# Ethereum Magicians - DAO Ring
#### Council of Paris: March 4th, 2019

## Notes
#### We started off the meeting with people proposing possible discussion topics. Some of them were:
* White hat, the ethics of DAOs - DAOs that don't turn evil
* Differences between DAOs that hold real money vs. ones that are more about coordination/cooperation?
* Real world legal entities and how they interface with DAOs
* When is using a DAO a bad idea (it isn't efficient)?
* How do we explain DAOs to people who don't know what they are?
* Incentive mechanisms for people to participate in DAOs
* DAOs in 2012 - Where are we now, what has been achieved since then? Is there something we have achieved?
* What interactions are possible with a DAO?
* Are they only used to exchange value in and out?
* What are the benefits of these interactions?
* How technical architecture decisions affects the sovereignty of the network of participants
* Emergency resilience of DAOS - What do DAOs do when things go wrong (such as an issue with a smart contract, or the governance not working)?
* How to distribute initial tokens to DAO participants / How to bootstrap a fair DAO?
* Evolution of DAOs, what will be the future, how do we develop building blocks to get from where we are today, to the ideal of DAOs?


#### For the purpose of time, we decided to focus the discussion on four key topics:
1. Governance Design: Ensuring decentralisation, Incentive Mechanisms, What interactions are possible?
2. Legal interfaces
3. When to DAO, when not to DAO?
4. Mitigating Risks in DAOs

### Topic 1: Governance Design

Highly theoretical, however there isn't a real understanding or agreement about how this works. Rather than inventing new models.

Impossible to build governance for system that hasn't been built.

[Henry] - What's the difference for a company that works on the blockchain vs. runs in a traditional way? Basically a group of people that build a list of how they want their business to work? First start with the interactions a business or group will have.

[Daniel, Colony] - Governance is a hard and annoying thing, but people play games without pay and they are fun. Can we design mechanisms that are closer to games so that people engage in governance without financial expectations?

Parliamentary procedure sucks - How can we move against these existing governance structures.

Instead of having a single governance mechanism, having the simplest question - simple mechanisms to solve small questions inside of governance - breaking up governance into little chunks.
* Chunking example - Budgeting, allocating resources - if we could come up with a game to break these down.
* Question: Should there be a team of hundreds of people worrying about individual chunks like budgeting? Or should these be handled by a voted in team/group?

[Niran, Panvala] - Slate governance - For a quarter of the year, this is how governance works. Then after that quarter another "slate" could be proposed and governance structure can change.
* Tons of ways to do this governance - Not having a strong opinion about which game theory structure is the best. It's about building towards which structure makes the most sense.

Is the economic mechanism the best & only structure in order to build these governance structures? Attention is just as valuable as financial governance mechanisms.

How do you actually make sure that this decision is actually implemented?

Freerider example - Is there something that can be done inside of the governance system to incentivize people for contributing. Socially or economically rewarding those that contribute.

A lot of research being done on bonding curves - Earning x coin that have social economies that aligns everyone's incentives within the commons.

### Topic 2: Legal interfaces

Building protocols that have physical and real life bounds / legal structures built into them. Shaping these interactions within societies and business, creating an interface for this. So that these DAOs can interact but are also legally compliant.

Examples attempting this:
* Aragon Association: They have duty over the ETH/ANT in the treasury, but token holders still have voting privs to distribute the capital.
* Mattereum way: Legal documents are tied into the smart contract themselves.

Question: Is the idea to have one legal foundation? Because if yes, if we want to truly decentralize, how can we do that by using existing legal structures?

Can we call them unstoppable DAOs vs stoppable DAOs? Legally compliant vs non compliant.

* Special cases where a single company has single needs, this doesn't need to be an unstoppable DAO - They need to be a stoppable, compliant DAO.
* When DAOs become unstoppable for negative reasons, Darknet DAO - How unstoppable do we want these DAOS?

Taking from the Bitcoin/Ethereum model, what is the minimum that needs to be done? Basic questions around using funds to buy/trade?

These questions are also about fiat, how can we interact with the traditional economy from a DAO structure - Is this going to happen by skipping over the law or adapting the law around these structures.

Do we want to build something completely new? And ignore the traditional law - How many people can we get to ignore the law and use these systems. There's probably a balance between making tools for the traditional legal system and educating regulators about how to incorporate DAO structures into law.

Legal systems aren't all bad and for most people we will need to abide by these existing legal structures.

[Need to clarify] Very unlikely governments want to undermine their own power by aligning with distributed governance. We're not even sure this distributed governance.
* Optimist on this issue, easier to see the governments as people who see the use case and power structures inside of DAOs and cooperate with.

Drawing distinction between vision of everything being decentralized and using some of these tools to improve business & existing structures.

It will always be a hybrid between existing structures using these tools and building new structures entirely.

[Need to clarify] Two ends of the scale - the "we're going to start an organization that isn't worried about these traditional systems" - On the other side, things like MakerDAO, building a DAO structure through legal frameworks.
* Clearly the law can't do nothing, large amounts of capital held & raised - Usually are legal structures are built around traditional structures. However in Blockchain-land it's just a bunch of people doing things without any traditional structures.

### Topic 3: When to DAO, when not to DAO?
* Scale is one of the key reasons to build DAOs, they can be hugely beneficial for organizations that want to scale governance. Much less efficient to create a DAO for 5 people, however with 50,000 people, a DAO can be powerul and useful.
* DAOs are a really interesting mechanism because it's online and easy to start one up nowadays - However it doesn't solve the question of how to organize people. Right now we don't have an example of a 50,000 person DAO that is in action. Maybe in the future we can use these to scale, but right now it's not clear how it will work.
* [Some disagreed that a DAO can still be useful for smaller orgs] 5 people can still have conflict - and if a DAO can help with coordination in any of these conflicts there is value.
* DAOs vs Swarms - DAOs really focus on funding moving. Swarm are smaller application of finance.
* DAOs could scale better, DAO is a toolset for providing governance rules to govern a certain resource. We have distributed systems that govern resources in real life right now - Language, a resource, participate within governance of this, just really fuzzy. DAOs can be used when we can express resources & value precisely.

[Need to clarify] Key use case for DAOs - Resources management across nation boundaries. Creating a legal medium riding on top of the 'legal medium' that is the Ethereum mainnet.

### Topic 4: Mitigating Risks in DAOs

[Need to clarify] How you disrupt power initially, decisions need to be made quickly - That's why in traditional governments there's 'state of emergency'.
* Should these types of structure be built into DAOs?
* How to build good fail safe mechanisms?

A lot of failure modes - How do we reduce the failure cost?

* Instead of one very large DAO like "The DAO", have a - parent DAOs and child DAOs. Top down vs Bottom up - where child DAOs can build into a larger DAOs when needed.
* Child DAOs don't just need to build into a larger DAO, they can also buy shares in larger DAOs.

## Takeaways
DAOs seem to be something we can talk about for months on end.

If we want to keep this as an active ring, we should probably focus on one aspect of the system so it can be a valuable use of time and we can create useful documents.

The dgov foundation has regular meetings now, and many of the governance-like topics may be best for those meetings. They also have a wiki: https://wiki.dgov.foundation/

As a DAO ring, we can help contribute to dgov's wiki for our focus area.

## Action Item
What are your thoughts on the topics that are best suited for Magicians (look at the notes for examples, or suggest your own)?