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A Summary of

A Prehistory of DAOs

by
@keikreutler
Gnosis Guild
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“The internet consists of transactions, relationships, and thought itself”

  • In today’s web, one could argue that only the first part of this statement is correct
  • Blockchain-based digital assets could spawn relationships via new peer-to-peer institutions taking root
  • A core application of blockchains—global digital assets, which do not rely on institutions to prove they are not being double spent
  • The utility of provable uniqueness has led people to think about new forms of finance and organizations

The TIMN Report

  • “Tribes, Institutions, Markets, Networks (TIMN)” report by David Ronfeldt. Defined the political ideology of the early internet
  • Funded by the RAND Corporation—a non-profit research/development think tank which informs the policies of the US military, government, and industry, to the present day
  • Narrative of societal evolution—humans have progressed through four organizational forms: Tribes, Institutions, Markets, and Networks
  • The report’s argument gives context to the ideology from which decentralized organizations draw—most apparent in networks (multi-organizational). New information technology emphasizes multi-organizational networks that impact institutions
  • The primary domain of networks is the “autonomous social sector,” or civil society, which is strengthened by multi-organizational networks
  • The TIMN presents a “saccharine” political image for networks

Decentralized Autonomous Organizations (DAOs)

  • Part of civil society, though not mentioned in the TIMN
  • Comes from predicting how decentralized technology will change how organizations function
  • The term emerged from the Ethereum blockchain community
  • Old definition: a capitalized organization in which a software protocol directs its function, focusing on automation and placing humans on the periphery
  • Organizational values cannot be automated/executed by code—tacit knowledge cannot be fully expressed via software
  • The first DAO became a huge spectacle in the Ethereum blockchain community, but was hacked a month after launch
  • Today, DAO is a chimeric term that varies on cultural context
  • This essay focuses on examples of DAOs in the Ethereum blockchain community
  • 2021 definition: voluntary association with the operating principles of digital cooperativism (though digital primacy will eventually fade)
  • It is critical to understand that DAOs ultimately coordinate through collective vibes
  • Today, DAO tools generally take the form of a Discord server and a Gnosis Safe Multisig (a multi-signature bank account)

PleasrDAO

  • Example of the “minimum viable” DAO
  • A collective of fans using a multi-signature account to bid on an NFT by pplpleasr
  • Repeatedly successful missions means that PleaserDAO can incubate projects by their community
  • Issued $PEEPS as their token
  • Has an elected group of individuals who manage their treasury
  • Evolving towards longer term missions—tokenization creates opportunities and challenges

A New Dimension in the Cooperative Moment

  • DAOs today emphasize open participation and economic value creation; their culture has moved toward specific niches and social connection
  • Many DAOs use the platform Snapshot for governance—hold public votes for collective decisions
  • DAO’s history is incomplete without mentioning platform cooperativism 
  • Platform cooperativism and “exit to community” have intersected with the crypto space and advocate for platforms owned, developed, and stewarded by a community of users
  • Now, it’s become clear that software protocols can exit to and build with community
  • The International Cooperative Alliance: cooperatives are autonomous associations of people united voluntarily to meet their common needs and aspirations through a jointly-owned/democratically-controlled enterprise
  • The Rochdale Principles guide cooperatives globally
  • DAOs could set more thought-out norms surrounding democratic member control, which cooperatives usually define as one member, one vote. Most DAOs use one token, one vote—means that DAO members with greater financial stake have more influence
  • Inequality—not all stakeholders have the purchasing power representative of their stake
  • Some projects have approached this by retroactively sending tokens to prior users, Regen Network set aside a percentage of tokens for stakeholders in regenerative land management to form community DAOs
  • Tokens can be easily distributed—possibility for a new form of token holder company 
  • Stakeholders with tacit knowledge benefit governance, so we should focus on both token distribution as well as decision making mechanisms
  • Tokenization introduces more financialized relations. For DAOs that want to create economic value, the token is useful on three fronts:
    • Bootstrapping funding
    • Distributing Governance Rights
    • Aligning Ecosystem of DAOs
  • Tokenization introduces the expectation of co-ownership of its assets from the beginning
  • Equitable token distribution/mediation/governance is important because many tokens that double as governance rights can be sold on secondary markets
  • DAOs could introduce other forms of decentralized governance into cooperatives to directly address dilemmas that cooperatives face
  • By embracing cooperativism as a protocol, DAOs could create a cultural space that can be crafted beyond old divisions

Guilds and MMOs

  • Many DAOs resemble enclaves from other online cultures, especially the guilds in massively multiplayer online games (MMOs)
  • In MMOs, players form groups called guilds to accomplish goals too lofty for single players
  • Cultural patterns are present in guilds, and mismatches occur between the tools available in the games and the guild’s actual needs—many guilds develop their own tools
  • Parallel to DAOs—DAOs use a combination of composable tools rather than platforms that anticipate too many use cases for participants
  • Guilds often embrace economic practices of redistribution—Dragon-kill points (DKP, an allocation system) are most relevant for DAOs
  • At the end of a mission/”raid,” loot from the slain enemy must be distributed. Perceived fairness is critical to members with different skill sets working together again
  • Guilds often move from random distribution to distribution weighted by participation, to distribution based on an informal scoring system like DKP
  • Example: the Leftovers DKP system
  • DKP makes the exchange of time for goods possible, and signals a player has meaningfully participated in raids over time. Precedes the mechanics of DAO platforms in development now (reputational tokens in DAOs provide greater voting power that only amasses over time rather than with participation)
  • Guilds resolve disputes outside of court systems, despite the fact that expensive stakes are at play—highly relevant for DAOs
  • Guilds have articulated economic structure similar to market socialism (though most players would not politically embrace this label—shadow economics)
  • DAOs still retain a powerful ambiguity, which could be co-opted to several different ends. How do we cultivate DAOs that can build solidarity across ideological divides?

A Constellation is Born

  • Many proponents of DAOs believe DAOs could out-compete by out-cooperating the modern firm
  • Companies arise when the services priced by the market should be more efficient because markets create unaccounted for transaction costs. The size of firms may have practical limits they can’t exceed
  • DAOs aspire to become more efficient as they get larger—use technical governance protocols to reduce transaction costs. Still have a long way to go
  • The assumption that all tools create useful cultural patterns and tool-centric development must be reconsidered. Use highly composable tools

Layers of the DAO

  • Long-term problem: distributing ownership to specialized, squad-like entities (similar to gaming guilds)
  • Effective DAOs are more like networks of teams
  • Layers of a DAO
    • Token
    • Teams
    • Missions
  • A heterarchical network emerges
  • When prioritizing distributing ownership, tokens allow DAO networks to be controlled by members
  • Tokens, teams, and missions should be represented by token ownership in more than one DAO—the purpose of tools is to facilitate collaborations across many teams/DAOs

Future Networks

  • DAOs operate on our sensory nervous system, but may reorganize/reshape/redistribute the material world, as well
  • DAOs have legitimate political relevance (DAOs vs. PACs). Introduce new forms into traditional political participation that emerge from the network union
  • DAO should stand for “decentralized avatar organizations”—recognize the coming “virtual zeitgeist”
  • DAOs can learn from their prehistory/move towards a syncretic theory of organizations
  • DAOs are less protocols than they are high stakes, interweavable game worlds
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