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On DAO governance... or How to pick the "RIGHT" organization
May 17th, 2022

The recent discussion on Hop forum spurred me the write my thoughts on this issue and decentralized governance in general.

I have presented there my Case Against delegating to Organizations where I argue against making it "OK" and socially acceptable for organizations to apply as DAO delegates. You can see my original post along with the reactions here.

Case Against delegating to Organizations

“I have much stronger confidence in a promise of a mafia boss than a well meaning social worker”(paraphrasing N. N. Taleb)

Why? Mafia don is giving promises on behalf of himself, has his goodwill and reputation at stake, the latter of which is a very important asset in mafia business and in life in general. A social worker acts on behalf of an organization whose decisions he rarely influences or controls. Even in a case he influences things, he has no reputation at stake.

Neither feelings nor inhibitions

Even thought we like to anthropomorphize organizations and often think of them as of people they have no conscience, shame, compassion or any other feelings that tend to make humans behave much nicer to other humans than they would otherwise. Easily observed when compared online vs offline interactions of the same people. It’s no coincidence that psychopathy and sociopathy is more prevalent in higher management. They can be more ruthless and effective. The point being that organizations have only incentives and no moral inhibitions that would keep them in check.

The happy beginnings...

Currently we are in the early days and crypto is still full of early adopters whose primary motivation is not money. Many companies are currently lead by value driven founders, passionate about self sovereignty decentralization and building a better world. Many organizations reflect these values, but as crypto becomes more mainstream it also becomes less value driven and more incentive driven.

The main company incentive is profit, which is neither good nor bad, but would rather not have profit seeking automatons for delegates, which is what all for-profit companies trend towards.

Google silently removes its "Don't be evil" motto after almost two decades source

The curious case of Google...

Larry and Sergey started Google with “don’t be evil” slogan which currently seems laughable, but there is no reason to believe it wasn’t genuine belief of the founders. The founders though are long gone (as all will eventually be) and if the whole business model of company is built on selling ads, it’s hard to avoid the scenario where it ends up harvesting users for data and attention. Any CEO who would want to change course would be quickly replaced by someone who can better act in the company's best interest.

Are all organizations evil?

As I have argued above,
they are strictly incentive driven, and if these are misaligned with human wellbeing than it's too bad for humans.

It is theoretically possible to design better organizations implementing novel mechanisms where we can leverage tokenomics in removing negative externalities. Something along the lines of Vitalik's Retroactive public goods funding, or Kevin's Regenerative Cryptoeconomics. Still, we have a long way to go implementing these into practice and seeing them withstanding the test of time.

Avoiding plutocracy

In our discussion @Reav3R raised couple of very important points in his post, quoted:

From two very simple premises:

  • The ethos of (Hop) DAO is to be as decentralized as possible, hence the D in the name
  • Consolidation of executive power reduces the decentralization of a DAO; the more unique entities hold executive power, the more decentralized a DAO is

We can conclude that:

  • Sybil attackers compromise the decentralization of a DAO
  • Consolidation of executive power within the hands of a few entities could potentially(1) compromise the decentralization of a DAO

Looking at this from a DAO’s perspective, it is only a question of decentralization; once one entity gains 51% of the executive power, they are free to do as they please...

... “Collectives” are much more likely to seize that 51% than “individuals”, and by delegating to a collective we increase that risk.

... Consolidation of executive power poses an existential risk to decentralization of DAOs, and organizations are far more likely to succeed at doing so. We should treat the cause not the symptoms.

His point is different, but very well taken. I was arguing that a person with the same amount of tokens is on average a much better choice than an organization, his point was that we should not miss the forest for the trees and combat the concentration power itself, no matter if in hands of individuals or organizations.

Delegates indorsed by organizations

I think the palatable way how organizations could influence governance is by endorsing delegates. Why? it does not seem realistic that organizations would not want to exert influence and just stepped away from governance completely it's hard to imagine.
I see this as pragmatic middle ground. There is also the fact that organizations are much better known than individual candidates.

With people the Catch-22 is that those who are publicly well known are known precisely because they are already busy building in the ecosystem and do not have the time to be delegates.

However, I think we should establish a norm that delegates which are supported by given organization should have no conflicts of interest and are still representing their views.

A disclaimer from the delegate in similar spirit would be warranted: My voting is neither financially nor in any other way incentivized to represent the views of XY organization.

Does our reaction matter?

One may argue that even if we would ban it, or make it socially unacceptable organizations can still apply as anons, would this norm actually solve anything? Naïve answer would be No, but I believe we have seen that social consensus is actually a really strong force in the society, even if hard one to measure.

Most people actually do not want to break social consensus if they feel it serves a good purpose. If you are not a psychopath you feel bad about yourself if you act against what you believe is right.

We are establishing new norms of decentralized governance here. There may well be organizations that are and will continue to be good force for the space for decades to come, but it is a strong precedence I would rather not see...

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