DXdao celebrates two years of on-chain governance
DXdao passed two years of on-chain governance today, one of the longest histories of on-chain governance for any DAO. The community is commemorating the occasion with a special Proof-of-Attendance (POAP) token to all 183 addresses that have participated in DXdao governance over the last two years on Mainnet and xDai. The community is also using this as an opportunity to take stock of the progress of DXdao and what to focus on in the future.
DXdao (or dxDAO) started as a radical experiment in decentralization. The Ethereum community has always been intrigued by organizations that would live entirely on-chain. The story of “The DAO” caught the attention of many in the space and its spectacular collapse only further interested the community in exploring new ways of organizing humans.
Two leading Ethereum projects, Gnosis and DAOstack, conceived of the idea of a DAO that aimed to be decentralized from inception. This idea, which eventually became DXdao, hinged on distributing voting power (Reputation or REP in DXdao) to as wide a distribution of participatory Ethereum addresses across the globe. These addresses, and not Gnosis or DAOstack, would govern DXdao and decide its future.
There were three ways for anyone to earn REP in DXdao during the May 2019 distribution:
- Locking ETH or certain ERC20 tokens in a smart contract for two weeks (the original yield farm!)
- Trading on the DutchX Auction platform, which was started by Gnosis but later owned and governed by DXdao
- Swapping GEN, DAOstack’s native token, for REP to run DXdao’s Holographic Consensus
In total, 399 addresses received REP during the initial launch. Decentralization requires wide distribution. Bitcoin had years of hobby mining for its initial distribution, while Ethereum pioneered the global crowdsale with its ICO.
DXdao, meanwhile, is unique in distributing governance rights to a wide number of addresses a full year before DeFi summer. Moreover, REP in DXdao is non-transferable, so voting power cannot be bought or sold. DXdao scales by inflating REP (not diluting equity), which brings others into the governance process.
Establishing DAO sovereignty
As an on-chain entity from day 1, DXdao has focused on building products and capabilities that can be owned and governed by DXdao. Of course, one of the first things that any organization needs is a website. This is easy for a company with a mailing address, but much tougher for an on-chain organization like DXdao. How to get website approval and control into the hands of DXdao governance?
Soon after its launch, DXdao solved this problem in what has become known as the ENS Update Proposal Process and is now used for all DXdao products and sites. It works like this:
- DXdao members build a site and shares the release with the community
- A community member uploads this to IPFS and verifies the IPFS hash
- An on-chain proposal is made to point the DXdao.eth ENS to the IPFS hash of the latest release
- The website is updated when DXdao governance approves and executes the proposal.
This same process is used for every DXdao product release and website update. Only proposals from DXdao governance could change the site, trail blazing new levels of censorship resistance for DAOs.
A long history of on-chain governance
DXdao governance officially launched on July 14, 2019 and almost immediately after proposals started coming in.
The first proposals dealt with governing the now defunct DutchX exchange and setting up the DXdao.eth website, but the community’s attention quickly turned to how to raise capital for DXdao in order to fund product development. In the fall of 2019, proposals were approved that outlined a scope of work for Level K, Corkus and dOrg to build a continuous fundraising dapp that would eventually become the DXD bonding curve. Given the lack of funds in the treasury at the time, these members were paid in “DAO debt” until there were funds to pay for development.
DXD marks a new era for DXdao
DXdao approved plans for the launch of DXD in early 2020 and became the first DAO to launch a fundraiser in May 2020 with the deployment of the DXD bonding curve contracts and passage of the DXtrust.eth dapp approval proposal.
The curve was based on the FairMint contracts and used a buy-burn model. ETH deposits would mint new DXD at a continuously increasing price, while DXD could be sent to the curve or burned in return for ETH. In this model, revenue from DXdao products would be sent to the bonding curve to support the price of ETH.
The bonding curve was a revolutionary design and over 25,000 ETH was deposited into it, most of it in the summer of 2020. The community fiercely debated the merits of the bonding curve and ultimately decided to “halt the bonding curve” by making the price to mint new DXD incredibly high.
Building and governing products
As DeFi exploded in 2020, the DXdao community focused its efforts there. If DeFi is the financial infrastructure of the future then it needs decentralized governance to prevent plutocracy. As this new paradigm emerges, DXdao strives to build permissionless products that are governed in a transparent manner.
Omen, a prediction markets platform, was the first product for DXdao, coming out of a collaboration with Gnosis and built on the Gnosis Conditional Token Framework. Millions of dollars were traded on its 2020 presidential and ETH2 deposit presidential markets. DXdao governed its collateral, determined validity of markets and launched a faster, cheaper update on the xDai network.
Swapr (formerly DXswap) was conceived around the time of the bonding curve, just as Uniswap v2 launched. It has morphed into a governance-enabled AMM and yield farming platform across multiple networks.
DXdao also governed Mesa, a batch auction DEX that found product-market-fit as an IDO platform which has formed the thinking of Aqua, as well as Rails, a Layer 2 payment gateway built on Loopring but has since been deprecated. There are also inklings of a new product, Carrot, a conditional KPI token platform.
With two years of on-chain governance, DXdao has made many strides towards building a resilient, transparent, and decentralized organization. Last September, REP holders ratified the DXdao Manifesto. DXdao also passed Worker Compensation Guidelines to help onboard full-time contributors, conducting payments through on-chain proposals. DXdao also went multi-chain, launching a second base on xDai with a third soon to follow on Arbitrum.
In early 2021, DXdao ratified Governance 2.0, a unified plan for reputation (REP) and token-based (DXD) governance. The new structure aims to create a sustainable system of governance that includes relevant stakeholders and promotes decentralization.
The future of work
The pandemic has hastened the digitalization of the world and made remote work commonplace. Even so, most jobs still require a bank account and a mailing address in certain countries. DXdao’s two years of existence demonstrate that a global organization coordinating over the internet is possible, but it opens up new questions about how to build organizations on the internet.
DXdao does not own a Twitter or Medium account; trusted community members run them, because it’s currently impossible for DXdao to own a Web2 account. Since its inception, DXdao has explored new products without centralized dependencies, such as Radicle, a decentralized Github alternative that enables code repo ownership by DAOs.
As DXdao moves past 15 full-time contributors, it’s dealing with the normal scaling problems of any new project while also trying to ship products without the hierarchy of the traditional corporate world. The on-chain proposal process set forth by the Contributor UX squad aims to enable onboarding of any person in the world (including anons).
As blockchains scale, governance has become more and more important. Humans have millenia of experience in governance but none at digital and global scale. So far, only centralized organizations have scaled on the internet — can decentralized entities use Web3 tools to prevent the mistakes of the Internet giants?
The answer lies in transparent governance by key stakeholders. DXdao’s reputation-based system, particularly the Governance 2.0 system, gives everyday contributors a greater say in governance, as opposed to every other DeFi protocol that distributes governance rights based upon the amount of capital. Since REP is only earned, those building for DXdao are the ones governing DXdao.
Perhaps the most frustrating part of DXdao’s current operations now is the over-reliance on Web2 infrastructure. The tools for managing digital organizations are still in the early stages but promise a new world without lock-in or siloed data. DXdao is at the forefront of the revolution — building, funding, governing and utilizing decentralized infrastructure.
About DXdao: DXdao is a decentralized collective that builds and governs DeFi products. DXdao was spawned in May 2019 through a collaboration between Gnosis and DAOstack. Reputation (REP) is voting power in DXdao, and DXD is the financial token with a claim on profit from DXdao products.