HOPR Basics: Intro to the HOPR DAO

Previous editions of HOPR Basics have focused on the technical side of HOPR: how the protocol is built, how it works, and why it works that way. We’ll return to these concepts early next year as the HOPR protocol enters its next phase, but for now we turn to a different but no less crucial part of HOPR: governance and the HOPR DAO.

Over the next few episodes, we’ll be looking at how the HOPR DAO is being built, what it’s for, what risks and problems we’re trying to avoid and what the long-term goals are. Most importantly, we’ll be looking at ways in which you can get involved and make a difference to the direction of the HOPR project, regardless of your technical expertise or the number of HOPR tokens you hold.

DAO Basics

DAOs are a hot topic in crypto, but they can be very hard for newcomers to understand. DAO stands for “decentralized autonomous organization”, but this doesn’t exactly make things crystal clear!

The simplest way to think of a DAO is an organization with no centralized leadership. This is a strange concept, but it comes with strong advantages: without centralized leadership, a DAO is free to operate untethered to any particular people or locations.

There is also increased transparency and security because thanks to the blockchain everyone can be certain that the rules governing the DAO are being implemented accurately, consistently, and without manipulation, both internally and from outside forces.

The legal status of DAOs is still uncertain, but one of the most exciting opportunities DAOs represent is the ability to connect people across borders and jurisdictions. A DAO structure can be used to manage everything from a book club to a multinational organization. It also provides opportunities to participate privately (although allowing people to participate fully anonymously introduces its own risks which we’ll cover later).

Decentralization brings with it a whole new way of working and making decisions. But it also creates a whole new set of problems. In the absence of traditional hierarchies and power structures, people still need a way to plan and reach decisions. These coordination problems were impossible to resolve before the development of blockchains.

Trustless Coordination

A blockchain (or other decentralized ledger) provides a trustless and tamper-proof source of information that everyone in the DAO can agree on, as well as a way to track and manage participation in the form of votes using tokens. These voting tokens can be the same as the project’s main token or a dedicated governance token, and voting can be based on token balances, simply holding any tokens, or even more complicated systems. The nuances of this are a subject for a later episode, but the point is that blockchains provide a way for people to participate in a DAO from anywhere and be confident that their participation is being handled fairly and transparently. Thus no leader or arbitrator is required to run and oversee DAO processes. Of course we may still want those roles in some form, but the crucial point is we’re no longer required to have them. This is a momentous development in how humans can structure their organizations.

Why does HOPR need a DAO?

But just because something is possible, doesn’t mean it’s a good idea. So why does HOPR in particular need a DAO?

By providing transport level privacy, HOPR is an essential part of a private and decentralized web3 ecosystem, acting as a base layer which all other applications can run on top of. This makes it fundamental infrastructure, similar to the roads, pipes and wires which underpin our physical societies.

Because HOPR provides such vital infrastructure, it is crucial that it shouldn’t be controlled by a centralized authority. This isn’t just about negative concerns about the people in charge (for example corruption, mismanagement, or even just bad priorities): having a centralized point of control is a potential source of weakness even if the best people are in charge. A single leader can suddenly become ill, or can be put under pressure by people with malicious intent. Being based in a particular place potentially brings legal issues based on local laws.

All decentralized projects need a way to coordinate and make decisions, but not every crypto project has or needs a DAO. Bitcoin is a prominent example of a crypto project that works with very few formalized governance structures. And there are plenty of examples of crypto projects with DAOs that display limited effectiveness, often due to a lack of engagement or an imbalance in token holdings which centralizes decision-making power even though the process itself is decentralized.

But HOPR is more than just the protocol. It’s also the basis for an ecosystem of research, development and outreach to the non-crypto world. There are far more decisions to be made than just the parameters which govern the protocol (although these also will need to be regularly updated). Therefore HOPR needs a formalized governance structure in the form of a DAO.

Building a HOPR DAO

Of course, all this is a long way off. HOPR is still at an early stage of its development, and it makes sense for a lot of direction to come from the creators of the project, in this case the HOPR Association and its members.

But good governance can’t be implemented overnight, and there is a lot of balancing and optimizing to be done. It’s important to start the process early so we can be sure that everything is in place for when the HOPR project becomes a true DAO. One major risk of transitioning to a decentralized and leaderless state is that the genie can’t be put back in the bottle.

What’s happened so far?

Despite taking a cautious approach, HOPR has already made huge strides towards becoming a DAO. The launch of the HOPR token was handed over entirely to a proto-DAO called the Genesis DAO, with none of the funds raised at launch being controlled by the HOPR Association.

Since the launch in February 2021, there have been two DAO experiments based on a Swiss system of semi-direct democracy. The HOPR Association provides a topic to be addressed, community members put forward proposals which address the topic and gather support from other members in the form of signatures. The proposals with the most signatures are then put to a vote using HOPR tokens. We feel this system provides a good balance between giving a voice to everyone while respecting the higher investment of people with larger token holdings. Of course there are still many factors to balance and optimize, but we feel we’re off to a strong start, as demonstrated by the high level of participation in these experiments relative to other crypto projects.

Next time we’ll be looking at this process in more detail, including some of the most important factors we’re trying to balance and how the HOPR DAO will evolve over the coming months. Until then, you can check out more information about the HOPR DAO by visiting the DAO category of our Medium blog.

Sebastian Bürgel,
HOPR Founder

Website: https://www.hoprnet.org
Twitter: https://twitter.com/hoprnet
Telegram: https://t.me/hoprnet
Discord: https://discord.gg/dEAWC4G
LinkedIn: https://www.linkedin.com/company/hoprnet
Forum: https://forum.hoprnet.org
GitHub: https://github.com/hoprnet

Previous HOPR Basics Episodes:

Episode 1: What is HOPR?
Episode 2: What is Metadata?
Episode 3: Anonymous Routing
Episode 4: Mixnets
Episode 5: Incentives
Episode 6: Proof of Relay
Episode 7: Tickets and Payment Channels
Episode 8: Probabilistic Payments
Episode 9: Cover Traffic
Episode 10: Cover Traffic Nodes
Episode 11: Balancing Cover Traffic
Episode 12: Intro to the HOPR DAO