DAOs, Coordinape and beyond

0x32Dc
October 8th, 2021

Disclaimer: I wrote this paragraph at the end... After reading everything I realized that this article is going far beyond Coordinape. It shows problems that DAOs can generally encounter, and maybe even more, when they are using a decentralized tool like Coordinape. So this is more to explore some issues, and try to discuss some solutions. Either by developing new features to be implemented on Coordinape (but I know that the team is working very hard to consistently improve it), or more generally to rethink DAO’s organisation and how rewarding members can be done as fair as possible while keeping the best possible balance between decentralization and efficiency.

Preamble

If you are part of a DAO you probably already know this. And it’s probably why you joined one. When you join DAO’s calls or speak with people involved in DAOs, very often, they will say that DAOs are the future , that DAOs will change the world, that DAOs are changing our vision… Even if it’s in part true, let’s me honest… at the moment it’s only on paper and we are at the beginning. Based on my personal experience, as of today, I don't know of any DAO that works perfectly and where everything is perfect. But this makes complete sense. We are exploring a totally new approach and experimenting. However, it should be emphasized that even if everything is not perfect, some projects are doing very well! And there is no doubt that it will become better and better with time.

Coordinape: a tool to distribute resources to contributors.

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Coordinape is a platform for DAOs to easily and fairly distribute resources to contributors. Community grants, internal salaries, and special projects can all be incentivized and rewarded by the community itself. Instead of cumbersome voting or black box committees, contributors themselves can quickly and transparently reward the value they see being created.

I won’t go into the details on how Coordinape is working. You can find most, if not all, information on the docs👇.

Transparency: A key feature

Transparency is a central feature around which Coordinape is built. This is the second sentence of the introduction presenting Coordinape:

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Quote 2

In fact when a DAO is using Coordinape, the main goal is to decentralize the rewarding process and make it accessible to all members, but also allow all members to see what is happening.

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Quote 3

But let’s be honest. When there are several dozen members, it can be very tricky to see how rewards are shared between members and more importantly, where members see value inside the DAO.

But the team behind Coordinape developed a very interesting feature. After each Epoch, a map is generated on which you can track all interactions between members. Each line between two members represents an interaction.

This map is very interesting and powerful. In fact when you select a member, all lines coming to, or from this member are highlighted. In orange, you see how this member allocated to others. In contrast, the green lines represent what this member received. Moreover, you can have an estimation of the quantity of GIVES received/sent. In fact bands around the member represent the total GIVE those members have received during the epoch. And the thickness of each connection is also correlated with the amount of GIVE flowing to and from each member. So even if members can’t see exact numbers, they have a relatively precise idea of what is happening and how GIVE, and budget, is distributed.

With the map and in few seconds only, you can have a pretty good estimation of members creating value for the community, or at least how other members see and value each other. Interestingly, when the number of members is big enough you can see some clusters, very often composed of members with a very similar role (dev / Communication / UI ..).

How DAOs are using Coordinape ?

Whereas most DAOs are using Coordinape as it was originally designed, it’s interesting to highlight some variations.

Each member is allocated a fixed amount of GIVE (100 by default), and can send any number of these tokens to other Circle members freely during the Epoch. Members can also opt out if they recieve funding elsewhere, allowing them to send GIVE but not recieve it. GIVE has no value if it is not given to another Circle member -- the process of gifting defines the per-member payout from the cirle's budget.
When the Epoch ends, the GIVE each member has recieved can be exchanged for a pro rata amount of monthly treasury budget.

Core only

Some DAOs are not allowing all members to allocate. Instead, only some members, usually the core team, is allocating. Even if it’s not the original goal of Coordinape, it’s an interesting approach, and for sure better than shady allocations. At least other members see what is happening, and each member of the core team can allocate as they wish.

Based on $ value

In other DAOs, instead of exchanging GIVES for a pro rata amount of the budget, each GIVE has a value. And then the average of allocations is made. So, for example, they define that 1 GIVE = $100. So if François received, 2 GIVES from Emmanuel and 4 GIVES from Brigitte. He will receive ($200 + $400)/2 = $300. In this case, members can allocate a precise amount of rewards in terms of $ value.

Hide transparency

Do you remember the quote n’2 ? Interestingly (or not), several DAOs asked to develop a new feature to hide allocations during the epoch. So allocations are secret and members don’t see what other members are sending them, and so, what they are sending to others. The main argument for this (and we will explore those “issues” later) is to prevent ’Obligated Votes’ and ’Revenge Votes’. But this raises a major issue. Why DAOs are using a tool to increase transparency, and at the end are asking to hide this transparency and come back to a “black box approach”. This behaviour is just an easy solution, and it only helps to hide something important under the carpet.

Credit: @EoinKr  (https://twitter.com/eoinkr/status/996992476597686272)
Credit: @EoinKr  (https://twitter.com/eoinkr/status/996992476597686272)

In fact, if this kind of votes and allocations are happening in a DAO, there are several reasons:

  • Members didn’t understand how Coordinape works. So some education is needed
  • Members really do it on purpose. And in that case it means they are not here for good reasons. Then the DAO should probably speak to them and find a solution.

Hiding everything is counterproductive and goes against the spirit of a DAO and Coordinape. And let’s be honest! If members want to trick the system and do ’Obligated Votes’ and ’Revenge Votes’ they will just organize themselves privately and the result will be the same. The only difference here, is that other members won’t be able to see this kind of behaviour (remember everything is transparent normally), so they won’t be able to react, and the problem will only amplify. Do not bury one's head in the sand …… find solution !

Credit: https://testeurs-outdoor.com/ca-commence-a-faire-beaucoup/
Credit: https://testeurs-outdoor.com/ca-commence-a-faire-beaucoup/

DAOs taking this path are probably going in the wrong direction…

Is Coordinape a perfect tool ?

Short answer is “No”…. But of course nothing is perfect! I will explain why and propose some possible solutions. But I also know the team behind Coordinape is working hard to constantly improve it! Let’s improve it all together and build the perfect tool!

As it was mentioned above, one issue is members not allocating “properly”. Properly is probably not the best word here, as there is no proper allocation. But they basically allocated for bad reasons and do not focus on work done or value generated. The 2 main reasons are ’Obligated/Friendly Votes’ and ’Revenge Votes’.

  • Revenge Votes are mostly happening in small DAOs in which members usually allocate to all members. If someone gives you an amount that you don’t find acceptable, you will also allocate a small amount to this member.
  • Obligated/Friendly Votes are mostly happening in big DAOs. In this case members will give to others just because they personally like them or because another member has a “higher role’ so they feel obligated to give them something. it may also happen because you naturally have more visibility over what your friends are doing

But they are other issues:

  • Coordinape can quickly become a contest of popularity. “Visible” members usually tend to receive more than other members. This could be a major issue for people working by themselves and not sharing their work with other members on TG or Discord for example. At the beginning of each Epoch, each member can add a few lines to explain what they did. But when the DAO has a lot of members, it may be difficult to read all profiles. And this is why we can often see clusters on the map with contributors working on the same topic, as they usually know what others are doing. This is not a big issue per-se, as Coordinape is not used to reward all members, but mostly people you are working with. Sometimes it’s just annoying if someone is doing something very useful for the project, but you don’t know it, and you can’t reward this member.

Too big to control everything

In order to decentralize the process of onboarding new contributors even more, members can now vouch other members to incorporate them into a circle.

With Vouching, circles may determine their porosity via threshold settings, and contributors in a circle can actively engage in the management of its growth.

DAOs are able to adjust those settings. For example vouching someone may need only one or several vouches. The higher the limit, the less easy it is to invite undeserving contributors. But it’s also more difficult to invite someone. On the other hand, if only 1 or 2 vouching is needed, it’s then easy for malicious member to vouch friends.

An important aspect is also to keep an eye on people “opt-in” during an epoch. When a member is “opt-in” he can receive GIVES. In big DAOs, it’s very complicated to follow what every member is doing. With the vouching system it may be even more difficult as contributors can be added but the majority of other members may not even know them. Usually when someone is added to a circle it’s because he recently did something useful for the DAO. But will he stay? Will he keep doing things?

This is why bounties may still be a good start before integrating someone into a circle. A contributor may have to do X task before being integrated into a circle. This will prove the implication of this member. Some features could also be added not to allow “new members” to vouch for other contributors and avoid friendly vouching (if this is happening).

Members are not robots

Also a member may not do much work during a few months/weeks for several reasons, and this is fair, members can take a break, have other priorities … But this may be problematic if they are still “opt-in” and receive rewards during this period. This could be even more problematic with new members who joined a circle at some point and then are becoming ghosts and are staying here for no reason.

There are several options to resolve those issues, for example admins, can automatically opt-out members at the beginning of each epoch. So, at least, member have to connect, and opt-in, to be able to receive GIVES. It allows to remove “ghosts”. But of course people here to trick the system, can always opt-in even if they were not active.

Note*: All above remarks are, at the end, not only related to Coordinape. All DAOs will face this kind of problems no matter the tool they use. And the bigger they are, the harder it will be. This may just be even more complicated when using an opened tool. Being transparent is a key aspect here, as members see what is happening they can raise concerns if needed. But a certain “layer of control” may still be needed. Not to really control per se, but more to monitor that everything is going well and that there is no abuse. It also allows to react in the event of a proven problem.

But again if a DAOs is facing these kind of issues, it’s mainly because of its members and their behaviours. In an ideal world, all members should be fair, and opt-out if they were not active recently, and only vouch for real contributors. Vouching friends and ghosting to receive Rewards is not the spirit of a DAO.

Quadratic voting

This is another aspect where there is space for improvement . As it is now, rewarding is only based on the numbers of GIVES received, and it’s not weighted by another parameter. Let’s explain this:

And take 2 examples:

  • Emmanuel received 100 GIVES from 10 different members (10 x 10). So Emmanuel is probably key in the DAO and is interacting with many members.
  • Brigitte received 100 GIVES from 1 member (1x100). Brigitte is probably working on a project with someone. Other members don’t know what they are doing (It can also be a friendly allocation!).

At the end of the epoch Emmanuel and Brigitte will receive the same reward. Is it really fair ? *

Personally I would really like to see a quadratic voting approach being implemented in the same line of what Gitcoin is doing. As we see above it can also help to reduce the impact of “friendly votes and vouching” in the extreme case of a member, or a small group vouching friends and then only allocating big amount of GIVES between them.*

****This is, of course, an extreme case. But it could easily happen if there are a lot of members in a circle and if members can vouch others easily. A 100 GIVES allocation can be completely legit, especially if it comes from a core member.

What about long-term members?

Most DAOs are composed by a core team, usually receiving fixed salaries, and a group of “free electrons” also called contributors. Whereas Coordinape is very useful to onboard and reward new members, it can show some limits for long-term members. In fact when a DAO is using Coordinape, members never know what they will receive. New members are usually really happy to be part of a circle as it means they will receive some rewards for their work and that their work is recognized. In contrast, long-term contributors may want more stability. When you are part of a project for months / years, it sounds legitimate to ask for some stability. You may want to organize your time more efficiently, maybe quit your job…. But if you are not sure about what you will get at the end of the month, it could be very tricky. Long-term members may not want to join the core team for many reasons, but just find more stability inside a DAO in which they are participating and in which they prove their utility and involvement.

I personally think DAOs should keep some kind of grants, or retention packages for long-term members. A layer between core team and new onboarded members. For example, we can image keeping Coordinape, even for those members, but also allocating a fixed salary every month. Coordinape being here as “tips”. And with quadratic voting we could also imagine giving less impact by GIVES received by those members (if they already received and other source of income). So Coordinape can still be used for all members!

Conclusion

DAOs are now a key part on DeFI. A lot of people see them as the future of organizations. Whereas most DAOs are now well organised, the question of community involvement and rewarding is becoming central. Fair rewarding is, first of all, needed to reward current contributors, as all work merits salary. But it’s also essential to growth the DAO and attract (and retain) new talents. A lot of DAOs are now looking for decentralized solutions fitting with the foundations of what DAOs are and should be. Tools are developed and used. But as this is a completely new approach and a new way to think about an organization, new challenges are arising every day. We are all here to find solutions and make DAOs always better.

Acknowledgment: A big thank you to @Wot_Is_Goin_On for the proof-reading.

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