In the previous post we discussed how DAOs are in truth neither fully decentralized nor truly autonomous. They are not fully decentralized due to the reality that unilateral action and decision-making is often necessary to get things done. They are not truly autonomous because aspects of their operations fall outside the scope of enforceable governance.

What is more important than decentralization is accountability. We can permit centralized and even hierarchal structures in pursuit of our goals so long as those structures remain accountable to the wider constituency. If DAOs can adopt a method to administer and oversee any task required of them, even off-chain, they may yet be truly autonomous.

There is no organizational structure to rule them all... Except maybe the third one!

We propose a system for DAOs to wrap the advantages of centralization within an additive, accountable framework. This framework allows organizations to allocate conditional resources and privileges via their existing governance mechanisms.

The framework includes four primary components:

1. Solvers — Configurable, interoperable smart contracts with interfaces for operation and on-chain oracles to report outcomes.
2. Solutions — Locked configurations of a solver(s) and conditions defining a use case.
3. Proposals — Temporary ERC1155-compliant treasuries which enact a solution when successfully funded.
4. Arbitration — Optional arbitration which incentivizes fair play among parties by game theoretical and absolute forces.

… and four more supporting concepts:

1. Keeper — An address assigned to a solution with primary responsibility for delivery and for operations requiring manual invocation.
2. Directive — A goal and its associated deliverables desired by a DAO for which it is willing to pay compensation.
3. Arbiter — An address assigned to a solution which is responsible for delivering rulings in the event of unsettled disputes by overriding oracle reports.
4. Participant — An address participatory in a solution.

Accountable Centralization

We employ the ERC1155 Conditional Tokens Framework to conditionalize resources flowing through the system. By enabling conditional logic for digital assets, fungible conditional tokens can be used with value contingent on oracle reports in the future (such as by a DAO vote). These conditional tokens are minted when a proposal meets its funding and distributed to participants in a solution. When a solution is settled, the oracle reports on the outcome of the solution are finalized and corresponding conditional tokens are redeemable for ERC20 collateral.

The typical flow of a task begins with its conception as a directive. This directive receives a proposal, which offers a solution and a funding goal. When a proposal is funded, the solution is enacted, and its solvers are invoked to serve their functions. When the component solvers of the solution are completed, so too is the solution, and thus the proposal. Participants may now redeem any conditional tokens they hold for their share of the project funding.

This system allows us to delegate miscellaneous work in a responsible way. We conceive of something we want done — a directive — and allow proposals to be made which suggest a way for getting it done. When a DAO successfully funds the proposal through their native governance system, it goes live! In the simple case, a solution may just name a Keeper who has full responsibility for delivery. This Keeper may further subcontract conditional tokens to others in exchange for assistance on the delivery.

If an organization is more particular, they can configure solvers to their specifications. For example, a DAO may wish to use a solver configured to loop in a DAO vote on any person the Keeper wishes to hire for the task (and compensate those voters with a small portion of the proposal funding). The composability of solvers, in conjunction with the complex logic enabled by the Conditional Token Framework, allows DAOs to implement any preferred governance schemes within the policy of a solution.

The key that makes this work is that conditional tokens are fungible yet have no real value unless their conditions are met. If we were to simply hand funds to a contractor, we’d be out of luck should they run off with our money. If we locked the money into typical escrow, it can no longer be distributed to others. Instead, we transact with what is essentially a fungible IOU: In order to get X done, here is Y funds — and Y funds will be real if you are acting in good faith (or: if <anything>).

We believe this simple and effective scheme allows for DAOs to internalize all aspects of their operations within their governance. They can hire developers and community managers, build websites and apps, and form partnerships with other DAOs or traditional entities. For each specific case, they can decide which conditionalities are suited to their needs. In simple terms, this system brings human capital management on-chain without laboriously programming every aspect of it.

It also enables a new form of entrepreneurship in the space. If any service can be wrapped in accountability, they can be sold to (and between) DAOs. We imagine new DAOs cropping up in the space selling customer support, marketing, development and what-have-you to each other. Enterprising individuals can act as keepers, discovering new services and partnerships that can bring value to their DAOs and writing proposals which offer them as solutions. In the future, these “platform cooperative”-like organizations may interoperate programmatically and fluidly, coordinating as though they are vertically integrated corporations.

We are building this system as a core technology underlying Cambrian Protocol, our effort to bring human capital management on-chain and help usher in the future of work. If you want to hear more about what we’re doing, ask us a question or lend a hand, check us out at https://cambrianprotocol.com and join us on Discord!