Intro

Governance, the enduring backbone of societal order and progress, has an intricate and diverse fabric that has evolved throughout history. Today, as we scan the spectrum of governance, we notice two prominent systems ruling the roost: democracies and authoritarian regimes. Both models, replete with their own strengths and weaknesses, present a vivid tapestry of how human societies operate, function, and innovate. Democracies, widely recognized for their representative governance, depend on elected officials to manage a nation's treasury, taxes, and investments. This model has been a hotbed for fostering innovation, leading to significant advancements that have reshaped our world. However, it is a costly system that leans heavily on the integrity and trustworthiness of human beings, often grappling with issues such as corruption. Moreover, while the democratic system tends to bolster entrepreneurial spirit, it can limit a country's power to finance, thereby impacting the growth and development of the private sector.

In stark contrast, authoritarian countries demonstrate a different dynamic. Governed by a select few, these nations are often seen as less financially credible than their democratic counterparts, barring periods of populism. The corruption levels are high, with limited room for innovation due to a blurred divide between politics and the private sector. However, some authoritarian regimes manage to create an effective separation between political governance and private enterprises, thereby somewhat mitigating these challenges.

Corporate structures represent an interesting governance variation in the private sector. A board of directors, chosen by stockholders, elects a chief executive officer (CEO) with the power to manage the company. This system is typically efficient, yet it hinges heavily on the quality and integrity of the board and CEO. Despite the successes and failures of these systems, they still seem dated and constrained, tightly bound to human trust, narratives, philosophies, and corruption. They fall short in embracing mathematical precision, a key element for establishing a more robust and fair governance model.

Historically, humans have long engaged in the persistent endeavor of sculpting effective systems of governance. These systems, predominantly conceived and assessed through real-world implementation, were time-consuming to create and challenging to modify, consequently limiting our ability to understand their true potential or drawbacks until decades or even centuries later. Now, however, we find ourselves on the precipice of an era where the testing and analysis of governance systems can be accomplished at an unprecedented pace.

As we stride forward in the digital age, an exciting new possibility emerges on the horizon: coded governance pioneered by Ethereum. This could revolutionize our traditional governance concepts, opening doors to a post-democratic world. Such a world wouldn't imply authoritarianism but introduce new mechanisms for managing human and economic coordination. A future where governance is not dictated by the frailties of human nature, but driven by incorruptible, transparent, and efficient code, is worth examining.

Ethereum and the post-democracy era

This innovative phase has been catalyzed by the advent of Ethereum's decentralized governance mechanisms, providing a unique platform to examine governance systems not just in theory but in simulated practice as well. The Ethereum landscape is an experimental playground that allows for rapid prototyping, implementation, and analysis of various governance models, effectively transforming our historical approach to understanding governance.

Governance in Ethereum and in the broader crypto space is a complex matter of deep concern. Since its inception, Ethereum has aimed to provide a decentralized, transparent, and efficient platform for developing and deploying smart contracts and decentralized applications. However, as the ecosystem matures and becomes increasingly complicated, the governance of the platform presents challenges that echo those of the physical world we aimed to upgrade from.

Moreover, the Ethereum governance process, like most governance systems in the crypto industry, cannot be a direct imitation of traditional governance systems. Instead, it requires a unique and innovative approach that aligns with the inherent principles of decentralization, transparency, and efficiency. However, the rush to tokenize and create Decentralized Autonomous Organizations (DAOs) in the last bull market cycle has led to hastily developed governance systems with potentially critical weaknesses.

A major revelation that has emerged from this new digital frontier is the intriguing observation of human behavior within these systems. A tendency has been observed wherein individuals primarily focus on personal financial gain or 'pumping their bag,' even at the expense of others, often through deceptive 'rug pull' tactics. This self-centered behavior online reflects a limited perspective, an inability to comprehend the broader, long-term benefits of a cooperative, collective approach. Such behavior also underscores the risk of corruption that lurks within these decentralized autonomous organizations (DAOs), which is startlingly reminiscent of the challenges faced in real-world governance systems. It emphasizes that the key to effective governance isn't merely about those who wield power, but rather, it hinges on the system's inherent design and its ability to limit corruption as much as possible.

Snapshot Model: Trust-based Governance

A commonly adopted governance model for DAOs in Ethereum is the "snapshot" model, where a small group of entrepreneurs host a multisig wallet and promise to adhere to the results of off-chain voting. This form of governance places full trust in the team to follow the community's decisions. However, it introduces a significant risk of failure as it relies heavily on human decision-making and has no legal enforcement mechanisms to ensure that the team acts in the community's best interest.

Moreover, the snapshot model of governance is akin to a blockchain being controlled by a proprietary off-shore server of a company, promising to act as users decide on the platform. Recent examples from social media platforms illustrate the potential drawbacks of such a setup. Additionally, this governance model opens up the community to the powers of regulators and corruption, as it essentially entrusts decision-making powers to a small group of individuals.

Castle Model: Upgradeable Features Governance

Another emerging governance model is the "castle" model, which includes upgradeable features in the protocol that only activate if a certain voting threshold is met in a proposal.

At first glance, this approach appears to promote flexibility and adaptability within the protocol. However, allowing upgradable features, irrespective of who holds the upgradeability rights (team, delegators, or holders), creates a significant point of failure and potential vulnerability for the entire protocol. It is also counter to one of the core ethos of the blockchain, that using a protocol or contract should only involve using the contract as it currently is. Upgradability of functionality in this approach allows modifying the terms of usage after interaction, resulting in the complete lack of trust in the contract as written.

Costs and Risks of Current Governance Systems

Both these governance models have considerable costs associated with their operation and pose significant risks to the stability and integrity of the protocols they govern. Besides being expensive to maintain, these systems often fail to generate added value for investors and the team. Particularly with upgradable systems, they risk undermining the protocol's credibility, potentially leading to its downfall. Moreover, these governance models put the team in a precarious position as they become legally accountable as the responsible party, both for managing funds and for determining the protocol's future direction. This heightened responsibility makes it easy for regulators in various jurisdictions to target and exert control over them.

The best governance model for Ethereum and other blockchain protocols is minimalism NO-protocol but economic ONLY governance, emphasizing simple, immutable rules without upgradeability's complexities and potential vulnerabilities.

And so what about a DAO and a token?

Current DAO structures often prioritize governance over development and protocol upgradability, putting the protocol's security at risk and potentially deceiving investors. The real value is to govern money and earnings.

For entrepreneurs, the benefit in outsourcing a protocol's economy to its holders is relinquishing their special centralized power and legal ownership of the money, reducing liability and eliminating points of failure. For token holders, independently managing earnings and yield is a requirement of the protocol being independent of the team to operate. Decentralized control of protocol finances is the only way to eliminate the individual greed seeking that has sunk previous protocols. This in turn ensures a truly decentralized model of governance and operation.

Introducing N🟣N: A New Era of DAOs

N🟣N aims to bring this ideal vision of DAOs to life. It is crafting a new wave of DAOs for immutable protocols, designed to empower shareholders to benefit from the protocol's success without being dependent on upgradability or vulnerable to malicious takeovers.

Operating an Economical DAO

In N🟣N's innovative structure, founders set up a funds splitter, designed to automatically distribute the proceeds from earnings or a treasury among different fixed functions every month. This new type of DAO enables the community to manage grants, dividends for investors, farming incentives for liquidity, inflation or deflation of the token, and investment funds, all without the risk of a rug pull by the founders.

In addition, N🟣N allows developers to establish fixed economic choices for holders within the protocol itself. These choices allow for changes to monetary policy in a structured way, leaving core functionality in tact while allowing for evolution and maturity of the protocol. This empowers users to manage fees and incentives, adapting the protocol to different circumstances without the risk of breaking it.

Success Story: NONbeta

A shining example of this approach is NONbeta, N🟣N's beta governance model. For over a year and a half, it has granted our community complete decentralized control over financial management, independent of the team's influence. Token holders alone are fully responsible for the inflation rate, investment strategy, and protocol fees. This setup ensures that even if the team were to vanish overnight, the protocol would continue to function as usual, epitomizing true decentralization.

You can play with it here:

Heading Towards a New Ethereum Era

N🟣N is pioneering a new era, one that facilitates genuine onchain businesses, with real earnings and bona fide investors. This shift encourages teams to create and manage real businesses rather than perpetuating Ponzi-like schemes to enrich venture capitalists and insiders.

By focusing on investor empowerment and complete decentralization, N🟣N's innovative DAO structure sets a robust standard for other protocols. It paves the way for a new Ethereum era where protocols can thrive on their merit, and investors can manage their earnings and investments independently and securely. This transformative approach is an important step towards realizing the full potential of blockchain technology and the dream of a truly decentralized future. The tools to build and even elaborate on this model will be available for everyone to use.

Check our Discord for the latest updates: