DAOstack Q&A

The other day, the representatives of Inc. Magazine asked us to answer some questions in service of a story they were developing about DAOstack. I’m publishing the ensuing Q&A here, with their permission, in case it’s useful for the wider community. Answers represent my own perspectives, though I did receive a good deal of input from DAOstack architect Matan Field, and in some places I have paraphrased his words.

If you have not already read the article An Explanation of DAOstack in Fairly Simple Terms, you might like to start there as it provides a more comprehensive overview of the project.

Several blockchain companies get off to a great start, but why do you think many lack the capacity to deploy their resources effectively?

Well, we see it empirically. There are many blockchain organizations today that have effectively unlimited capital at their disposal, as well as effectively unlimited people who are available to contribute — unlimited at least in the sense that neither of these are limiting factors to output. This is the case with Ethereum, which has billions in liquid assets, and it’s the case with, say, Bancor, which raised nine figures overnight last year.

The limiting factor in massively crowdfunded and crowdsourced projects like these is actually decision-making capacity. How do you deploy a billion dollars in an effective way? Not over 20 years or even 2 years, but over a few months, and turn it into innovations, turn it into the kinds of game-changing solutions that everyone who contributed those dollars, in principle anyway, is counting on? That’s not a simple task.

And you can’t well go and centralize like a conventional corporation, because that’s not what anyone signed up for, because you’d be very fragile to bad or misaligned decision-making by concentrated power-holders, and because a small leadership team does not have the capacity to process that many decisions that rapidly anyway.

You also don’t want a system in which the token-holders are the decision-makers, where the more token you own, the more decision-making power you have. That’s a plutocracy. Vitalik Buterin recently wrote a post about the dangerous increase in “coin-holder voting” we’ve seen in the blockchain space. If voting power is represented by token ownership, and tokens can be bought and sold with dollars or ETH or whatever, then influence is for sale at all times, and you have a totally corruptible, non-resilient system.

What you actually need is a decision-making framework that is both scalable and resilient (non-corruptible), which is to say one in which the interests of the common good can be represented by the fraction of the organization that is most qualified to make each decision most effectively and efficiently, no matter how large the organization. This means you need systems of reputation, which is basically equivalent to voting power in DAOstack’s suggested governance protocols, and you also need systems for signaling, which is some means of leveraging the crowd’s wisdom to determine how much attention a certain decision is even worthy of getting.

How does DAOstack improve previously nonexistent (or insufficient) decentralized governance?

Primarily in three ways, we might say.

First, DAOstack offers building blocks for governance systems that can scale up infinitely, such that large numbers of (good) decisions can be made in a small period of time, while also remaining resilient, which is to say non-corruptible by bad acting, bad influence, or bad judgment. To that end, DAOstack has innovated a system of governance it refers to as holographic, which means that decisions can be effectively made by a minority of reputation holders, with that minority virtually guaranteed to act in alignment with the interests of the greater majority. The word ‘hologaphic’ is an analogy to how each fragment of a hologram contains the entirety of the image, when isolated from the whole.

Second, and very importantly, the premise of DAOstack is not to try to engineer the right governance protocol ahead of time. Previous systems have for the most part been fairly rigid: they’ve been designed with most of the decision-making protocols prescribed in detail for the organizations that will use them. DAOstack takes a different approach, which is not to build the castle, but rather to build building blocks that can be easily configured to architect the governance system for any given organization. The idea is that there is no one-size-fits-all, and more importantly that the best solutions will only emerge over time, though rapid, market-driven evolution. DAOstack essentially represents a framework for governance experimentation, like a sandbox, or a lego set, or a WordPress.

Finally, DAOstack is a system designed for a high degree of accessibility. You don’t need to be a blockchain governance programmer to interact with it, although if you are, you can get in there and tinker with the modules, the mix-and-match smart-contract building blocks, without needing to reinvent the wheel each time. But there’s also an application layer, including a user interface called Alchemy that allows any non-technical person to participate in decentralized decision-making, or even set up a decentralized organization, with a few clicks. You can also be a front-end developer with no familiarity with blockchain or smart contracts, and there’s a JavaScript API that lets you build dApps (decentralized applications) on DAOstack’s back end.

If blockchain is so transparent, then why is governance important? How do DAOs improve communication between parties?

Well, what we’re doing is improving coordination among parties. It’s a bit misleading maybe to say we’re improving ‘communication’ per se, because that implies social coordination, whereas what DAOstack offers is scalable solutions for asocial decision-making. It allows crowds to collaborate effectively by coordinating a lot of their decision-making indirectly, which is really the only way to coordinate when you’re talking about thousands or millions of people collaborating without centralized leadership.

(This is not to say that DAOstack is against social coordination, or is even a replacement for it. It’s just two different scales of activity. Both are actually really important.)

But more to the point of what I think you meant is that blockchain, transparent as it is, is not a substitute for human decision-making. It can keep trustable records and, through smart contracts, execute decisions that have been made. These are amazing feats to pull off without a middleman or arbiter. But they are not the same as running an organization.

Governance protocols are needed in order to receive input from the human participants and produce output in the form of decisions. Which means that humans are required both for choosing the protocols, like for example whether they want a majority-rules system or something different, and also for actually providing their input on a decision-to-decision basis.

We could think of a DAO, then, as the combination of a group of human participants with the blockchain-based protocols they agree to adopt.

Why is DAOstack’s technology different from other Decentralized Autonomous Organizations?

For one thing, it’s important to note that DAOstack’s technology is not a DAO — it’s a platform for DAOs. It’s analogous to how a toolkit and the table you build with the tools are two different things.

It also so happens that the DAOstack project is launching a DAO, called the Genesis DAO, which will be the first DAO deployed with the DAOstack platform. But that’s not what your question was getting at, since you asked about the technology.

With that said, I think the previous answers pretty well cover this one, in terms of how our technology differs from previous platforms and systems.

I would also point out, though, that there are almost no DAOs in existence at this time, at least not in the way that DAOstack thinks of DAOs. The DAO movement is quite nascent, truly. Most of the experiments so far, worthy as they are, have not had systems that are very scalable, or very resilient. They have performed limited sets of functions, and in some cases they have actually been fairly centralized, which is understandable since that’s often what’s necessary to operate effectively when you don’t yet have a scalable governance solution.

How does Arc make it easier for other companies to construct their own DAOs?

Arc is a library of modules which each represent bits and pieces of governance machinery that can be easily mixed, matched, and modified to create the complete governance protocol for any given DAO.

Does DAOstack retain ownership of any DAOs/DApps users create with its system?

Absolutely not. DAOstack doesn’t even retain ownership of its own technology, at least in the conventional sense of ownership. The system is open-source and free to use, and even free to copy. There will, however, be an incentive for organizations to integrate with the system, and with the GEN token, because of the benefits of interoperability and network effect among DAOs and dApps utilizing the stack. This is similar to how organizations are incentivized to execute smart contracts on the Ethereum blockchain, even though it is also open-source and could be easily copied. Same with Bitcoin, in fact: its power is largely in its network effect.

Is it possible DAOstack’s DApps will supplant currently existing blockchains or other platforms?

Not blockchain platforms, no. DAOstack is built on the blockchain, so it’s a layer up, not a competitor to any blockchain. And the applications built on the stack are a layer up from that, as they are built on DAOstack’s back end.

Why does DAOstack use the Ethereum network?

Right now it’s really the only viable technology in existence for the purpose. It’s the only blockchain network that has full programmability, has smart contracts, and has enough maturity of not only the technology itself, but also of the development environment. If that changes at at later time, we would be interested in creating versions of DAOstack compatible with other networks.

Does the DAOstack team predict that DAOs will help blockchain become more mainstream?

Yes, very much so. One of the biggest questions within the blockchain community is what will be the killer app, the application of blockchain that will get mass adoption. In great likelihood, DAO is that killer app. Andreas Antonopoulos has spoken about this as well.

There are several good reasons to believe this:

1. DAOs solve a major problem. They improve the status of the current system in a big way by producing organizational systems much more efficient and resilient than existing structures, and therefore more capable of addressing some of the greatest global challenges.
2. Blockchain is a necessary component of DAOs. Without blockchain, DAOs are not actually scalable.
3. DAOs are flexible enough to touch a wide variety of types of organizations. They have the capability to become ubiquitous very quickly, particularly in the digital sphere, and then in the analog sphere.
4. DAOs are one application of blockchain that actually does not depend on true scalability of the blockchain itself, since DAO governance requires relatively low transaction volume. So DAO is a blockchain use case that can actually scale before the blockchain itself figures out how to scale.

How do DAOs enhance decentralized curation, and what are some ways this feature can be used?

Like we said, the essential function of governance is to intake input from agents, which we might also call members or participants, and produce output in the form of decisions. One variety of decision might be to transition funds from wallet A to wallet B, while another might be to distribute reputation or voting power to person C. Curation is just another variety of decision, in which the question being answered by the wisdom of the crowd is how to subjectively rank a list of objects like websites, restaurants, news articles, or whatever.

Like other decentralized governance systems, curation systems need to be scalable, because we might be talking about thousands or even millions of individuals weighing in on the subjective quality of thousands or millions of objects. Google search is an example of a very large curation engine, currently a centralized one of course. It’s easy to imagine how powerful it could be if it were socially curated, if there could be a system efficient enough to register and weigh the input of the crowd to rank websites on the web, in a way that is not corruptible or exploitable by a disproportionately powerful few.

Same thing with Facebook, Spotify, Yelp, and so on… I look forward to when the curators of these kinds of platforms are the users, rather than being driven by ad revenue, the gathering and selling of personal data, and so on.

What roles do GEN Tokens play in DAOstack’s platform?

GEN is the attention token of the DAOstack ecosystem. Just as gas, paid in ETH, procures the collective attention of the decentralized world computer known as Ethereum, GEN can procure collective human attention. And a prediction market, running on GEN, helps each DAO to prioritize the most important proposals.

We 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.

What is the DAOstack’s team ultimate vision for the company’s technology?

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 collectives.

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.

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.

Do developers need to be familiar with blockchain in order to build collaborative applications with Arc?

No, that’s exactly the point of Arc.js, a friendly JavaScript interface.

Are DAOs mostly for technological and finance companies, or can the technology be applied to other fields?

Any time there’s a need to harness collective intelligence of a large group of people to make good decisions together, that’s a use case for DAOs.

With that said, it’s also true that the easiest applications of DAO, and therefore probably the earliest, will be organizations in which value is produced virtually or digitally, like finance, technology, and online media. This is because it’s easiest for decisions to get carried out by smart contracts when the consequences of the decisions are digital.

The next step will be bridging to the physical world. It’s totally possible, but will require some additional elements, some kind of API between the digital and analog worlds.