DAOstar #1: Challenges for DAO Governance Tools

DAOstar One hosts a monthly roundtable featuring leaders across the DAO ecosystem. The following summarizes a conversation on June 3, 2022 featuring leaders from Tally, Snapshot, Abridged, Paladin, Bribe, Commonwealth, and Metagov. Edited by James Brennan and Joshua Tan.

Tl;dr:

1. The social capital currently required to change governance injects a default conservatism into DAOs that dampens their capacity to adapt.
2. Knowing which voting mechanism to implement is anything but straightforward. Token-governance has been the default, and this is to the detriment of both the DAOs themselves and the wider ecosystem as it leaves other models underexplored.
3. Those who receive airdrops often fail to change delegation; even solutions such as decaying delegation still require more engagement than currently exists. Inflating vote supply can combat the negative biases of inactive delegates.
4. The growing body of researchers and experts in Web3 still lacks an established relationship with builders. Both parties would otherwise benefit greatly from partnerships, yet this often fails to materialize due to time constraints among many other reasons.

And a small solution: traditional governments often send out paper informational pamphlets with For and Against arguments along with resources and sources when referendums are on the ballot. Protocols can use this strategy as well.

Highlights

Dennison Bertram, CEO @ Tally

“Where I think delegation fails is that it fails to keep in mind that people’s attention is a scarce resource. So you can airdrop tokens, you can get them to delegate — because they want to get your money — but then they will never think about it again.”

Romain Figuero, Co-founder @ Paladin

“Today, public goods funding is not something we’ve figured out in a scalable way to enable … organizations to have 5–10 people working full time. So we have to think, “How do we not only build DAOs, but the tooling around it and think of them as something that’s going to be able to keep running?” … The core tenet behind this thinking is that you can take much more risk and lose much more time on things that you know will not bring profitability because you don’t have the clock of venture funding running out, of public spending drying up, or things like that.”

Fabien, Founder @ Snapshot

“I think with DAO tooling the activities are less financial. It’s not like DeFi where it’s all about transfer, where you can always take some protocol fee. For many DAO tooling protocols there is no place to take a fee. … I feel like many [tooling providers] need some time to find the right way to get profit.”

George Beall, Commonwealth

“A lot of valuable conversations are happening in synchronous chats right now, which don’t enable you to go back and actually see what was being talked about and what led to a decision that was made six months ago.”

Nelson Jordan, Co-founder @ Avenue

“[Many are] starting with the assumption that everybody needs to vote. I push back on that and question that assumption. I think we need to do more work on ‘Is that the right way to run these organizations?’”

Daniel Ospina, Founder @ RnDAO

“I feel there is a disconnect between the people in the groups that have developed some of those insights, and DAO tooling organizations on the other side that are mostly builders. … We have a lot of insights … and we spend five times more just building relationships.”

Takeaways

Challenges Identified

The wide-ranging discussion brought up several hurdles encountered in governance tooling. Below, some of these are separated into two groups, however, the categories frequently bleed into one another.

Governance and Coordination

1. Discussion on governance itself can often take up a great deal of an organization’s time and thereby reduce overall efficacy rather than aid it. Disagreements over otherwise small details can occupy a great deal of time set aside for wide-ranging meetings.
2. Governance opinions and direction arise informally from the community through disparate chat rooms (such as Discord and Telegram). This creates a challenge for coming to consensus as the signal to noise ratio is high without good organization and monitoring.
3. The growing body of researchers and experts in Web3 still lacks an established relationship with builders. Both parties would otherwise benefit greatly from partnerships, yet this often fails to materialize due to time constraints among many other reasons.
4. The social capital currently required to change governance injects a default conservatism into DAOs that dampens their capacity to adapt.
5. Once communities gain control over the protocol, the direction can, for better or for worse, diverge from founders’ intentions.
6. Member engagement within a DAO is difficult to sustain.
7. Those who receive airdrops often fail to change delegation, and solutions such as decaying delegation require active engagement by community.

Models and Mechanisms

1. Knowing which voting mechanism to implement is anything but straightforward. Token-governance has been the default, and this is to the determinant of both the DAOs themselves and the wider ecosystem as it leaves other models underexplored.
2. Reliance on suboptimal tooling can prefigure poor social outcomes. Discord, while it’s the most common tool among DAOs, is far from perfect.
3. A current lack of widely available, human-readable contract and proposal design tooling harms the governance outcomes of organizations without the technical capacity to regularly employ what technical skills they have on hand.
4. Without consistent funding, many tooling projects struggle to maintain development.
5. Smart contracts sit at the foundation of Web3, however on-chain activity can be expensive at scale. Deploying new models and projects can at times be more effective than maintenance.
6. While delegation is currently popular as an alternative to simple token voting, it is not accepted as the end-all solution
7. Minimizing governance within an organization is often seen as a way to avoid its associated issues.

Going Forward

Here are some highlighted takeaways from the session. Delegation became a topic of particular focus during the discussion which indicates a need for further research and development here. At future roundtables, these insights will be built on and the questions refined.

Useful solutions

1. Automation can serve as the counterbalance to governance. Once up and running, automated system maintenance can be more sustainable than frequent political coordination.
2. Projects can be abandoned after a time. This space changes quickly and DAOs which recognize a project is no longer viable/useful can accomplish more.
3. Traditional governments often employ informational pamphlets with For and Against arguments along with resources and sources when referendums are on the ballot. Protocols can use this strategy as well.
4. Creating stable funding sources for public goods and DAO tooling can insulate projects from market volatility and enable further innovation.
5. Collaboration between DAOs can help all parties involved build faster and build better.
6. Contributors can focus their attention by participating in a smaller number of higher quality DAOs.
7. Inflating vote supply can combat the negative biases of inactive delegates.

Open Questions

1. Does everyone need to participate in governance?
2. Is one-person one-vote ideal?
3. How ought people organize around proposals and initiatives?
4. When is “governance” a useful lens to apply to decisions and when isn’t it?
5. What are the different ways one can participate in governance?
6. Which types of governance are generally better suited for which types of projects?
7. How can future collaboration on these questions be improved?

Across the Ecosystem

Our moderator, David Ehrlichman of Converge and groundw3rk, asked three questions to the DAOstar One roundtable:

1. Why do you do the work you do?
2. What are the major challenges for building DAO governance tooling?
3. What opportunities do you see that could contribute most to the growth of the market for DAO governance tooling?

Here are their answers.

About DAOstar One

DAOstar One is a roundtable of key organizations in the DAO ecosystem. We build technical standards and other public infrastructure for DAOs and DAO tooling.