Designing DAOs for Ecosystem Governance

Transcript

today I'm Ilya co-founder of near protocol and I would like to talk about evolving ecosystem governance and so for kind of veneers admission from the start has been a world where people have control of their assets their data and importantly power of governance right what does this mean this mean that as a user as a person you can kind of participate in decisions made and you have the ability to you know exit if you don't agree with the majority now as we probably all know there's not that kind of working governance yet especially on the protocol levels many dials have you know kind of been wumbling around

they're kind of how to make it work and kind of for us to you know make meaningful progress right to actually be representing stakeholders to actually be making decisions that are better than you know any single person can make we need to start figuring this out right and so we need to start with our own communities and even more importantly we need to start doing this because we only will learn from doing it and then we can iterate right we can improve and so for us like I've been thinking about this topic from 2019 we have tried a bunch of small experiments and we're starting to kind of put it this together but it's not a perfect solution right it's not going to be a perfect governance system none of

them will be but we can start making progress so why do we need governance kind of more broadly well ecosystems are in some ways like companies but you know decentralized they have lots of different participants lots of different interests there's kind of you know the the basic token holder interests there's people who are building stuff there's different token in the ecosystem there's companies that doing stuff and so there is kind of limitation to how much kind of self coordination can happen right and you know the some politics Will arise bureaucracy will arise and more importantly because there's no clear decision makers for different topics you'll have this kind of missing

opportunities you'll have the ability not to make decisions right and to stall and maybe until somebody actually uses their political power and pushes stuff but at the end it's like it's not a process right it's kind of very individual based and if we're talking about public goods right which is you know the biggest topic of blockchain you know there's a public goods and there's things that have value capture well someone needs to do them somebody needs to continue building the protocol somebody needs to fund the infrastructure and tooling that is available to everyone and that does not directly generate Revenue right we're talking about open source this is the same problems that you know Linux has it's the same problem that openstack has all of this existing Pro like large projects that coordinate tens of thousands of developers have those

problems and by the way they don't have a good solution either so we have a lot of tools we have a lot of you know things we invented we have the blockchain itself to coordinate things but you know it's still difficult there's people involved and we need to figure out how to build this for future how to make it resilient how to kind of make it evolve uh as things progress so let's look at governance outside of F3 right so I would say there's like two main domains so there's a public domain a government and you know the current system I would say like however imperfect it is uh usually splits the power between you know two or three main branches right there's a branch that represents the kind of the country that

the Congress it may have you know different kind of houses or uh house kind of uh like how the representatives and the Congress well there's another branch which is a executive branch this is a branch that you know gets elected and goes in with implementing some platform they actually are kind of operate within the limits but they have a very clear mandate and obviously governments really focus on you know public goods and kind of economy growth and then you have corporations corporations have a very clear executive vertical from the start and for the most part this executive vertical is kind of deciding on most of the day-to-day stuff with some oversight

from board and from shareholders and but it's kind of only focus is kind of profit maximization right that's their end goal and this is why you know using this corporate structure for blockchains end up you know kind of misleading because we have a lot of public goods that need to be taken care of so as I mentioned we have been building a bunch of stuff we have been trying a bunch of stuff um the kind of overall you know there's been what is it like five years six years of Dao kind of experiments you know some failed dramatically some failed less dramatically some have been kind of making steady progress but the

kind of the lessons have been is that um if you have a protocol Foundation right ethereum foundation near Foundation when three Foundation right all of each protocol has a foundation but it's always trying to reduce its control over the ecosystem right it starts kind of by launching this network but it cannot kind of continue you know maintaining and pushing it because otherwise people will rely on Foundation to do everything right and then you know we go back to the corporate structure we started with you have doubts right you have tools and people have kind of came together but the reality is unless you have very clear roles and very clear rules on how things work this dials usually kind of

stall right and you know many people kind of coming in on enthusiasm work a little bit unless they're getting paid and have a clear structured role they just leave right they do something else and so there are kind of two major approaches have emerged right uh for a Dallas one is token weighted where you have people who have tokens who have vested interest in this you know protocol or Dao or whatever that is and they vote for some decisions so this is you know with snapshot with like compiled down unit swapped out Etc and usually uh because you know there's really large holders that just

individually would have loaded everything in there's some kind of like quadratic voting or some other form of uh reduction of the whale vote now what came pretty clearly right after that is that that's not enough and so uniswap and few others have a smaller group of individuals who are kind of actually doing the decisions right so even though there is a token vote that is not enforceable it's not actually executable right away there's a smaller group of individuals who are usually you know reviewing proposals or making them and then actually executing right there multi-sync pretty much holders and this group does not grow very well right as this group grows beyond like 15

people we actually see a very clear like uh decrease in participation and this I'm looking at some uh participant of a Dao that has this problem at 21 members um and so like you kind of you kind of cannot engage big groups uh uh in in this and you need to split them you need to have smaller dials and you need some form of kind of coordination and so each of this comes with Zone challenges and you know some have combined we have been doing kind of astradau which is our framework for Dallas which allows to configure any of those ways you can configure you know multiple groups with different permissions and you can like we have you know a few like a hundred plus active

Dows every week and so they've been experimenting with all the stuff and kind of few of those things emerge from there now just to mention like on the near ecosystem itself we actually went with a decentralization route right uh we have kind of the original team that started near and built a lot of the original kind of protocol have went across many different companies and teams and building sub protocols or or focusing on different dimensions and verticals of building right so there's Pagoda and calamaro kind of contributing to the protocol and developing their own offerings to developers there's Aurora which is offering for evm there's makina which is data storage octopus which is part kind of side chains there's

proximity and human Guild which focus on gaming and D5 and so there's a lot of different kind of focuses and verticals that are kind of in parallel are expanding the ecosystem which is amazing and this is kind of what we want from the ecosystem right it's not kind of a single company that you know marches in One Direction it's kind of gross in all directions at the same time now the problem is right with this as we mentioned then you can unlock lack coordination and lack actually a clear uh single path that people can work on and so kind of the solution I want to propose here is near digital Cooperative um this is not you know obviously a perfect governance solution as I

mentioned but you know we want to start iterating on this and putting this in place and figure out what what works and what doesn't and so kind of the main idea is of the slide the main idea is you have this treasury right at the end you know you're managing resources it's I mean obviously it's not just about money it's about you know the positioning and influence and people who are working on it but kind of uh at the core there is some treasury that uh that you know is distributed there's a congress so there's a representative uh form of governance that can be making decisions and approving votes and so there it splits into two houses so as I mentioned there's two major ways to do

it and so we actually do both and then there's an executive part and so executive part is where the accountability and execution strategy comes from so um yeah I mean I just talked to the slide uh like and and kind of think of this as a metadata right it kind of combines the dial that has the token holders it combines it out it has kind of Merit and I'll talk about this in a second and it combines the executive kind of branch which is functions more as a company but it's still you know is uh represented by by you know an account on on the blockchain and is able transparently to make decisions for everyone to discuss and and comment so principles of this right like at the

end we're not going to make it perfect we need to come from principles and iterate and evaluate if this system is following the principles we need so the first principle is transparency right this is just kind of General Neo ecosystem value of transparency and we want all decisions to be publicly recorded now that doesn't mean that all decisions will be publicly discussed that's important because some decisions you know you cannot discuss publicly because they actually affect some for example NDA thing or they affect somebody personally which in you know you don't want to kind of expose to this you want votes to be explained right so if you have somebody voting for a decision they need to explain it and you

know you can still have a private voting within this but you need some kind of reasoning behind it and you want to kind of emphasize communication right like at the end this will be the success system is almost over communicating at all times and kind of creating this transparency we want to be kind of golden KP address like at the end you know there is like we're all trying to shy away a little bit from you know all like some of the major kpis as this network has but they are there and everybody looking at them right for example talking price and there is also other kpis right active users there's other kpis which is you know how many successful companies you have in ecosystem and so all of those things are important and important for like publicly pronouncing that these

things are important and tracking them and actually keeping the executive team and the Congress accountable to this and we want to minimize politics right we did not start you know blocking blockchain to do politics although this is narratable where people there's politics but there's a few principles we can use to minimize it right again transparency is part of it a clear map of accounted like of responsibilities as well right so you know if we have this houses and we have this Congress and executive having clear responsibilities yet making sure that there is no kind of uh like overlap and if there's overlap to actually have a process to resolve it so House of marriage right house of

Merit is kind of this idea that there needs to be a small number of active contributors right people who are pretty much spending their full time on in this ecosystem and they are uh you know they're pretty much invested with their time right it's it's pretty like if you think of steak as your money Merit is your time and also it's not just investment it's also the result the outcome of this is that you you have brought kind of value to the system you grew ecosystem in some way and so the process is you know pretty straightforward you apply publicly you provide pretty much what have you done for the ecosystem and kind of the existing members vote on this but you have a public deliberation so people can

kind of provide you know supporting or non-supporting evidence and there's you know a lot of kind of functionality that needs to be built out here but we can start this kind of you know MVP of this and and evaluate and House of Merit has importantly a veto power over executive branch they are able to pretty much block and potentially fire the executive um and and kind of evaluate it so in a way it it's it functions as a board for the for the ecosystem and in normal circumstances right it pretty much will provide the input from all of the kind of different places people are coming from and uh deciding on a budget right for the from the treasury for the executive fund of our ecosystem for the you know next quarter

for example and so the idea is that it focuses on success of kind of ecosystem as whole on the long term so hustle stake is like this open participation right this is what we've you know been wanting in blockchain like everybody can participate at any time from where everywhere it doesn't matter what your you know uh any of the you know protected uh things are like it doesn't matter because you're represented by the address and you can do it and so um the idea here is you know it's defined by kind of quadratic voting root square of your stake so actual delegated or direct stake near and it's really for larger fandoms right it's so for idea when something with the normal system is going wrong and you can actually like

overturn and veto Merit you can overturn an executive who is a large quorum and this kind of having this is a backstop and focus on economic circuit system but also a place where somebody can come up even if they have a smaller stake and propose some ideas right it's pretty much a way kind of to surface the referendum ideas that right now you would need like hundred thousand signatures right if you want to go and propose something and change.org right for the white white house to review so this is a way to kind of surface broader ideas and so the important piece right it's a piece that I believe is missing in most of the Dallas right now or it is there but it's not actually kind of uh

declared properly because usually if the Dow is doing something there's somebody doing stuff and being accountable for it is this idea of executive branch right and like forgive my terminology I mean I just wanted to kind of differentiate it from CEOs and ctOS so it's the minister and uh and president and so the idea is like you have the kind of a singular you know person who is responsible for strategy and for those goals and who's accountable for those goals choose a kind of a community and ecosystem as a whole and if they're not doing it well they can be fired by this you know House of Merit and houses take and so they would have you know ministers who are responsible for each vertical and they will be coordinating kind of the public

good distribution and kind of defining which parts of the economy are important in which places and and you know actually helping with inorganic growth again the same as for example uh you have governance that you know kind of invest or subsidize some specific branches and so at the end you have treasury right so this is where the fun the funds are stored and kind of the uh what allows for those branches to be able to delegate power and and you know execute on specific needs of the ecosystem and in a way this will become kind of fun to find strategy at the end right at the end it will be you know deploying Capital into different funds and different organizations which our van

will be deploying things across the ecosystem but this deployment itself is a strategy right it's a definition of what's important in the ecosystem at any specific point of time so how do we get this right I mean it's again as I said and I'm going to review this many times it's not gonna be perfect initially but the simple position doesn't need to mean a chaos right it doesn't need to mean that nobody's responsible for anything and so we need to kind of continue doing it and we need to figure out a way to uh manage shared resources the smaller groups you know faster decision making you know kind of having some uh vertical of of uh is important and then having the oversight and transparency is important meta

governance again at the end we'll be reviewing this and we'll you know revalidate benchmark it with the whole ecosystem have an open discussion and see if this process needs to be uh improved so this requires participation this requires feedback so join us we'll have more information posted on governance Forum in a couple days so please join it just join the discussion and join any of those houses As You Wish thank you [Applause] question no hi um yeah I really appreciate you actually trying to tackle these this sort of

not having decentralization equal disorganization um one thing I wonder is so in terms of modeling right separating powers doesn't mean that people that are looking to uh you know monopolize on their position we'll look at how crossing different angles influencing other people and other votes you know trying to you know to whatever extent you try to have the you know quadratic uh you know staking voting you know tied to individual people so that it's you know non-cibil other things so you know how many uh how far along have you gone on like what are the anticipated attacks or like what's the strategy going to be is for

how much you try to do this ahead of time versus seeing it in the wild and then reacting to the attacks you know iteratively yeah so it's a good question like I mean any governance is susceptible to some form of you know demagogue or influence or buy buy out right and we see that in every single country right now and so I think like the idea here one is to think through some of those attacks kind of the standard things um you know stake and and and quadratic voting you know Merit and kind of thinking through that process and making it more kind of more objective as much objective as you can possibly can right

at the same time it's true that like there will be soft powers like this is not you know going anywhere and so this is why it's important to have the kind of judgments the votes be explained like I think this is the biggest part right now that people don't need to explain when they vote right on why they voted in this way and so you are not able to evaluate if the you know what your congressman is saying is because they're getting paid or because they actually believe in this and their beliefs are consistent right and so I think building out sounds like infrastructure where you can actually look at a specific individual or specific group right and seeing if they're kind of posted beliefs and their votes are consistent and if not having a process of them being kind

of removed fired right is important so I think like we'll need to figure out some of the mechanisms but transparency as a goal is important here and I think like that we have the tools to do it which you know for example governments do not and so I think that's the biggest benefit that we can have the situation and also like we're way smaller as a you know as ecosystem overall so we're able to iterate and we're able to do this versus if you try to iterate on a U.S Congress on U.S Congress or something that's not really possible foreign first one where is the um the foundation in all of this uh setup uh this is the

first question and second question is that usually in governments there is a the record which are actually much more complicated system just comparing just vetoing maybe and there is no in this scheme there is no such thing that actually does the judicative uh Bridge yeah yeah so what to do with it maybe maybe you need to add it there yeah so I've been thinking about this a lot and we definitely need a conflict resolution chord system I think we will get there how it will play their role over time I think the I mean pretty much as soon as we have like a a full-on block of the system probably will need it um I think like introducing right now

without having reputation without having kind of a clear tools to evaluate decisions right now it's kind of not the right time and like we don't just don't have tools like you can say like hey cool just few people are Judges now what right we don't have but on the other side like we do have code and so a lot of things we can actually program and and like you know a lot of the Judiciary side like is either enforcing existing laws or or precedent building and so I think for president building we'll need to build some kind of reputation system and that's why at least right now I I hope and we'll see right but the hypothesis is that house of Merit will be able to build precedence and maybe that's not true and then we'll need to valid and kind of propose a

different system on a foundation side Foundation is you know is fun to fund structure right now right it's it's deploying Capital across the ecosystem and so it will continue doing that and you know it can be working together with this executive uh Branch right to deploy it within the kind of mission of the ecosystem okay yeah so first of all thank you for for all the things that you you put together in the presentation really was very useful for for a lot of us my question I think is kind of related with the with the previous one is is launching versus off-chain boating you know uh how you how you see the future because typically there are the problems which are very complex at least to to resolve through one chain button mounting at

least at first so do you see the coexistence do you see one one form dominating the other how are you what's your opinion on that so what we've seen so far is astrodite for example all of the votes are on chain right and that works fine the thing is all the discussion happens off chain in telegram groups and Discord and Forum Etc and so there's very weak linkage on this and and kind of that's why there's the reputation lack and some other stuff I think the actually like the talk before it at the boat was discussing on how to build a social on top of near ecosystem and so how to link you know people's reputation how to create you know followers how to create groups it's all the stuff and so as we build out some of that infrastructure I think the discussions

the conversations can be still linked that doesn't mean that everything needs to be public so on chain doesn't always mean public like we have people building private voting on chain we have so you can have a private voting where the kind of the vote is not exposed but you for example can have you know all the reasoning published in some shape of form right so like there's ways to create this and unchain is just the way to facilitate the aggregation of the final vote now there's also a separate step which is execution that's that's why it's actually important to just to disentangle the on-chain vote and saying like Okay we voted for this now this needs to happen an actual execution because execution can be complex it doesn't always mean you know execute

this transaction on chain it can be like go you know make a deal with you know IBM for them to do like allocate 100 Engineers to build an alternative client right for example and so that execution that's why you have executive branch which can go out and do this and will be accountable to this vote right and you know if they don't do it they'll fire they'll get fired over time right foreign thanks everyone hope you enjoyed it [Applause]