The (non)sense of DAO’s for the Wintergatan Community

--- title: The (non)sense of DAO’s for the Wintergatan Community tags: DAO, Wintergatan, blockchain, communities --- # The (non)sense of DAO’s for the Wintergatan Community In his latest video, Martin voiced his interest in DAO’s and seeing what they can do for the Wintergatan Community. DAO’s are Distributed Autonomous Organizations. In essence it is a digital version of a Cooperative or LLC, utilizing technology to become transparent and truly decentralized and democratic. This document tries to explore how they can contribute to the Wintergatan community, what the good and bad sides are, and explore the alternatives. Everybody is invited to comment, and if people are interested in collaborating on this document, both with arguments for or against, please contact me and I can invite you to edit this doc. The question whether DAO’s are a useful tool is two-fold. There is the organizational question whether a DAO style structure fits the community or not. And if it does, there is the question whether the technical tools that are part of DAO’s are the best tools to use, or if there are other tools that can achieve the same goal, or maybe even be better. The first question needs to be answered before it makes any sense to even look at the technical tools. ## TL;DR DAO's are digital Cooperatives/LLC's. They are fully flat and democratic organizations, that use tools of distributed data storage and computation to ensure that no specific person is needed in either the decision making proces or the maintenance of the infrastructure needed to facilitate that process. With that, it removes the potential for bottlenecks or conflict that can arise if a single person or small group of people control a community. Decisions are made by voting and anybody can table proposals without any prior approval, or cooperation from anyone. The process of proposing plans and voting on them is fully automated. Furthermore, the distributed storage and computation means that there is no infrastructure to maintain beyond peoples personal computers, or people or work needed for infrastructure maintenance. So even if 98% of a community would leave, the last 2% could still continue using it without any downtime or issues. Voting decides which proposals the community thinks are good ideas and want to spend time and/or resources on, and which it doesn't like. Voting is awarded to people by merit, and that process too is predetermined and automated, so out of the control of any individual. The more people contribute to the organisation (as determined by the community itself), the more voting right one can earn. But anybody is welcome, and anybody can contribute, make proposals and get a vote in the decision making process. ## What is the problem that needs to be solved? Traditionally DAO’s come from the financial and crypto world, so a lot of the narrative around them is rooted there. This is unfortunate because that world is very polarizing (for many valid reasons), which makes it hard to separate the two and look at DAO’s objectively. But essentially DAO’s are just a digital/web native version of an LLC or Cooperative. Just like LLC’s are used for many different types of businesses and organizations, there are many different areas where DAO’s can be useful. Here I try to focus on the way they can be useful to (volunteer run) web native communities, possibly centered in the maker and content creator scenes. DAO’s stem from the realization that in online, globe spanning communities and organizations, the traditional pyramidal shape in which communities and organizations are governed is difficult to maintain, while emerging technologies and tools can solve problems that took a lot of time, effort and infrastructure from people in the past. In (online) communities there is often a huge pressure and workload on a small group of core people to maintain the community. Responding to questions, moderating discussions, channeling ideas, managing projects and generally making sure people feel welcome and happy is a huge challenge for a community, and the weight of that usually falls on a small number of shoulders. The people outside that core group may not really know what’s going on and may not feel like they are a real part of the community. The small core group feels responsibility to keep the community going and is afraid that if they step away, the community will suffer for it. They often have a vision for where they want to take the community, but may have a hard time to communicate it, and may not know if the larger community agrees. Or the community might even disagree. The community on the other hand may be full of energy and ideas about things they want to contribute but if the small core group needs to approve or manage all initiatives and wants to keep control of the community, they can become the bottleneck holding the community as a whole back. This can lead to frustration in both directions, even though they all want what’s best for the community. Especially with online communities, where people may never meet each other in person, and or don’t know each other well, this is a much bigger challenge than in small geographically concentrated organisations where people know or see each other frequently. ## So how can DAO’s help? Stimulate initiative from anyone. If your ideas fall on deaf man’s ears, they may just not be a right fit for that community. But at least it’s the larger community as a whole that your ideas don’t fit with, not any particular individual. Financial incentive potentially. No paperwork to set up bank accounts, legal entities and all the related paperwork. Transparent. Ownership. Removing at least the decision making bottlenecks. ## How can the technological tools of a DAO help? DAO’s use the blockchain for implementing the voting system and administering the rules of the DAO. But why do you need blockchain for that? In essence, the blockchain, especially in combination with smart contracts, are a form of combining distributed storage of data, and distributed computing. Think of distributed storage as something like Bittorrent. Instead of a central server to store files, everybody has the files on their own computer. I can delete my files, but nobody else is affected as long as there is someone out there with a copy. And as long as someone keeps their bittorrent client running, the data is available to everyone. Distributed computing is similar to things like Folding@Home and Seti@Home, where instead of using a massive central supercomputer to solve complex computational problems, everybody’s own computer is helping out with the computation. The blockchain combines the two. It allows data to be stored in the blockchain itself which is distributed to all participants, but also stores the algorithms (smart contracts) to process that data. Everybody’s computer that takes part in the system has a copy of that data, and can use the algorithms in that data to process new data coming in. So far this has nothing to do with DAO’s specifically. It just describes the blockchain, and smart contracts. What DAO’s add on top of that is a way to agree about changes to the rules in these smart contracts/algorithms.DAO’s are just a mechanism to define rules in smart contracts, and record who has how many votes, and what the rules are to change the smart contracts. Lets expand on the analogy of bittorrent: Let’s say you share a lot of stuff on bittorrent, and you’re tired of all the people that only download your stuff but never contribute back. You might want to change the bittorrent protocol so that the download speed of people is proportional to the amount of data they upload. So people that upload a lot (contribute a lot) are rewarded by getting higher download speeds. But since the bittorrent protocol is governed by a central authority (company actually), you have to convince that central company to change the protocol. Even if the majority of the users of bittorrent agree with you, if you can’t convince the central company, the protocol won’t change. If it’s open source, of course you can fork it to make your own version, but now you are creating 2 communities, and forcing people to choose. And you are now also forced to become the maintainer of that new protocol, instead of just contributing a 1-off change, which may be a responsibility you don’t want to take on. So there is a big barrier to take initiative, and the bittorrent company is the bottleneck. What the blockchain and DAO’s on top of them do is set the rules to make changes to the protocol. Anybody can propose a change, and the mechanism of proposing changes and voting is automated. If enough people vote for it, the change will happen. You can for instance define the rule that with every uploaded gigabyte (contribution) you gain karma, and with that karma you can choose to buy a voting stake in the community. You could also opt to set caps to the number of votes any individual has, to prevent people from controlling the community by just uploading a lot. Since the smart contracts are bascially just code and data, any rule can be made. The difference with technologies like bittorrent is that taking initiative and contributing is rewarded in the design of DAO's, and with enough contribution to the community, you can get an ever growing say in the community governance. A webapplication that does the same can easily be built, and existing tools may also provide useful functionality in this area. But any individual or small group of individuals that is needed to maintain or change the infrastructure, automatically become the bottleneck in those changes. Both in their time expenditure but it can also be their attitude as a gatekeeper. And as such, they automatically have more power over the community. Shifting priorities and interests, and especially conflicts within or with that group of people, can lead to systems going down, and the community scattering as a result. There are plenty of examples on the internet of communities where this happened. There are definitely technical solutions to recover from these situations, with database backups, keeping code open source, etc. But by using distributed computing and storage, you prevent the problem, instead of providing a solution to recover from it after the fact. Since all the computation, and all data storage, is always with everyone, nobody controls it or can take it away. ## Relevant examples of DAO’s ## Why are DAO’s a bad idea? * Currently DAO's are mostly used by communities that are already invested in the crypto world. Most people that start or are member of DAO's already know the crypto world quite well. The opportunities outside the crypto world are massive, but the adoption is still lagging behind. This means that for communities like the Wintergatan community, the learning curve can be steep, and some people will definitely drop from the community because of it. * Gas fees: DAO's are centered around the Ethereum Blockchain. If a DAO wants to allow people from the general public to join, and allow them to use their fiat currency to start them off in the DAO, the gas fees for moving ETH to tokens used in DAO's are substantial. It can easily cost $15-20 USD for a transaction. And often you may need to do 2 or 3 transactions. So if you want to take $50 of fiat currency over to a token of your DAO, you quickly don't have much left. Solutions could be to offer ways to gain the tokens directly from the DAO on a sister chain like xdai, and future additions to blockchain scalability could provide long-term solutions. * DAO’s depend on blockchain technology. Blockchain technology is just a fad centered around risky and volatile financial speculation, and a power hungry climate threat that doesn’t really solve a problem that can’t be solved with traditional tools. There are a lot of counters (PoW vs PoS vs PoA, and don't blame the tool for how it's used, regular money is worse) against these arguments, but they are valid arguments nonetheless. * DAO’s are very new and unproven technology, especially outside the financial world. Being the first to implement new technology is risky. There will be kinks to work out, ## What alternatives are there? ## Where/how could we start with implementing a DAO? For now, random links and things to investigate further: * https://www.ethichub.com/en/ * [daohaus](https://daohaus.club/) * https://sourcecred.io/ * https://shop.metafactory.ai/