Decentralization Report, by the SingularityNET Supervisory Council
This decentralization report is written by the SingularityNET Supervisory Council, headed by David Orban, Penny Wong and Esther Galfalvi as an independent researcher. It provides the backdrop in pursuit of greater decentralization for the SingularityNET organization and ecosystem.
Our decentralization report gives an overview of the landscape of DAOs, and also includes non-blockchain-based modes of decentralized coordination, and those that are self-organizing with a partial blockchain element. It provides a starting point for people who have little knowledge about DAOs and decentralization. Some aspects cover old ground for those with a background in blockchains and DAOs. However, we felt that a general overview was missing from the literature and wished to provide a grounding in DAOs, their forms, and challenges as well as exploring other kinds of decentralization.
First, we outline the definition of DAOs and some taxonomies that have been used to think about them. While there is a great deal of variation among definitions both in academia and on the blogosphere, the main common characteristic of DAOs is their capacity to release funds and where voting results are enacted autonomously in a decentralized way. Coordination, however, is not always decentralized in DAOs, which is why we have differentiated between DAO governance and coordination in our report. DAO coordination can be hierarchical, or they can be decentralized; DAOs do not automatically entail an absence of central leadership.
DAOs can fall into various categories depending on their complexity, purpose, technical implementation, or operational decisions. For example, some DAOs are self-coded while others use prefab settings on DAO builder platforms such as Aragon or DAOstack. Voting can be restricted specifically to software implementations, or they can concern all kinds of operations and governance questions. Proposals can be discussed on or off chain. Voting can take place on chain, off chain, or in a combination. Different groups of people can be involved in different kinds of decisions, or everyone can be involved in every decision. These designs each carry a set of outcomes, but they seem to be made with various levels of conscious thought and commitment. We propose that many of the issues for DAOs arise because of a conflation of voting/technical governance and coordination, where many critical processes are elided. Therefore we have divided the report into two sections: governance and coordination.
In our governance segment, we explore some of the main voting structures that can be found in DAOs and outline their strengths and weaknesses. For those with an extensive background in decentralization or blockchain voting, this will be old news. However, we have included this whistle-stop tour as there are few such overviews in literature, and to give some indication of where work is still ongoing to make voting fairer and more secure. We include summaries of one token, one vote; one wallet, one vote; quadratic voting; holographic consensus; reputation-based voting; and liquid democracy/delegated voting. We find that there are significant challenges associated with each type of voting, usually based on wallet-splitting and/or the association between wealth and voting power. Power often ends up centralized by design, system exploitation, or through voter apathy. We conclude that a combination of methods could be helpful to equalize voting, both in the voting design itself, and by combining on-chain and off-chain solutions. For many successful decentralized organizations, voting is the last event in a sequence of discussions and sometimes off-chain voting, and often serves only to ratify what is already known to be the will of community members.
In the coordination section, we introduce Ostrom’s principles for “commons-based peer production”, which provide a useful framework for thinking through decentralization by considering different functions and layers of organizations. This includes clearly defining community boundaries, appropriateness, and flexibility of rules for “local” conditions (where local could be a pod or domain in the ecosystem), inclusion of the community into creating rules and processes, creating conflict resolution mechanisms, and so on. Then we provide an organizational perspective to add depth to this set of principles, observing critical organizational and individual needs that are sometimes overlooked when DAOs are formed. These include organizational process needs such as crisis responses (which can be slowed by voting processes), roles and accountabilities and so on. For individuals, career development needs, psychological contracts, clarity over roles and responsibilities, and practical needs such as insurance, healthcare, or legal protection are all areas that may need attention when considering progressive decentralization. These are often (though not always) provided by traditional organizations. We also note the importance of organizational culture, which can be cultivated with good communication, shared vision and values, and high levels of community activity, engagement, and openness. It can also be impacted — positively or negatively — by the technical parameters of the DAO, including the number and type of communication channels, and voting structures themselves.
After this theoretical grounding, we explore some concrete models and examples of decentralized coordination. Many DAOs organize themselves into domains or pods, either formally or informally, while others are highly organic and freeform. The latter type is usually fairly limited in complexity, whereas the domain structure is often developed to handle multiple projects or key organizational functions. Some blockchain solutions are in development to handle domain structures, such as the Metropolis (formerly Orca) protocol, which includes a permissioned multi-sig wallet for each pod.
We include some discussion of non-blockchain decentralization, as this can offer insight into how decentralized coordination can function. Domain structures are used in the Holacracy model, for example, which is a non-blockchain decentralized management structure that effectively eliminates the middle management layer and splits the organization into “circles” and “roles”. We point to cooperatives as sources of valuable guidance as to how people can self-organize based on shared values. These have now started to manifest on blockchain technologies in the form of Distributed Cooperatives (DisCOs). Finally, we look to the Teal system for principles in a new paradigm: the conscious organization. These principles include fostering community participation, independence, conscious communication and recruitment practices, integration, and organic community-led evolution.
Our paper ends with a short series of recommendations and questions that the community could consider when considering decentralization, including a phased decision-making process that begins with the development of an overarching vision of how the organization would like to evolve, consideration of which people could be involved in which decisions and how those decisions should be made before moving on to the technical implementation.
You can access the full paper here:
https://public.singularitynet.io/decentralization_report_1.0.pdf
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