DAO is an attempt at a new way of human organization, through the blockchain to make the entire process of governance efficient and credible.
Written by: PAKA Labs
Foreword: DAO, Sociology on the Chain
Francis Fukuyama reveals the essential source of the birth of order in contemporary civilization in the book “The Great Break”: “It is no longer considered to be the top-down grant and acceptance of political or religious hierarchical authority, but is considered to be based on scattered individuals. The result of self-organization on the previous page.” In a world of blockchains without authority, no coercive external forces, self-organization, and full of single games, the exploration and construction of order generation may be the most interesting and important intellectual development.
Since the first day of the birth of the blockchain, all contributors have been sending ideas to a basic question, which is also the question of the world’s encrypted organization: “How will the dispersed individuals in the information vacuum environment be formed? Unify the goal and work together to achieve this goal in collaboration?”. In the real world, the influence of social norms is so low that a new discipline, sociology, has been produced. In the encrypted world, organizational relationships are defined as consensus by code. The unique product born from the original blockchain has also received a name full of Oriental Zen flavor: DAO.
DAO is not only a sociological concept, but also a paradigm of organizational relationships, and even became a buzz word when the crypto world broke the circle. Bitcoin itself can be understood as the earliest DAO. After 12 years of growth, DAO, like all collaborations, will produce the division of labor and development of participants, and it is necessary to follow the context of DAO to look at its future. Well, let DAO it!
Overview of the development of self-organization on the chain
DAO’s conceptual logic differentiation
DAO, as a collective decision-making organizational governance paradigm, corresponds to the blockchain tech stack in three forms: protocol-level consensus, application-level decision-making, and middleware services.
Protocol layer governance
- Starting from off-chain governance Bitcoin Ethereum BIP EIP non-formal negotiation model
- On-chain governance Decred, Tezos, Polkadot automatically perform upgrades
Application layer governance
- Financing type: The DAO→ Molon DAO
- Business decision type: MakerDAO→ Dapps DAO modules
Governance middle tier
With the refinement of the division of labor, tools such as Aragon, which are used to create and manage DAOs, have appeared in the market. And Snapshot and other proposal integration platforms.
Aragon, DAOstack→SubDAO
The development of DAO and the development of the crypto market are also following each other. In the pre-Ethereum era, DAO is embodied as Bitcoin’s on-chain consensus and community governance. With the diversification of the underlying public chain, here is the first differentiation of DAO implementation methods. The formulaic negotiation model of off-chain proposals represented by BIP provides continuous support for network upgrades, but there are still disputes over development efficiency and on-chain execution. Some communities believe that more events should occur on-chain, and decred has appeared. And tezos and other chains automatically execute the upgraded governance logic. In Dash, DashDAO, a node dedicated to governance work, was born.
After the launch of Ethereum, the watershed event “The DAO” appeared, the earliest financing DAO project, which culminated in the successful raising of US$150 million, and ended with the theft of funds. Although the project fell rapidly, the model of “creative projects get financing from the community, and DAO token holders can enjoy future benefits” has been retained and has become the basic logic of the currently popular venture DAO. The Moloch, the prototype of the financing DAO, inherited this logic in its concise functional design.
The development decisions of the underlying technology may be more concentrated among crypto enthusiasts and geeks, and the scope of participation in governance cannot be expanded, so governance can only be the self-entertainment of a few people. Encryption users start to participate in governance extensively and personally, often starting from the application layer. MakerDAO is not only the originator of DeFi, but also the beginning of the practicality of DAO. This kind of application layer protocol directly facing end users makes people truly feel the rights they enjoy as currency holders.
Before DeFi formed a prairie fire in 2019, due to the relatively concentrated economic distribution of tokens for most projects, coupled with the limited scale of funds and users, voting governance has not yet become a normal operation for crypto players. And some visionary practitioners recognize that DAO, as the prerequisite for the organization of the crypto world, is an essential requirement for any community-based organization. The DAO service platform represented by Aragon (2016) and DAOstack (2018) has provided DAO tools for thousands of community-based projects, and has deposited hundreds of millions of dollars in governance. According to incomplete statistics, the number of DAO participants has exceeded 60,000 addresses, which has increased by more than 60 times from 10,000 at the beginning of last year.
With the rapid development of the scale of the encryption industry and the refinement of services, DAO is also evolving rapidly. While Ehereum’s competitive ecosystem is developing rapidly, its organizational paradigm is also seeking innovation. Polkadot adopts the mode of timely upgrade of on-chain governance at the protocol layer, and the multi-chain architecture also provides new development soil for DAO. Different from Etetherem’s “strong application and weak protocol” status, rising stars like Polkadot rely on powerful tool support to provide a silky development experience for the project to help the application to be implemented at low cost and efficiently. In this environment, a strong infrastructure is a necessary guarantee for late-comer advantages. As a necessary component, the value of DAO’s service platform is particularly precious. SubDAO came into being. It helps the Polkadot ecological project to create and manage DAO agilely, and can become a solid middle platform for the entire ecosystem, further realizing the value capture of DAO.
Application layer DAO specific scenarios
According to actual use cases, it is more widely present in all projects: According to the statistics of Deep DAO, Aragon is now the largest DAO platform, supporting more than 1,300 various decentralized projects. There are relatively few decentralized communities on similar platforms DAOstack and Colony. What is interesting is that dozens of forked communities have been generated based on Moloch, which is the most common DAO model in financing.
According to the scene classification of the application layer, we discuss the mechanism of DAO in the following environment.
DAO application scenario classification
1. Financing Scenario
- Purpose: To create a decentralized incubator for funding investment or grants to provide support for project development
- Moloch dao, Duckdao, Marketing dao, DAOSquare, DAOX, DEPO
- Extended application: Initial DAO Offering
Let’s take Moloch as an example to understand the principle of financing as DAO and its original scenario as a financial business.
Moloch
The Moloch DAO that appeared in 2018 was created to manage the funding of Ethereum 2.0, which is an ongoing Ethereum expansion plan. The design of v1 provides a classic paradigm for on-chain DAO investment, and the supply-demand negotiation mode of early investment forms the on-chain specification through simple and elegant code. a Minimally Viable DAO.
Moloch can be described as two main smart contracts:
- Moloch.sol- Responsible for managing members, voting rights, submission of proposals, voting and processing voting results
- Guildbank.sol (Union Bank)-responsible for the management of union assets
Financing when new members join
SHARE’s original assets are minted and distributed to new members, and new members are introduced by the original members’ proposals. SHARE is not transferable, but the corresponding ETH can be withdrawn from the union bank. The fact that new members join the association actually realizes the event that old members invest in them. Old members deposit 10 ETH and initiate a proposal. The proposal specifies the number of shares allocated by new members. Share holders vote for or against. The distribution will be realized if the vote is passed, and the status quo will be maintained if the vote is passed. Members who are dissatisfied with the voting result can use “retire” The function exits the organization.
Forks of Moloch
In 2019, developers in the Ethereum community forked the code. This fork was used to modify smart contracts to develop more complex DAOs. For example, MetaCartel Ventures and Marketing DAO, which are able to allocate and transfer shares and other assets among members. Since then, the profitable DAO MetaCartel Ventures, which focuses on early investment in Ethereum projects, has raised nearly $24 million from its 64 members.
In addition, DAOs like DuckDAO and DAO Maker also operate token public offerings. DAO Maker’s rSHO has even been recognized by regulators in Malta. The project uses on-chain address analysis to find historical transactions to identify applicants who may become long-term token holders and train them to become valuable community members.
2. DeFi scenario
In the governance of the respective projects at the application layer, the business model is different, and the governance content is different. The following scenarios are more representative:
DAO module in DeFi:
It is mainly used to determine the key parameters of the DeFi business in a decentralized manner. Starting from MakerDAO, the governance of Uniswap has become a landmark transaction of on-chain activities, and has been widely marked as a standard for screening qualified users (such as using MakerDAO). On airdrop)
Cross-chain liquidity DAO:
Represented by BadgerDAO, BoringDAO and LidoDAO, it aims to solve the centralization problem in the process of asset cross-chain.
3. NFT encryption art scene
A DAO project focusing on encrypted artwork investment and ecological construction. As the NFT boom (or bubble) reached its peak, the DAO formed around NFT also attracted people’s attention. The clear purpose of Pleasr DAO was to win Pplpleasr artworks. Since then, the DAO organization has purchased three more artists’ works and plans to continue investing.
However, it is not the first DAO dedicated to NFT. Flamingo DAO is a project initiated by LAO in October 2020. According to Wright, the company already has 40 members, a $10 million fund, and has acquired about 6-700 NFTs, including NBA Top Shot cards and the rare CryptoPunk.
4. Service aggregation scenario
With the increase in projects, there is a strong demand for DAO. DaaS (DAO-as-a-Service), which specializes in providing developers and projects with convenient and easy-to-use standardized modules that integrate DAO, will become a standard configuration in any blockchain ecosystem. .
DAO ecology at a glance
The scale of asset management is one of the best in the encryption ecosystem. Only the dozens of the above-mentioned projects counted by Deep DAO have deposited assets of more than US$700 million. Take the independent ecology of Ethereum as an example. In an economy with a current market value of approximately US$1 trillion, the cost of funds for organizational collaboration is only 0.07% of the market value. On the one hand, we can understand that in the crypto world, people can collaborate at a very low cost. On the other hand, it shows that the entire DAO market still has great potential.
(Data source: DeepDAO Data acquisition time: May 19, 2021)
The development and prosperity of Polkadot, which is catching up with the state of the ecosystem, also has strong demand for DaaS. SubDAO plans to become a parachain of Polkadot, a decentralized DAO platform service platform that supports high customization, low development costs and multi-asset support. In addition, the project is actively exploring diversified usage scenarios, attracting more partners, and ultimately becoming a booster for ecological development, providing a complete and easy-to-use governance module for the project, promoting refined governance, specialization and division of labor The efficiency of decision-making is improved.
DaaS value capture
In the traditional world, it is difficult for infrastructure to accumulate and capture the value it carries, and it is often used as a public item to output positive externalities. In the encrypted world, the value of the protocol layer has been verified, and middleware and tool-type projects can also become sedimentary value through reasonable usage scenarios and tools.
Aragon has established a good model for the value capture of general governance infrastructure. The project ANT token combines the dual value of management value and utility token. First of all, we need to understand that Aragon has established a governance jurisdiction with a non-legal concept on the chain, and distributes governance as an economic activity in this jurisdiction. As the Aragon-based project belongs to its jurisdiction, when participants disagree, the Aragon court is set up to establish its jurisdiction rules and resolve conflicts within and outside the organization. The project token ANT, as an incentive for jurors and basic transactions, has overall supervision power. Specifically embodied as (Source: Placeholder Blog)
Management attributes: it has planned future economy and enhances its stored value status in the Aragon jurisdiction
Court pledge: Mortgage to the court system by casting ANJ, and the jury members need lock-up guarantee
Verification of pledge: used for pledge and payment of Aragon Chain by casting ARA
In the SubDAO system, the project token GOV contains the dual value of the utility token of this parachain and governance incentive rights. First of all, GOV will be used to pay the network fees to the node maintainers, and also to vote for the election of the SubDAO council. In the SubDAO network, the creation of governance pools by organizations will incur a certain opportunity cost of funds, and these organizations can obtain GOV benefits through mining, and governance pool asset certificates and GOV can be combined to obtain higher benefits.
Based on the DAO infrastructure of Polkadot ecology, SubDAO provides Polkadot developers with a complete set of convenient and easy-to-use DAO development tools and management systems, and plans to implement intelligent asset management, reputation systems, im and other application scenarios. In the future The exploration of GOV will also realize more use cases of GOV.
It is still not the “final form of governance”
In the real world, Fukuyama once asserted in “The End of History” (The End of History) that democracy will “become the ultimate form of governance in the world.” Obviously DAO has not yet appeared. DAO is an attempt at a new way of human organization, through the blockchain to make the entire process of governance efficient and credible. However, the current DAO is far from being asserted as the final state. Code security risks and legal risks are original issues that cannot be ignored. The lessons of The DAO have taught us a vivid lesson. In addition, DAO still has many optimizations in its mechanism.
1. A series of deficiencies caused by insufficient governance incentives:
The problem of low voting rate is still a constraint, the governance pledge rate is much lower than the overall industry pledge rate (Governance Staking vs DeFi TVL is still several orders of magnitude difference), the scope of participation is limited, the attraction of funds is limited, and the support for new projects is insufficient, which is a vicious cycle.
2. The uneven development of each ecological DAO:
At present, the main DAO organizations and tool chain platforms are concentrated in the Ethereum ecology, but Ethereum has attracted the main resources in the entire encryption market. For related ecology and heterogeneous ecology outside of Ethereum, the insufficient development of DAO will reduce the vitality of the community and the market. Subject diversity.
3. Fragmentation of functionality and mobility:
The liquidity of financing DAO is fragmented, and the functions of each governance platform are isolated.
4. The contradiction between efficiency and decentralization:
Coordination and agile actions are far inferior to centralized decision-making, which is easy to split the project, or miss strategic development opportunities in decision-making swings.
5. The performance of the chain:
Scalability and high gas fees are the problems of Ethereum and also obstacles to the development of DAO. In response to this situation, projects such as Metis are building so-called Layer 2 solutions, while other projects believe that transactions need to be kept on the chain. This has fallen into another debate about the lack of decentralization of Layer2.
In summary, the development of DAO is still a long way to go. In the emerging ecology, we look forward to projects such as SubDAO to bring new breakthroughs to DAO by solving incentive problems, realizing cross-chain asset management and interaction, and expanding application cases.
development trend
0. Integration of DAO and corporate governance
In April of this year, dOrg became the first DAO in the United States to be legally recognized. The Wyoming State Senate approved the legal status of the DAO, a decentralized autonomous organization, through its first committee member, and gave them the ability to be a limited liability company (LLC). This makes the virtual digital management jurisdiction on the chain have also been given the identity of the jurisdiction under the chain, and we can expect that the accompanying DID will also gain a place in the evolution of contemporary TechReg. Sociology on the chain will affect the organizational structure and social form in the real world, which may be another exciting paradigm shift in modern society.
1. DAO will also become the traffic entrance of the encrypted world
Each public chain ecology will form a complete financing DAO, governance DAO and DAO tool platform system. Developers only need to invest the minimum cost to adopt DAO, and users will also more easily join. The refined development of the DAO tooling platform will eventually make DAO extremely easy to be adopted and become the same basic construction as wallets, browsers and Oracle. The DAO platform, which is the first to provide richer public chain ecological expansion, more complete SDK tools, and more robust modular functions will also become the entrance to the encrypted world.
2. Composability with more tracks
Decentralized identity system: The identity reputation system based on DAO enables users participating in DAO to generate precious value data, provides tools for credit rating, on-chain identity review, and diversified scenarios. It is a key part of combinable building blocks.
Normalization of governance incentives: Inflation incentives to participate in governance will become the basic yardstick of yield in DeFi
Combination with other modes : such as NFT+DAO
At present, we have seen that some projects are seeking various possibilities for the scalability of DAO. Especially in the direction of finance, Automata buys and sells governance votes to create such a lending system. SubDAO plans to provide a personal reputation system based on on-chain governance behavior and provide support for on-chain financial services.
3. Capital absorption capacity will become a key indicator for evaluating the DAO platform
The development and struggle of DAO is mainly manifested in the optimization of voting rate incentives and governance pledge mechanism, especially DaaS. Its management fund scale (AUM) is a key indicator to evaluate the competitiveness of the platform. It is similar to the DeFi traffic competition period and uses an innovative model. Attracting the amount of governance funds will make the project a track runner, and SubDAO’s governance mining model is already being demonstrated.
4. Establishment of industry-based key indicators
After the maturity of the DAO track is improved, a tracking indicator service tool will be formed to provide a more valuable basis for decision-making for the entire DAO market. We believe that a vertical data and other tool service ecosystem will be born for the DAO module.
5. DAO Venture may be the true form of VC in the crypto world
DAO will assume a stronger early value discovery function. With the improvement of platform functions and the improvement of network effects, DAO will accumulate more outstanding projects, gather larger-scale basic funds and unite the most active and enthusiastic practice and promotion of ecological development. By.
Reference materials:
1. DAO: A Decentralized Governance Layer For The Internet Of Value
http://sammantics.com/blog/2020/5/20/dao-a-decentralized-governance-layer-for-the-internet-of-value
2. Placeholder: ANT economic model
https://mp.weixin.qq.com/s/7D9GFT4t8eGhQszTFaievQ
3. Interview with the founder of Moloch What is Moloch DAO, a popular blockchain governance project? Why is it so important?
https://mp.weixin.qq.com/s/vxjABEIAiGVK8jMo-SndwQ
4. Daniel Kronovet: Aragon, DAOstack, Colony, Moloch: Comparison of four typical Ethereum decentralized organizations
https://blocking.net/15522/aragon-daostack-colony-moloch-comparison-of-four-typical-ethereum-decentralized-organizations/
5. List of IOSG DAO projects
https://www.notion.so/DAO-a07427e6fe9248a8a28a0a3330ed49cf#0f4918cc407145d389375f7ca00f7461 6, What can we 6. do with a DAO in 2020?
https://daobase.org/what-can-we-do-with-a-dao-in-2020/
Source link:mp.weixin.qq.com
