collectives to self-organize around shared goals or values, easily and efficiently. DAOstack is sometimes called an operating system for collective intelligence, or a Wordpress for DAOs.

The platform, which launches in spring 2018, includes a modular smart contract framework, a friendly JavaScript developer environment, and an intuitive user interface that allows anyone to participate in a decentralized organization without technical knowledge.

This article unpacks why such a platform is valuable, the components of the stack, and how it can work in real-world use cases. Plus we’ll touch on the utility of GEN, the native crypto-token of the DAOstack ecosystem, and the Genesis DAO, the first decentralized organization to form using DAOstack.

The Need

Historically, when there has been a need to coordinate large groups of people and point them toward collective action, humans have relied on systems of top-down hierarchy, as in corporations, governments, and militaries. It’s fairly easy to point the ship when you have only one captain, or a small team of navigators.

One major problem with top-down hierarchies is that they contain concentrated points of failure, since individuals can be subject to bad influence, bad acting, or simply bad judgment. Also, the interests of the powerful few are often misaligned with those of the less powerful many, leaving the decision-makers frequently incentivized to act against the common good.

An exciting alternative has arisen in the form of a movement toward decentralization, in which networks of peers self-organize to act collectively without such concentrated power centers. One such type of organization has become known as a DAO, or decentralized autonomous organization.

In a DAO, a network of peers encodes its protocols for decision-making into the blockchain, and it relies on smart contracts — usually executed on the Ethereum network — to be the arbiter that tallies votes and carries out the will of the people.

It’s a popular concept because it promises to “eliminate the middleman” — and the boss, for that matter — as well as to circumvent centralized funding mechanisms like venture capital in favor of crowdfunding. Imagine thousands of people working together to solve major world problems, with rewards distributed according to value contributed, and decisions being made through the wisdom of the crowd. It might be Facebook or Amazon but owned by the users; a hedge fund with no one skimming off the top; or even equivalents of BP or ExxonMobil, driven by the people and for the people (and the planet).

Up until this point, however, DAOs have remained largely an abstract idea, not yet in practice except in a handful of limited cases. And the decentralization movement has not yet scaled.

It turns out that decentralization poses some major challenges.

Perhaps the biggest one is inefficiency. If you give everyone a voice, things can get very noisy very quickly, like an annoying neighborhood association meeting, multiplied by a thousand. The more you distribute decision-making power throughout an organization, the more you risk bogging everyone down in a sea of decision-making, making it difficult to reach consensus, or both.

So, if you’re going to coordinate a crowd effectively, you need technology not just for making proposals and tallying votes, but also for managing the collective attention. You need ways to determine who can make proposals and how. You need ways to determine which proposals should actually get the attention of the voters — sort of like means of voting on what to vote on. And you need ways to determine who should be involved in each decision, according to reputation or subject-matter credibility.

You also want none of these mechanisms to be vulnerable to corruption, which is to say you don’t want influence easily bought and sold. You want everyone to be incentivized to act in alignment with the greater good. And you want all these systems to be robust enough that they can scale to provide viable alternatives to today’s telecoms, oil giants, social networks, and so on.

To address a problem this complex, we need an elegant and adaptable solution.

The Approach

The first principle of designing the DAO stack was not to build a specific protocol or a specific application, but rather to build the soil, the ground from which a whole ecosystem can grow and thrive. — DAOstack architect Matan Field

When the originators of DAOstack set about to architect solutions for decentralized governance, they recognized that given the complexity of the problem, the best solutions would emerge only over time, especially since needs would vary across use cases.

So, first and foremost, they designed DAOstack to be not a fixed offering in decentralized governance, but rather a sandbox for ongoing experimentation, in which bits and pieces of governance infrastructure can be easily mixed and matched for each organization, like LEGO building blocks or WordPress templates.

They also wanted to offer multiple ways for users to interact with the system, so that it would serve the needs of everyone from blockchain-governance programmers to the most technophobic DAO participants. And they wanted to make it easy to build custom front-end applications based on the stack’s back end because they realized that many use cases would require their own interface.

With all these considerations in mind, the team built “the DAO stack” — as the technology itself is often called — from the ground up, modular at its core, and open-source throughout.

The DAO Stack

Arc

The base layer of the stack, called Arc, consists of the bits and pieces of governance infrastructure mentioned earlier. It’s a library of smart contracts implemented on the Ethereum blockchain, each of which represent functional elements that can be mixed, matched, and even modified to create the complete governance protocol for any given DAO.

Arc is the product of years of research by some of the leading scholars in decentralized governance into making systems that are both (a) resilient to bad acting and (b) efficient and scalable.

Because Arc is written in Solidity code, the users most inclined to interact with the stack at this level will be programmers. In fact, DAOstack envisions an ecosystem in which developers regularly adapt the smart contracts to create alternative governance solutions that anyone can adopt, just as anyone can create WordPress templates and make them available to others.

Arc.js

Arc.js is a JavaScript library that lets front-end developers easily build applications on top of Arc without being familiar with Solidity or the blockchain.

With Arc.js, any organization or industry has the option of creating a custom interface suitable for its own use cases. DAOstack envisions ultimately hundreds or thousands of such Dapps (decentralized applications) deployed on Arc.js.

The Application Layer

Most users of DAOstack will not be blockchain developers or software engineers, but rather participants in decentralized organizations, and in some cases creators of them. These individuals will be interacting with the DAO stack primarily through the Dapps built on Arc.js and Arc.

There might be a Dapp for sports DAOs, in which fans collectively own teams and direct their actions; another for music services without the middleman, like a decentralized Spotify; and another for industry trade organizations. Sapien is using DAOstack to build a social news network, while Menlo is building a platform for decentralized funding of blockchain projects, and Cultu.re is planning a worldwide peer-to-peer identity and contracts system to parallel those of nations and states.

Alchemy

The first application being built on the stack is Alchemy, an intuitive user interface for budgeting and resource allocation for decentralized organizations. With Alchemy, anyone will be able to create a DAO in a few clicks, create an ERC20 crypto-token if desired, and invite others to participate in a hub of decision-making and talent-sharing.

In Alchemy’s early releases (MVP demo here), participants will be able to create and vote on proposals, have funds transfer automatically when proposals pass, and reward contributors with both tokens and reputation (voting power). Alchemy also includes a prediction market function, running in parallel to the voting apparatus, that will help organizations prioritize important proposals. More on the prediction feature in a bit.

The future roadmap for Alchemy includes greater customizability, integration with other popular collaboration tools, mobile support, and bounty systems.

The ArcHives

The ArcHives are a set of shared registries designed to enhance interoperability among the DAOs and Dapps utilizing Arc and Arc.js.

  • The Hive is a registry of offers and requests used to enhance the sharing of talent and resources throughout the DAOstack ecosystem.
  • Compendium is a registry of Arc-compatible governance modules, created and curated by the DAOstack developer community.
  • Mosaic is a registry of DAOs in the ecosystem, curated by the community.

DAOstack Use Cases

In the broadest sense, DAOstack is useful any time there is a need to coordinate a large group of people to make decisions collectively. So, by thinking about a few different types of decisions a group might need to make, we can imagine several categories of use cases.

1. Collaboration to Produce an Outcome (“Work”)

In cases in which the goal is to develop or deliver products and services — roughly speaking, a decentralized “company” — the decisions that need to be made often concern how to value individual contributions, and how to budget for projects and other purchases. Which projects should be funded? How much should James be paid for that article, or Sally for that software upgrade? What will be the process for verifying and evaluating work? Should the organization invest in this or that office space, legal support, or PR firm?

Examples include the following:

  • A film project of 1,000 artists
  • An open-source software project of 10,000 developers
  • A climate initiative of 50,000 scientists
  • A collaborative news network of 100,000 journalists

Soon these kinds of organizations will be able to use Alchemy to collectively distribute token and reputation, find collaborators, and offer bounties to professionals. Or they could build a custom Dapp on the stack if that would better suit their needs.

2. Asset Management

These types of collectives make decisions primarily about the management of assets and the allocation of funds. Should we invest in this company, or that property? Should we pay out this claim? Should we sell that asset?

Examples include decentralized versions of the following:

  • Venture funds
  • Insurance networks
  • Charitable funds
  • Pension funds
  • Real estate investment collectives

3. Curation

Curation networks leverage the wisdom of the crowd to rank the subjective quality of objects. What content should be featured in the feed, or the newsletter? How trustworthy is this company? How good is the food at that diner?

Examples include decentralized versions of the following:

  • Restaurant or hotel guides, similar to Yelp or TripAdvisor
  • Article or video feeds, akin to social news feeds or Reddit
  • Website listings, like a socially curated Google search

4. All of the Above

In practice, many DAOs will include decision-making in more than one category. An open-source software project, in addition to rewarding its contributors (case 1), might collectively curate which code will be included in each release, or featured in its newsletter (3). Conversely, a social network, in addition to curating content (3), has a business to run and must pay its developers, marketers, legal personnel, and so on (1). And either organization might want to invest the proceeds from its activities into other ventures (2).

The Holographic Consensus and the GEN Token

“There is a natural tension between scalability, the number of decisions a collective can make in a period of time, and resilience, the incorruptibility of those decisions. We resolve that tension with a new collective decision-making process, called Holographic Consensus, whereby small groups can make decisions on behalf of the larger majority in such a way that guarantees perfect alignment between the two.” — DAOstack architect Matan Field

Now let’s discuss DAOstack’s innovations in governance. I’ll keep it fairly brief and link to some further materials for those who are interested.

We indicated earlier that a governance system needs to be resilient with regard to bad acting or influence. So it’s important to separate monetary wealth — represented by token ownership in many DAOs — from voting rights. If tokens can be bought and sold, and tokens represent influence, then influence is for sale at all times, and we have a plutocracy, in which the wealthy few have control over the less wealthy many. (Vitalik Buterin, inventor of Ethereum, recently wrote about the increase in plutocracy among blockchain projects and the dangers of “coin-holder voting”.)

To account for the need for resilience, a.k.a. incorruptibility, DAOstack’s governance templates separate token ownership and voting power into two different currencies. DAOstack generally refers to the first — the fungible, transferable token that is a form of monetary wealth — as simply token, or GEN if we are talking about that specific token. The second — voting power — it refers to as reputation. Reputation cannot be directly transferred from peer to peer, but rather is distributed by the passing of proposals to assign reputation, or by the adoption of protocols that later result in reputation being transferred automatically. For example, there might be a protocol through which reputation is distributed for positively reviewed work.

Now we also said earlier that, in order to scale, a governance system needs to be efficient, which means having mechanisms for managing the attention of the collective. It needs to ensure that the most important proposals get attention, that those proposals get attention from the right subgroups, and that the subgroups are inclined to act in accordance with the interests of the greater majority.

This is precisely where the GEN token comes into play. GEN serves as the attention token within the DAOstack ecosystem. With GEN, you cannot buy voting power, nor can you vote with it, but you can place a stake for or against a proposal that influences whether or not it rises into the collective attention of the voters, the reputation-holders. If you stake for proposals that the reputation-holders then pass, you’re rewarded with more GEN. If you stake for a proposal that then fails, you lose your GEN. And vice versa if you stake against proposals.

This staking system effectively amounts to a prediction market that runs in parallel to the voting apparatus, and it’s at the heart of what’s called the Holographic Consensus, DAOstack’s solution to the problem of resilience and scalability. “Holographic” refers to the way in which each piece of a hologram, when separated from the whole, contains a representation of the entire image — analogous to how a relatively small group of voters can represent the interest of the greater whole.

You can learn more about the Holographic Consensus from its principal architect Matan Field in this keynote, or this Ask-Me-Anything interview video or transcript.

GEN will likely have other utility on the platform too, related to The Archives, for example. Also, GEN will be the primary currency for the buildout of the DAOstack ecosystem itself, with contributors to the platform rewarded in GEN, and even investments into projects that are built on the stack tendered in GEN — according to the collective will of the Genesis DAO.

The Genesis DAO

The Genesis DAO, I believe, is one of the most exciting aspects of the DAOstack project. Scheduled for deployment in spring 2018, it will be the first DAO created using the DAO stack, and it will be piloting Alchemy to collectively manage a fund right away.

Its mission will be to advance the DAOstack project and ecosystem, and it will be investing in proposals primarily of several types:

  1. The further buildout of components of the DAO stack, including Arc and Arc.js
  2. Support for/investments in collaborative applications (dApps) to be integrated into the DAO stack
  3. Support for/investments in organizations built on the DAO stack

Eventually, the Genesis DAO will be responsible for allocating the majority of the funds expected to be generated by the GEN token sale. Funds will be transferred to the DAO gradually over time as it demonstrates increasing stability and security. The Genesis DAO will also eventually hold the ability to mint additional GEN tokens after the initial sale.

Participation in the Genesis DAO will be open to anyone. Anyone will be able to create proposals or stake GEN for or against the boosting of proposals. Of course, not everyone will be able to vote on proposals — some amount of reputation within the Genesis DAO will be required for that.

The Collaborative Economy

“In almost every area of our lives, we have the incentive to do the wrong thing. If we all had the incentive to do the right thing, we would all be in a radically win-win situation, with a totally new world.” — DAOstack architect Matan Field

The Genesis DAO and Alchemy are, of course, just the beginning. DAOstack imagines thousands of organizations and Dapps utilizing the stack in the near future. And the intention is not just to serve each use case individually. It’s easy to imagine how, with a scalable solution for decentralized governance in place, decision-making can become more frictionless not only within collectives but also between collectives.

Indeed, this is the broader vision of DAOstack. The platform is designed to underpin an entire ecosystem of decentralized organizations — a community of interoperable DAOs, able to share talent, ideas, and learnings with one another. DAOs will even be able to act as members of other DAOs, creating a fluid “DAO mesh” or “internet of work” in which collectives of collectives are commonplace, and in which any given individual might participate in dozens of different DAOs.

Imagine what becomes possible when tens or hundreds of millions of people are participating in this kind of collaborative economy — one in which no one wields a disproportionate amount of power, all are rewarded in proportion to the value they contribute, and everyone is incentivized to act in alignment with the common good.

This is not only an exciting scenario; it’s arguably a necessary one. Many futurists believe that solutions to some of the world’s great challenges — climate, poverty, terrorism, nuclear risk, and so on — will be solved only through the power of decentralized collaboration on a massive scale, as well as through a widespread shift from win-lose (or “rivalrous”) economic incentive structures to win-win (or “anti-rivalrous”) ones.

(For more on the anti-rivalrous economy and DAOstack’s potential to help bring it about, I recommend this interview with DAOstack advisor Jordan Greenhall.)

The DAOstack project, at its essence, endeavors to use crypto-economics and other technologies to create moment-to-moment micro-incentives that, when multiplied across thousands of individuals and millions of moments, give rise to a macroeconomic climate that enables crowds to collaborate more resiliently and efficiently than any other system that has yet existed.


To learn more about DAOstack, or to get involved:

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