9 major indicators of DAO health: from member conversion funnel to community token Gini coefficient

As collaborative work becomes more digital, its digital footprint becomes a meaningful source of insight into the health of collaboration and how to improve collaboration over time.

Although in the context of Web2, this information is sometimes used to exacerbate the information asymmetry between employers and employees, free sharing of this information with DAO members is an important part of the DAO’s spirit of transparency.

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A typical DAO “collaboration stack”

As the number of DAO members exceeds the threshold of 1,000, using these data to actively manage the health of the DAO is no longer a luxury, but a necessity.

The purpose of this article is to serve as a starting point for a “foundation” to have a conversation around the most important indicators that each DAO should track. I believe that my ideas will continue to develop, and I hope to learn this topic from the wisdom of the community.

What is a healthy DAO?

Well-recognized and actionable indicators cannot start with something that is easy to measure. Instead, we should start with the discussion about what a healthy DAO is and find the indicators we want to collect. Only then can we begin to make some pragmatic compromises on what we can measure.

A healthy DAO is a too vague starting point, so I broke it down into the following definitions so that we can carry out our work:

Healthy DAO = healthy community + healthy governance + healthy finance

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We can now proceed from this dimension and break it down into several important indicators.

Throughout the exercise, we will focus on those views that show us how our chosen indicators evolve over time. Since there is no clear benchmark to measure “what is good?”, observing trends can provide us with more insights than any specific point in time.

Community health

1. Member conversion funnel 

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What is it? In its simplest form, the member conversion funnel tracks changes in the number of members joining and leaving the DAO within a certain period of time. In a DAO with multiple member levels and a more powerful member mode, it also tracks the promotion/promotion from one level to the next.

Why is it important? Membership is the essence of DAO. Without members, DAO cannot accomplish its purpose. The membership conversion funnel provides more actionable insights than simply looking at the growth of the total membership, and can direct the DAO’s energy to more acute issues. For example: Should we focus on strengthening recruitment efforts? Or figure out why so many people joined and then left immediately?

As the DAO matures, it is possible to take advantage of more nuanced perspectives by visually superimposing different member “population” attributes or transitioning to more complex group-based analysis.

2. Small world score 

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What is it? This is a standardized score (between 0 and 100) designed to measure the fit between the overall shape of the DAO cooperation network and the small world network-in this network, the difference between two randomly selected members The typical distance (the number of steps required) increases in proportion to the logarithm of the number of members in the network.

Note: In network theory, a small-world network is a special type of complex network structure in which most nodes are not connected to each other, but most nodes can be reached after a few steps.  In daily life, sometimes you will find that some people who you think are “far away” from you are actually “close” to you. The small world network is a mathematical description of this phenomenon.

Why is it important? DAO hopes to create a community so that complex ideas can spread without being easily influenced by group thinking. Research (check the references section here) found that small world networks are ideal for this purpose. Observing how the small score of DAO evolves over time, you can make it feel whether it is moving towards or away from this ideal trend, and take necessary actions. As the DAO matures, breaking down the small world score into its components can provide sharper insights.

3. Top 5 Closers and Faraways 

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What is it? This is a list of the top 5 members with the highest betweenness centrality score and a list of the top 5 members with the lowest proximity centrality score.

Note: In graph theory, betweenness centrality (Betweenness centrality) is one of the measurement standards for the centrality of network graphs based on the shortest path. For a fully connected network graph, where any two nodes have at least one shortest path, the shortest path in the weightless network graph is the sum of the number of edges contained in the path, and the shortest path in the weighted network graph is the weight of the edges contained in the path Sum up. The betweenness centrality of each node is the number of times these shortest paths pass through the node.

Note: Closeness Centrality reflects the closeness between a node and other nodes in the network. The reciprocal of the sum of the shortest path distances from one node to all other nodes represents proximity centrality. That is, for a node, the closer it is to other nodes, the greater its proximity centrality.

With the expansion of the DAO, the “extreme” of the community has become an important source of insight for community health plans. However, it is becoming more and more difficult to figure out who these members are, because no community member has a subtle sense of the whole community. The betweenness score is an algorithm that identifies extremes, can take targeted actions against these people (prevent burnout, reduce churn), and identify broader patterns in the community.

Govern health

4. Proposal approval rate 

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What is it? This is the percentage of governance recommendations approved within a certain period of time.

Perhaps contrary to intuition, in the context of managing health, more does not always mean good. There is a “golden zone” for the approval rate of proposals (we set it at 65-90%)-an excessively high approval rate may indicate: group thinking, lack of psychological safety or action too slow/cautious; and too low approval rate It may indicate: real disharmony or inconsistency, unhealthy conflict, or trying to act too fast/too risky. Whether the approval rate is within, above or below the golden zone will cause the DAO to take different actions to improve governance health and the overall health of the DAO.

5. Voting participation rate 

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What is it? This is the percentage of community members who have participated in a governance decision. A more complex version of this indicator can visually superimpose additional community information, such as different membership levels.

Why is it important? A part of the DAO spirit is to involve the entire community in governance decisions, rather than leaving it in the hands of a few people. Tracking community participation in governance decisions can give us a good understanding of our progress in achieving this ideal.

6. Rolling voting participation rate 

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What is it? This is the percentage of community members who participate in governance decisions in a certain period of time.

Why is it important? Although under ideal circumstances, we hope that most people in our community can continue to participate in governance, but we may not have reached this goal. To make progress on this aspiration, a more detailed understanding of how the community participates in governance is required. A good starting point is to figure out whether the same people continue to participate in governance, or different people participate in governance more sporadically. Comparing and comparing the voting participation rate of “single decision” and the voting participation rate of “a period of time” can help clarify this point.

Financial health

7. Top 10 outflows 

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What is it? This is the Top-10 spending category that tracks DAO tokens in the DAO vault, evolving over time.

Why is it important? Where the DAO spends its tokens implicitly reflects its priorities. Comparing the spending model with the DAO’s clear priorities can give us a good idea of ​​whether the two things are consistent.

8. Planned and actual expenditures 

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What is it? This is to track the amount of community tokens that the DAO intends to spend according to its seasonal plan on a monthly (or weekly) basis, and compare it with the actual amount spent.

Why is it important? As the DAO matures, basic fiscal predictability becomes essential for healthy finances and ensuring smooth and continuous operations.

9. Gini coefficient of community tokens 

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What is it? The Gini coefficient is a measure of wealth inequality in a social group. It varies between 0 (when everyone holds exactly the same wealth) and 1 (when one person holds all wealth), and therefore provides a quantitative measure of inequality in a group.

Why is it important? Since the DAO is owned by its community, it becomes important to understand the ownership model. The trajectory here is more important than the value of the point in time: Does DAO ownership become more concentrated or more dispersed over time? In which direction do we hope it will develop? what can we do?

Summarize

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In this article, we define a basic model of DAO’s health and propose a set of entry-level indicators consisting of 9 indicators that can enable DAO to track and manage its health over time.

But is this a perfect set of indicators? Is this the correct set of indicators for your DAO? Probably neither. But we believe that this is a good starting point for dialogue on this important topic.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/9-major-indicators-of-dao-health-from-member-conversion-funnel-to-community-token-gini-coefficient/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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