Dao stands in one, good for all things. The meta-universe theme is very hot, and the market’s divergence is that if the meta-universe is only an upgrade of AR, VR+ multi-dimensional perception, how to realize the vision of giant transformation? We create and share in the meta-universe, and how do we get rewards for the labor we put in? Where will the future meta-universe work?
DAO ( Decentralized Autonomous Organization) is an organization method adapted to the meta-universe. The transformation of the production environment has given birth to new organizational methods. From the great nautical era to the meta-universe, organizational forms will continue to change and evolve. In the Web2.0 era, the monopoly of data by giants has been concerned by the society, and the organization rules of Metaverse DAO are operated by program supervision, and the ultimate guarantee of the organization rules is code. The pre-constraint of the code enables DAO to form an organization in a lower trust mode, and users can participate in global collaboration more widely in the digital world.
Blockchain technology guarantees “Code is Law “, while DAO guarantees the orderly formulation and execution of rules, both of which are the cornerstones of the meta-universe system. The Bitcoin network is the simplest DAO. Anyone can join the network at any time, become a node and provide computing power to ensure the security of the ledger. Ethereum further supports smart contracts, making general-purpose computing for decentralized execution possible. All kinds of applications derived on this basis are implemented based on the DAO of code rules. This makes it possible to build a meta-universe with 5G, Internet of Things, AI, and cloud computing power as the bottom layer, and the world of Web3.0 will be flatter.
The realization of DAO : the combination of on- chain + off- chain. On-chain governance implements decentralized decision execution through smart contracts, and the voting results of participants will directly affect smart contracts. Off-chain governance implements weakly binding organizational governance through social networks, voting systems, and multi-signature wallets. Projects often adopt off-chain governance during the development period, and change to comprehensive on-chain governance when the product matures, and gradually hand over the rule-making to the community. Earlier open source code platforms, UGC platforms, etc., have prototypes of free participation, but they are still evolving.
The DAO ecology has begun to take shape, but there are still shortcomings. The current DAOs developed by smart contract platforms mainly include: agreement DAO, investment DAO, grant DAO, service DAO, media DAO, social DAO and collection DAO. However, due to the high barriers to participation and prone to code vulnerabilities, DAO is still far from the final form. At the same time, the DAO will also face supervision in the future. In 17 years, the US SEC issued relevant regulatory opinions, and the Wyoming State Limited Liability Company Act further clarified that DAO is similar to a limited liability company but applies special regulations.
DAO accelerates the landing of the meta universe and lays out the “BAND ” track. We expect that in the next 5 years, there will be more and more abundant meta-universe network forms, which will promote the upgrade of the four major technology tracks of “BAND” (blockchain, game, communication, and display technology), and individuals will also be more convenient in the form of DAO Participate in it. 1) Games: Roblox, Unity, Tencent Holdings; 2) Display technology: Facebook, Sony, Sunny Optical, Goertek, Lantech Optics; 3) Network and computing power: Nvidia, AMD Sound Network, ZTE, Xinyi Sheng, Zhongji Innolux, Guanghetong, MG Intelligence. At the same time, we also suggest to pay attention to the evolution and development of blockchain public chain infrastructure and meta-universe concept projects.
Risk warning : Code vulnerability risk; Blockchain policy supervision risk; Blockchain infrastructure development does not meet expectations.
In our in-depth report on the meta universe series, we discussed the four pillars of the meta universe “BAND”, the importance and development trend of computing power to the meta universe, how voxel modeling can shape the virtual world, and the open and free economic system The meaning of meta-universe and the value capture of NFT in IP communication:
“Meta Universe (1): The Next Stop of the Internet”
“Metaverse (2): Reconstruction of Computing Power, the Stairway to Metaverse”
“Meta Universe (3): Is the meta universe made of “squares”? 》
“Meta Universe (4): The rise of GameFi track, Meta Universe embarks on a journey of breaking the circle”
“Meta Universe (5): Thinking in the Landing of NFT Business”
The world of the meta universe is colorful, but is it only AR/VR and virtual games? Where did the originality of the meta universe come from? Why are players willing to create in it? Looking back at the Internet era, platforms empower individuals and the online world has become flat. What impact will the future meta-universe have on the architecture of the digital world? This article will focus on discussing the development direction of the metauniverse organization form, the decentralized autonomous organization DAO constructed based on the idea of ”Code is Law”, and the inevitability, mechanism, current situation and prospects of its integration with the metauniverse digital economy.
Looking at the moment first, 1) At the Douyin Creators Conference, the company hopes that the income of content creators will reach 80 billion in 2021; 2) In the first half of 2021, the average daily active rider on the Meituan platform exceeds 1 million, and 60% of full-time riders have a high monthly income RMB 5,000; 3) In the first half of 2021, Didi’s annual active drivers in China will be 13 million. On these platforms, more and more workers are not completely employed by companies, but provide labor and get paid according to certain rules. This loose organizational relationship is more attractive to freelancers, and there is a prototype of the community. .
Looking to the future, can the Metaverse Project led by the giants of science and technology realize a sustainable and open digital world?
How will the rule governance of the meta universe be realized? What rules should users follow, and who will decide these rules?
How to collaborate in the meta-universe, how can people who have never met in reality form an organization to cooperate for a certain goal?
Is the meta universe a digital cage?
In the 1990s, Mr. Qian Xuesen did research on the in-depth integration of humans and computers, and he named it “Ling Jing”. Now it seems to be amazing. In the later period, the attached sheet of prospects for the future gave a lot of inspiration.
How to gather “Major Wisdom”? For the above questions, DAO can answer some puzzles.
From nautical trade to meta universe, from corporate system to DAO
DAO, or Decentralized Autonomous Organization, is a digital world organization based on blockchain technology. Its organizational rules are executed by distributed programs, which can align the interests of participants and jointly achieve organizational goals.
DAO has several major characteristics: information transparency, token incentives, code open source, community autonomy, participants have ownership of the organization, and freedom and openness. The biggest difference from the company is that the DAO organization is not organized through laws and contracts. Users in different jurisdictions and even artificial intelligence can form a DAO.
The DAO in the meta-universe digital age is like a modern company system that is developing rapidly in the era of great navigation. The transformation of the production environment has given birth to new organizational methods. From the great nautical era to the meta-universe, organizational forms will continue to change and evolve.
- Nautical Trade and the Development of Modern Company System
In the 16th century, the rapid development of maritime trade prompted the emergence and development of modern companies. The British East India Company and the Dutch East India Company were established one after another. It is generally believed that this is the earliest origin of modern companies. Changes in the production environment will promote the transformation of organizational forms. The production environment determines the organizational form. In an academic study published in 2017, the author combined institutional analysis and quantitative methods to extract the following two cores that promote the rise of the company system : First, transoceanic trade is prospering, and the demand for long-term large-scale investment is fierce; second, the system of the sovereign government begins to stabilize, and the risk of the government (especially the royal family) grabbing private wealth has declined.
Without innovation in organizational forms, the development of social productive forces will be hindered. Before the existence of a company, individual business and partnership organizations were the foundation of business. These organizational forms had a series of limitations: lack of an agent system, decision-making often required the unanimous consent of partners; enterprises and individual assets were not isolated, and individuals assumed unlimited liability. And any partner has the right to request liquidation of the enterprise. This kind of corporate rules makes it difficult to concentrate investment for a long time. You can only do small things such as opening restaurants and building workshops. Things like building railways, building bridges, and flying satellites to the sky cannot be done at all. Therefore, without the company’s invention in this business field, human society will suffer more obstacles when it steps out of feudal society.
Compared with traditional enterprises, modern companies have the following characteristics:
- All shareholders do not know each other. Before this, the companies were almost all family-owned, and there was a certain blood relationship between each other. The shareholders of modern companies surpassed the restrictions of the previous shareholder status.
- The separation of ownership and management power, and the decision-making power of the board of directors, has also become a prerequisite for the development of the modern professional manager system;
- Shareholders bear limited liability and no longer assume unlimited liability like previous companies.
- As an independent legal person, the company has an independent legal person status. The company conducts production and operation with an independent will and independently assumes responsibilities.
Under these characteristics, the company has expanded the scope of the organization, strengthened the execution of the organization, reduced investment risks, can engage in larger-scale investment and production, and has become more flexible than before.
- The production and consumption of digital content and the rise of DAO
The term “community” is translated from the English Community. In sociological research, the community is described as “ a close, supportive, and shared emotional social group composed of homogeneous populations with common values ”. It has a strong regional character. The development of the Internet has weakened the geographical influence, allowing people living in different geographical areas to communicate. The “residents” of online communities often have certain common interests or emotional tendencies.
The production and consumption of digital content are inseparable from the community. After the community gathers a group of people with the same interests, a large amount of digital content is produced for consumption in internal communication. This digital content includes but is not limited to: news, stories, open source software, images, translations, videos, reports, virtual IP, etc. In the early bbs, the moderator’s management and information creation of the forum can be regarded as a kind of digital content production of text. Hatsune Miku is a typical community-operated IP. Its prototype is a sound source library for speech synthesis technology. Its unique feature is that it establishes a model for raising and forming virtual idols. The community is directly involved in creating value, and sharing and disseminating it online, “I support idols” has become “I create idols”. The open source software community is generally composed of people with common interests and hobbies, and plays a huge role in promoting the development of open source software. The digital content production of the open source software community not only meets internal needs, but also promotes the entire Internet industry. develop.
Although the community produces a large amount of digital content, it has major limitations in terms of commercialization, collaboration, and incentives. The creation of the community is not like a company that meets the needs of customers through products and services. The production of these content is more because of the love of users and their willingness to “use love to generate electricity.” Therefore, community defenders often set up companies to operate. Companies generally undertake community infrastructure construction, products, and commercialization. However, the production, consumption, and collaboration in the digital world are different from those in the traditional world. The incompatibility has initially appeared.
Inadequacy of the company’s organizational model in digital production:
- Production and consumption in the digital world are naturally cross-sovereign, but the threshold for multinational companies is high, and the costs of cross-border collaboration and trust are not borne by a small team.
- In digital production, market competition is intensified, the role of people is enlarged, and the importance of other production factors is reduced. This kind of market environment is more suitable for decentralized small organizations.
- Open source and commercial value are difficult to consider at the same time under the goals of the company’s organization, because the company obtains benefits by providing services and products, and the open source infrastructure is difficult to generate commercial value for the company, but the open source project is an important foundation for the development of the digital world.
- It is difficult for companies to capture the commercial value of the community’s spiritual level. In the digital age, spiritual consumption is more important than material consumption. Some “power generation for love” creations meet the needs of the community, but it is difficult to capture value, such as secondary creation and memetic communication.
The rise of DAO has allowed the community to explore the second way of commercialization. DAO is the abbreviation of Decentralized, Autonomous, and Organization. From a literal understanding, decentralization is the decentralization of rule making and execution, and autonomy is that the community determines its own rules.
DAO generally refers to an organization realized through technologies such as blockchain, smart contracts, and token economy. Participants have a common goal and collaborate remotely through the network, using codes instead of laws to protect interest relationships. The development of DAO relies on blockchain technology. The blockchain smart contract platform guarantees the credible operation of the code, so that the organizational rules can be programmed, and the power to formulate the rules is handed over to the community through program design. The development of the token economy is mainly reflected in the exploration of decentralized financial facilities, token governance tools, and token mechanisms (such as liquidity mining). These ecological applications provide DAO with financial tools for consensus cohesion and community incentives.
Compared with the company, DAO has the following characteristics:
- DAO ‘s organizational rules are run by programs autonomously, and the ultimate guarantee of organizational rules is code rather than law. The blockchain technology guarantees the decentralized operation of the program, and the program rules restrict the members of the organization. This kind of pre-constraint enables DAO to form an organization in a lower-trust mode, and users can participate in the organization anonymously and transnationally.
- The identity boundary between participants and owners disappears, and DAO participants are generally token holders. In addition to the rewards for participating in the construction of the project, participants can also share the economic benefits brought about by the development of the organization; and this unification of benefits further strengthens the organization’s consensus.
- DAO ‘s information is transparent, most of the project code is open source, and any user can get all the information of the organization. It can be said that compared to the company, DAO does not set information thresholds, which encourages internal competition within the organization to the greatest extent. With strong ability, any participant supported by the community will quickly reach an important position, leading the development of the business, and the utility of the ability and reputation will be maximized.
- DAO is free and open, users can work for multiple DAOs , and they can also exit at any time. Of course, a small number of DAOs have set a screening threshold for entry, but they are often very early projects. This feature brings two main benefits. The first is that resource flows between DAOs are more efficient and frequent than companies, and information communication between industries is particularly in-depth, which greatly accelerates innovation and resource allocation, and makes blockchain a development speed. One of the fastest industries; the second is that users enter and exit at any time. Participants with the same goals enter the organization, and those who are dissatisfied with the organization’s route exit at any time, allowing the organization to reach a consensus faster.
- DAO does not need a tight organizational structure, but makes decisions in a decentralized manner. Different from the company, DAO’s decisions are made collectively, not by the CEO or senior management. The change and implementation of the rules are in place in one step. In fact, members who own one or a predetermined number of DAO native tokens can propose changes to smart contracts, put forward proposals, investment ideas, etc. and vote on them. The specific methods vary depending on the specific DAO, thereby promoting the development and growth of the DAO.
Based on the above five characteristics, the “labor” in the future meta-universe will be organized in innovative forms, such as digital content creation, game cashing, 3D modeling, IP transfer, etc., which can be accepted and delivered online. Can be achieved. We believe that the so-called meta-universe immersion is not only a virtual world that can be seen with VR and AR glasses, but a digital world that can freely create, socialize, engage in labor and economic activities.
DAO, the cornerstone of the meta-universe world
Blockchain technology guarantees Code is Law, while DAO guarantees that the right to make rules is in the hands of the community. The combination of the two is the cornerstone of the meta-universe world. At the same time, its open collaboration and open source code have always been one of the main driving forces for the rapid development of the blockchain industry.
- Transparent walls, no secrets in cryptography
Blockchain technology protects digital assets through cryptography, and these will also be one of the infrastructures of Metaverse.
The asymmetry between “defense” and “offensive” makes an order that is difficult to destroy possible. In the encryption algorithm, the huge disparity in the difficulty of encryption and cracking makes it much more difficult to break the rules than to maintain the rules in a network that is difficult to trace and sanction. Once a reliable algorithm is used and the key is not leaked, it is difficult for others to crack the content, and thus cannot forge identities and decrypt communications. It is the subtle use of this algorithmic nature that guarantees the security of the encrypted asset network.
The encryption algorithm is a transparent city wall, and its security comes from transparency and openness. The encryption algorithm is completely transparent and open, anyone can try to crack it, and only the encryption algorithm that has not been cracked can be used. Only after everyone’s scrutiny and all conceivable methods are attacked will the reliable encryption algorithms be used in production and life.
The hash algorithms and asymmetric algorithms commonly used in cryptocurrencies have also withstood the test of time and the public. These algorithms are protecting the order of the entire information network, whether it is network identities or bank passwords. When the Internet business process requires confidentiality, privacy, and identity confirmation, these algorithms are inseparable.
How to use encryption algorithms to build a value network without intermediaries? Many projects started before Bitcoin, but failed one by one. Until the emergence of Bitcoin, it was revealed that to build this indestructible value network, in addition to secure encryption technology, it also requires common interests at the economic level. Bitcoin constitutes a new way of organization- DAO , a mechanism implemented only through code, which condenses organizational consensus, and completely open collaboration is also possible.
- Bitcoin network, the beginning of DAO
All participants of Bitcoin do not have a corporate organization, and they all form a common interest through tokens under the procedural rules and move towards the same goal.
The goal of the Bitcoin DAO is very simple, to protect the security of the Bitcoin network and make Bitcoin transactions more convenient. Bitcoin is the earliest blockchain application. Behind it is the original and most successful DAO. Bitcoin with a total market value of more than one trillion US dollars is not operated by a company, but the DAO determines the direction of future development. Provide the labor needed for maintenance and development.
Bitcoin DAO is completely open, anyone can run a node, and anyone can mine. In essence, Bitcoin is an organization run by many miners and full nodes. They coordinate with each other through the Bitcoin protocol. Only transactions that meet the requirements will be accepted by other nodes, and blocks that do not meet the requirements will be rejected by other nodes. Record on the chain. Inspired by the proof-of-work mechanism, anyone can provide computing power to ensure network security. The incentives for participating in the operation of the network are mainly mining rewards. If miners can generate valid blocks, such efforts to contribute to the Bitcoin DAO can obtain mining rewards. Strictly speaking, BTC mining does not depend on the current popular mining machine-mine-mining pool. The emergence of mining machines is the result of competition in computing power. The emergence of mining farms is for the centralized operation and maintenance of hardware and reduce overall costs; The emergence of mining pools is to share the benefit risk. These are all improvements on the basis of DAO.
Bitcoin is completely open and open source, anyone can participate in the construction of the Bitcoin ecosystem. Any team can develop Bitcoin applications. Currently, the Bitcoin Core project is the most active and productive core project in Bitcoin development activities. It has a relatively loose development team and hundreds of volunteers from all over the world to contribute to the realization of Bitcoin. Their results are stored in the Github.com/Bitcoin library, anyone can view and provide code suggestions.
The Bitcoin Core project does not have a management organization and no membership system: it is open to everyone, anyone can become a contributor, and gain community reputation through high-quality contributions. In order to promote the development work, the core team will establish a work system to promote the progress of the project. However, if any entity abuses control of the Bitcoin Core project code base, the remaining members are free to fork the project and continue their work.
Than the special currency shared governance by the community, but the result of the implementation of governance need to agree to most of the miners, that the rule-making power ultimately rests in the hands of miners. Anyone can make a proposal for the development of the community, and the proposal that gets the attention of the community will be implemented into specific code by the developer. When the proposal code is implemented, miners will indicate their support for voting in the recently generated block information, and more than 90% of the most recent 2016 blocks are required for implementation.
For example, in June of this year, the Bitcoin Taproot upgrade program was voted on, which will improve the privacy and scalability of Bitcoin transactions. When the hash rate of the mining pools supporting Taproot on the whole Bitcoin network has exceeded 90%, the upgrade plan is finally confirmed. The protocol upgrade will be activated in November when Bitcoin reaches the designated “block height” (709632). All upgraded nodes and devices will be able to recognize and accept transactions using the upgraded protocol.
- Smart contract, the upgrade of DAO
The operation of Ethereum is similar to that of Bitcoin, but the function is expanded. The Bitcoin network authenticates a relatively single transaction behavior. Since Ethereum supports smart contracts, miners need to execute the contract while determining the right to keep the account. And synchronize the results of the contract procedure to the entire network. The scalability of the smart contract itself determines the diversity of DAOs.
The Ethereum DAO guarantees the deterministic execution of smart contracts and lays a platform foundation for Code is Law . Developers can freely create and deploy contracts. Ethereum miners need to execute contract procedures through virtual machines while mining, and generate new blocks from new data states. Other nodes need to verify while verifying the blockchain. Whether the contract is executed correctly, so as to ensure the credibility of the calculation result. Smart contracts in Ethereum always operate in an expected manner, allowing trusted calculations without a third party, and these transactions are traceable and irreversible. The smart contracts on Ethereum are open and transparent and can be called mutually, which guarantees the openness and transparency of the ecology.
Openness is the foundation of DAO’s ecological prosperity. Earlier we were often asked: Which company’s product is Ethereum? In fact, Ethereum, like Bitcoin, is also an open source code set on Github. Some people continue to upgrade and contribute code at the bottom of Ethereum; some people continue to develop various innovative DAPPs based on the Ethereum ecosystem; some people continue to purchase mining machines to invest in hardware resources for Ethereum accounting, and these behaviors are not the control and scheduling under the corporate system, but All participants in the ecology contribute to common goals and benefits. The open DAO ecology guarantees fair participation of all participants and is also the foundation of long-term prosperity.
DAO stands on one, making everything-explaining the DAO operating mechanism in detail
Vitalik, the founder of Ethereum, proposed that as long as it has a Turing-based smart contract platform, once a decentralized autonomous organization is launched, it can continue to operate in an orderly manner without human management behavior. Based on blockchain technology, Ethereum, which was launched in 2015, has been said to meet the requirements of Turing completeness and therefore can support such decentralized autonomous organizations. With the foundation of Code is Law at the level of the smart contract platform, DAO based entirely on code execution rules can be realized, thus forming the most mainstream organizational form in the blockchain digital world.
Ethereum implements a decentralized smart contract platform for running code, and developers can use this as a basis to put the logic of community governance on the chain. According to the implementation of governance, it can be divided into on-chain governance and off-chain governance: the former writes the governance program into the smart contract platform, users interact with the contract, community voting and result execution are automatically executed by the smart contract, truly realizing Code is law ; Off-chain governance is through voting tools, multi-sign wallets, social networks and other tools to achieve the constraints of the development team and the community, making the development team follow the results of the community’s voting, this is a weakly constrained governance model, but for development The project brings faster development efficiency and flexibility.
DAO is the most important form of organization in the blockchain digital world . According to the different organizational goals, it can be divided into: agreement DAO, investment DAO, donation DAO, service DAO, media DAO, social DAO, collector DAO . Most DAOs do not set thresholds. Any Internet user can easily join a DAO, communicate and collaborate on a global scale, and participate in the governance of the organization by holding tokens.
- Based on smart contracts, how is the governance of DAO achieved?
At present, the governance of DAO is divided into on-chain governance and off-chain governance, and there is also a DAO operating system that provides standardized governance functions. On-chain governance is characterized by the complete decentralization of voting and result execution, and off-chain governance relies more on tools to achieve weak constraints on the development team by the community.
Projects often adopt off-chain governance in the early stages, and the concentration of decision-making will give more flexibility to project development. However, as the project matures and functions are stable, the project will shift to a fully decentralized on-chain governance to truly realize autonomy under code constraints.
(1) On-chain governance, rules that are completely controlled by the community
On-chain governance is the implementation of decentralized decision-making through smart contracts. Participants’ voting results will directly affect smart contracts and are not affected by any subject. The purpose of voting is to approve or reject changes to the state of the system. Each type of voting is managed by a smart contract. The proposal contract is a smart contract that writes one or more effective governance behaviors programmatically, and any Ethereum address can be deployed. Token holders decide whether to implement the proposal in the form of voting, and the proposal process is automatically executed after the vote is passed.
Take the decentralized lending application Compound governance process as an example:
Pass holders can authorize any voting rights with addresses less than the number of passes. People who hold a specified number of voting rights (such as 1% or more of the total) can generate proposals (governance proposals). These proposals can be simple or complex, including but not limited to: increasing the assets supported by the agreement, changing the conditions for asset pledge, and changing the market Interest rate algorithm, change any variables and parameters that can be modified in the agreement.
Any proposal has a 3-day voting period, and any address can vote for or against the proposal. If more than 50% and more than 400,000 votes support the proposal, the proposal will be queued in the time lock and deployed to the chain after 2 days. Of course, this governance process is also realized through smart contracts, and within the scope of decentralized governance, processes, parameters, etc. can also be modified in this way.
Governance proposals are executable code, not directional suggestions to guide community development. That is, when the proposal is passed on the chain, it will be enforced by the smart contract. In order to achieve this, Compound designed a “time lock contract”, which has the right to modify the product code. At the same time, a governance contract for proposals and voting is designed. Proposal is executable code, and the functional contract can be modified after execution. If and only when the vote is passed, the code of the proposal will be loaded into the “time lock contract”, and the code can be executed to implement the modification after waiting for the specified time. In terms of image, it is like an impartial code administrator who will execute code modifications based on the results of the community voting, but the code administrator itself is also a decentralized execution smart contract, and will not be subject to self-judgment, bribery and third-party judgment. The influence of the three parties ensures the execution of the governance results (see the figure below for the detailed process).
Under this governance framework, the governance of the project is completely decentralized, characterized by open source code, free flow of assets, free contribution of personnel, community voting, and implementation of governance results without interference.
This model is CompoundGovernance invented by the Compound team, which is currently the most mainstream on-chain governance structure. According to DeepDAO data, nearly half of AUM’s top ten DAOs use CompoundGovernance, and GnosisSafe and Snapshot are an off-chain governance method, which shows the importance of Compound governance model in on-chain governance.
However, on-chain governance has three major shortcomings: “slow”, “expensive”, and “limitations”. Therefore, most DAOs will adopt off-chain governance in the early stages of development for transition.
“Slow”: The decision-making speed of on-chain governance is very slow, and the execution risk will greatly increase, thereby increasing the difficulty of project development and limiting the speed of project development.
“Expensive”: The on- chain governance process is fully on-chain and requires participants to operate on-chain. Today, with high gas, this model of a single vote with a gas fee of several hundred dollars is difficult for users to accept.
“Limitations”: The target object of on-chain governance can only be the code on the chain, which has strong limitations. Sometimes the decision result of the community is not to modify the code, and some projects (such as games) will not use all the code. On the chain, these are not available for on-chain governance at this stage.
(2) Off-chain governance, power checks and balances achieved through tools
Off-chain governance refers to the implementation of governance and result execution by the community through off-chain methods, generally through the use of various tools to achieve the checks and balances between the community and the development team:
I. Voting and depositing the certificate on the chain will be developed by the development team based on the voting results.
Voting off-chain, and the voting results are recorded on the chain. Taking the current most mainstream voting application Snapshot as an example, Snapshot takes a snapshot of the voting rights on the user chain (thanks to the openness of blockchain data), and allows users to vote off-chain according to the project governance rules, which greatly saves The handling fee required for contract interaction. At the same time, Snapshot will upload detailed voting results reports to the decentralized storage network to ensure that no one can modify the voting results. The project management team then executes according to the voting results, but this constraint is a soft constraint and requires the management team to follow the voting results.
II . The core members of the community manage the community treasury through a multi-signature wallet, and publicize the treasury address to be supervised by the community.
Multi-signature wallets are similar to ordinary blockchain wallets. The difference is that multi-signature wallets have multiple wallet key owners. When performing fund transfer tasks, multiple keys are required to transfer funds smoothly. The signature authority of a multi-signature wallet is often given to more than 3 core team members recognized by the community, which form mutual constraints. At the same time, these members often have a high reputation in the community, and most of them will also be authenticated by real names. At present, the most mainstream multi-signature wallet is GnosisSafe . The GnosisSafe+ Snapshot governance model described above is to achieve governance foundations through these two tools.
III . Social network tools realize information synchronization.
Twitter , Telegram , Discord are the most important social networking tools used by DAO . Although the discussion group is not directly related to project governance decisions, for decentralized projects, an important part of current decentralized governance is information transparency and fairness. The communication channel of the project party directly determines the transparency of information diffusion in decentralized governance, so it should also be regarded as an important part of decentralized governance. Most projects will also use social media such as Twitter, Telegram, Discord, etc. for community communication.
These social applications are also adapting to the new needs brought by the blockchain DAO organization. After Twitter implements the Bitcoin payment tip function, it said that it will support NFT verification in the future, and users can more conveniently display their favorites on Twitter. Discord will also adapt the Ethereum application development so that accounts can be associated with addresses. Once social applications and tokens are combined, it will bring a richer decentralized organization model.
It can be seen that off-chain governance does not implement “code as law”, but through tool assistance, information disclosure, the reputation of core members, and the “voting with feet” of Token holders (that is, investment can be transferred to other projects at any time) ) Realize the constraints. For most projects, the current community autonomy is achieved through the collaboration and cooperation of several centralized and decentralized components to achieve the purpose of community governance.
Projects often adopt off-chain governance during the development period, and change to comprehensive on-chain governance when the product matures, giving the rule-making power to the community. At present, projects with full on-chain governance are basically developed from off-chain governance. On July 20 of this year, MakerDAO announced that it will give the governance power to the community and will disband the core team. From the very beginning, MakerDAO was completely controlled by the development team, and now it is completely decentralized. The transfer of governance rights is also carried out step by step according to the development stage of the project.
We believe that with the development of the blockchain smart contract platform, it will be able to carry more code work on the chain, and the scope of on-chain governance will also expand. Looking forward to a fully digitalized meta-universe world, it is not impossible to achieve complete on-chain governance of the digital world.
(3) Standardized DAO operating system
The DAO operating system provides users with standard management tools and UI interfaces, allowing users to easily start a DAO with zero code . They usually provide a complete set of governance smart contracts, interfaces with external applications, and UI interfaces for participating in governance to promote on-chain actions in decentralized communities. The DAO operating system currently has projects such as Aragon, Daostack, and Daohaus.
Take Aragon as an example. Aragon has created a DAO framework on which users can create global organizations and communities. Aragon is a decentralized governance platform built on Ethereum. It provides companies and organizations with a modular way to create and manage DAOs. Taking its core application Aragonclient as an example, its application layer is mainly divided into permission settings (regulating who can perform a certain operation, dividing permissions), pass management (issuing and managing DAO passes), voting functions, and treasury management (the management company is in Aragon created the funds of the DAO organization above), and the four systems work together to operate a basic DAO. At the same time, Aragon client can customize the software according to the needs, and adapt it to other applications by transforming the Aragon client.
- In the ascendant-the ecological status quo of DAO
After the DAO’s community governance is realized, the development of the organization depends on the community consensus, which is the organization’s goal. Based on the goals of the organization, the current DAO applications developed by the smart contract platform can be divided into several categories, mainly including: agreement DAO , investment DAO , grant DAO , service DAO , media DAO , social DAO and collection Type DAO .
(1) Protocol type DAO
The goal of a protocol-based DAO is to build a protocol, as most Defi are supported and operated by the DAO behind it . Taking MakerDAO as an example, it has constructed a complex structure composed of 15 core units. Each unit has tasks and budgets, which are managed by one or more coordinators to coordinate and pay contributors to achieve long-term goals within MakerDAO. In addition, each department is an independent structure, governed by its own terms, but still responds to the governance results of Maker holders. Most Defi communities can be regarded as protocol DAOs, including MakerDAO, Uniswap , AAVE, etc.
The agreement-type DAO transfers power from the core team to the community by issuing project tokens, and provides the team with additional financial tools. Compound starts liquidity mining, uses protocol fee income to repurchase and destroy tokens, and provides token rewards to users who provide liquidity. Therefore, governance tokens not only represent governance rights, but also own project dividends. And through the mechanism design of the issuance and circulation of tokens, participants can be encouraged to contribute liquidity, participation, labor, etc. to the project. This feature brings more flexible tools for the start and development of the project.
(2) Investment DAO
The investment DAO is to bring return on investment income to the community. The investment DAO raises the capital of participants, brings together the investment channels and thinking of all parties, and jointly decides investment decisions. Although the investment DAO faces more legal restrictions at home and abroad, its development shows that any group of people can gather to invest in larger capital with a lower threshold.
The popularity of protocol-based DAO tokens has made it possible for investment-based DAOs with fully on-chain governance and execution . With the improvement of the Defi protocol and the popularity of a large number of protocol tokens, investment DAOs can make investment decisions and executions completely on the chain to ensure the security of participants’ funds. BitDAO, as a typical investment DAO, is a decentralized autonomous organization that aims to promote the development of open finance through collective investment. Using Gnosis Safe multi-signature wallet and Snapshot voting tool to achieve decentralized governance, users can create proposals and accept votes from token holders. The token BIT is the governance token of BitDAO. BitDAO is owned and managed by BIT token holders, and the corresponding investment will only be taken after the proposal and voting are successful. The return on investment of BIT comes from the income of the investment project and the income of its own future development related agreements.
(3) Donation DAO
Donation-type DAO is for the ecological development of the community. It allocates funds to support new blockchain projects and pays more attention to ecological development rather than project returns. This is the biggest difference from investment-type DAO . Donation-type DAO is the earliest DAO, through governance proposals, jointly decide how to use funds. The governance of the early donation DAO was initially carried out through non-transferable equity, which meant that participation was largely driven by social capital rather than financial returns. Most of the projects invested by grant-type DAOs are also infrastructure types, which are important for ecological development, but it is difficult to capture value. Like Snapshot and ENS, they obtain development funds through donations. The current donation DAOs include MolochDAO, UniswapGrants, CompoundGrants, etc.
(4) Service-oriented DAO
The goal of a service-oriented DAO is to realize the distribution of talents so that people can work on open blockchain projects. From development, products, art, to governance, marketing, and financial management, service-oriented DAOs provide channels for talent matching. Usually ERC20 tokens are used as a reward-that is, the ownership of the project they contribute. Service-oriented DAOs are exploring future work models and employment forms native to the crypto world. The current service-oriented DAOs include YGG, Gitcoin, etc., and they all build a decentralized governance platform to organize people to work on blockchain projects.
YGG Game Guild is a typical service-oriented DAO . The core business of YGG Game Guild is to organize players to make gold. The DAO aims to earn game assets by investing in blockchain games, train game players, lease game assets, and create a business model that enhances the virtual economy of the metaverse, and promote the creation of the world’s largest virtual world economy. YGG Game Guild actively manages the assets owned by its community to obtain maximum utility, and shares the profits of these assets with the community.
(5) Media type DAO
The media DAO is to produce public media content, so that anyone can participate in the creation of the media. Media-based DAOs often set up incentive plans for content production and determine the direction of the community through decentralized governance. The current media DAOs include BanklessDAO, Forefront, MediaDAO, etc.
Take Bankless DAO as an example, it is an open media creation community. Any who can join Bankless DAO server by Discord, and you can browse the vast majority of job history information and documents. Participating in collaborations and meetings requires membership, and the condition is to hold a certain number of BANK tokens. Bankless formed an organization on the social tool discord. There are about 8,000 discord members. Currently, 13 guilds have been formed, namely writing, finance, translation, research, operation, marketing, law, education, design, business development, development, Video and data analysis. All the work is done by the team members through the cooperation of the Internet tools. The main discussion takes place in Discord. The consensus and conclusions and work items formed during the discussion will be put into the message box, and they will be jointly maintained by everyone to track the work status. Any member can participate in any union discussion, and almost all work documents and meeting minutes are completely open to the community.
(6) Social DAO
The social DAO is concerned with establishing a more diversified and linked online community. The biggest difference between a social DAO and a chat community is that the community netizens are bound from the interest relationship, and they can jointly participate in the formulation of rules. The ultimate goal of a social DAO is to gather a group of people with the same interests, but the token economy can further strengthen this network relationship.
For example, FWB (Friendwithbenefit) is a private club with more than 2,000 members. Joining this club not only requires strict identity verification, but also purchases close to 10,000 U.S. dollars in tokens as tickets. And when members hold these “tickets”, he also owns a part of the club, and can participate in the operation and decision-making of the club, and will often hold offline member exchange salons.
(7) Collector DAO
The creation goal of the collector -type DAO is to collect NFT digital art, and to combine artists, fans, platforms, and works to create the long-term value of digital art. With the gradual acceptance of NFT digital art assets by the public, mainstream Internet applications such as twitter have also begun to be compatible with this asset form. Under the background of NFT entering the mainstream, collector DAO appeared. Its purpose is to collect NFTs with long-term value, to incubate emerging NFT artists, to establish a platform for enthusiasts to exchange and discuss, and to lower the threshold of NFT investment. The current collector DAO includes WhaleDAO, MeetbitsDAO, PleasrDAO, etc.
4. How far is the trip to the Great DAO?
In the previous article, we analyzed the model and process of DAO governance based on the combing of some overseas blockchain frontier communities. In essence, Metaverse wants to map people’s life, learning, creation, entertainment, and economic activities to the digital world. Changes in the organization of the digital world cannot be ignored, just like in the Web 2.0 era, people who share common topics through social software Connect; connect buyers and sellers through e-commerce platforms; gather a group of players through games. These connections go beyond space to a certain extent. On the other hand, the distribution system has also been adjusted to make society flatter, more efficient, and disintermediate. The process enables participants to obtain greater benefits.
4.1 The link between the company and the community is becoming more diverse
The link between the company and the community has become more diverse, allowing user participants to share the growth benefits of the community from more dimensions. After Zhihu was listed, it announced that it would give out some shares to reward the community, and Reddit also distributed some shares to the community.
Start-up companies are also using blockchain technology to ensure that users share the benefits of community growth. Zhiji Automobile launched the “Raw Stone Valley” plan in September 2021. What it is trying to achieve is the “User Data Rights Plan”, which recognizes the value of data generated by users and will share the value generated by data applications with users. In the specific implementation, the founding shareholder of Zhiji Auto contributed 4.9% of the equity income that it owns, which constitutes the basis of equity for Rough Stone’s return, and users who hold Rough Stone will enjoy the benefits of equity appreciation.
In the “program mining” rule, the quantity of rough stones dropped by half every four years. A batch of rough stones are dropped every 10 minutes. In the first four years after the rough stones are placed, 500 stones are dropped in each batch, 144 times a day. The driving data contributed by the user for each kilometer of driving mileage is included in the data pool participating in the mileage mining, and then the raw stone revenue per unit time is equally divided. This means that the earlier the user buys a car, the more mileage they drive, and the more data they contribute, the more data the user has and the more rough they can harvest. The rules of “program mining” fully take into account the differences in the amount of data generated between users, and through the establishment of rules, the value of rough stones is more reasonable and fair.
Earlier new car-making forces also provided additional subsidies to early users, such as free battery replacement for life, free vehicle maintenance, etc. This is similar to discounts on new products, but we see that Zhiji’s rough plan will consume car users. , Use, and feedback have been more organically combined, which is more in line with the characteristics of the future digital economy.
4.2 DAO is the governance solution for the digital world
Who will make the rules of the meta universe? How to enforce the rules of the meta universe? A huge digital world must have a large number of procedural rules. If the platform can block content at will, the game company can modify the rules at will or even suspend the sales number, countless subtle rules can be adjusted according to the company’s preferences, not to mention the virtual space-time that carries human activities. The formulation and implementation of governance rules is the most critical issue in the development of Metaverse.
DAO ‘s answer is to hand over governance rights to the community, to pass holders, and to participants. Whether it is Bitcoin, Ethereum, DefiDAO, investment DAO, the reason for its reliability is not only the realization of “code and law” by blockchain technology, but also the autonomy of DAO. Users know the procedural rules of these applications, especially the rules of digital property rights. These rules will not be arbitrarily changed. The power to change the rules belongs to the community, belongs to the holder of the pass, belongs to the miner, and anyone can become the holder of the pass. People and miners.
Governance rights protect the property rights of digital assets. It is precisely because the blockchain project delegates the power of rule-making to the community, all participants can participate in the rule-making, and the assets on the chain are protected. If blockchain technology guarantees “code and law”, then DAO has autonomy. Although most users will not participate in governance for a long time, they have the right to govern and form checks and balances with developers, and the rules will not be arbitrarily modified to have real digital property rights. If users do not have governance rights, so-called digital assets can be exploited at will through rule modification. The conditions for the establishment of digital assets are not only credible ledgers, but more importantly, credible rules and community governance.
4.3 Shortcomings of the current DAO
The development of DAO is in the exploratory period, and it currently shows some shortcomings. In most DAOs, users’ willingness to participate in governance is low, and decision-making is still very centralized; and because DAO’s rules are completely dependent on code implementation, when a major BUG appears, it will cause huge economic losses, and it is often difficult. Retrospectively afterwards; at the same time, some DAO certificates show obvious securities characteristics and have greater regulatory risks.
At present, the degree of public participation in governance is relatively low, and decision-making is more centralized. According to DeepDAO data, there is often a large gap between the number of voting users and DAO participants. For example, the total number of users of Uniswap is more than 200 times the number of voters, and the number of voting users of BitDAO is only one thousandth of the total number of users. This reflects that the threshold for participating in governance is still high, the significance of participating in governance for ordinary users is limited, and the decision-making of DAO is in the hands of a few people.
Code vulnerabilities can cause a lot of losses. The organization of code as the rule means that code vulnerabilities may bring huge economic losses. In 2016, the famous The DAO project encountered a serious crisis before it landed. The crisis led to the first large-scale governance of the Ethereum network, which eventually led to the hard fork of Ethereum.
The DAO quickly gathered a large number of users in the early days of crowdfunding, and more than 11,000 participants raised ETH worth 150 million U.S. dollars at the time. However, before the 28-day sale process was over, the hacker discovered a loophole in The DAO smart contract and stole the user’s funds deposited in the smart contract. In order to recover the stolen funds from users, the ETH community proposed a hard fork agreement, that is, to forcibly modify The DAO’s smart contract and return all funds in the crowdfunding pool to users-this is like taking the Ethereum block The chain ledger is rolled back. Subsequently, the ETH community voted to pass this agreement according to the proportion of computing power owned by different nodes, which led to the fork of the Ethereum network into two blockchains, namely ETC (Ethereum Classic) and ETH (now Ethereum Mainnet). )-Supporters of the former believe that this hard fork violates the spirit of decentralization and should not be considered as interfering with historical ledgers.
In 2017, the SEC issued an investigation report that determined that the tokens of TheDAO were securities provided and sold by virtual organizations. Therefore, subject to the federal securities laws, those involved in unregistered issuance may also be liable for violating the securities laws. However, in view of the facts and circumstances, the agency decided not to accuse the case or make a determination of violations in the report. Instead, it warned the industry and market participants: Federal securities laws apply to those who offer and sell. Securities issuance in the United States, regardless of whether the issuing entity is a traditional company or a decentralized autonomous organization, whether these securities are purchased in U.S. dollars or virtual currency, whether they are distributed in the form of certificates or distributed through distributed ledger technology, they all need to be supervised.
Since then, the concept of investment-oriented DAO raised in The DAO incident has gradually been diluted. It was not until 2020, four years later, that the rise of DeFi gradually returned to people’s vision.
4.4 The road of DAO supervision
The organizational form of the DAO is new to supervision. Just as the Internet was born for a long time, the network supervision of various countries has become more and more perfect, and the DAO will also experience a similar process. The DAO is a model that relies on smart contracts to supervise decision-making and operation through code, rather than relying on manual labor. The ideal meta-universe world will become the next-generation open network like the Internet, instead of belonging to a certain company. The process of building meta-universe will inevitably rely on the Internet of Things to collect data, rely on smart contracts to make judgments, and rely on virtual games. Social networking and so on, and this will face a series of domestic and foreign regulatory issues facing the digital world in a real sense, such as:
(1) Digital identity issues
Traditional identity verification relies on ID cards, public security departments, etc., which is convenient for social management. However, due to the need for centralized authentication, it is often encountered to prove that “my mother is my mother”. At the same time, if the user’s privacy protection is not done well on the Internet platform, it will A large number of identity information has been leaked, and such cases are not uncommon at home and abroad. In blockchain technology, the public and private key encryption system gives individuals the ability to prove “I am me”, which can hide their identity while protecting personal privacy. How to achieve balance is a problem to be faced in the future.
(2) The nature of NFT digital assets
The full name of NFT is Non-Fungible Token, a non-fungible token, which is the only digital token used to represent digital assets (pictures, music, videos, circuit diagrams, etc.). NFT has both the attributes of digital assets and digital consumer goods, which means that users may purchase NFTs to preserve and increase the value of their investments, or to consume certain hot money items. So, how to define the secondary transaction of NFT? How to conduct anti-money laundering supervision for NFT transactions? It is necessary to not only tolerate innovative species in the digital world, but also to ensure legal compliance is also a regulatory challenge in the future.
(3) Supervision of Metaverse “Games”
Take Roblox in the US stock market as an example. Its manifestation is a UGC game, but in essence it is more social chat among players in the game. The average daily online time of active users has reached 2.6 hours. Therefore, Metaverse is a game and not a game. Should it still refer to the measures of the game industry such as anti-addiction supervision and game version number supervision?
The United States began to try to supervise the DAO in 2017. Institutions including the US Securities Regulatory Commission SEC have elaborated on the supervision of the DAO until July 2021. Wyoming officially promulgated the DAO Act, which is a step forward in the characterization and supervision of the DAO. Take a brave step. The bill stipulates: “Unless otherwise stipulated in the articles of association or operating agreement, the management of a decentralized autonomous organization shall belong to its members (if managed by members) or smart contracts (if managed by algorithms)”, which gives intelligence The contract has a higher status, but it is far from clear from a practical point of view.
Since 2017, my country has introduced a series of policies and regulations, including the “Announcement on Preventing the Risk of Token Issuance Financing”, “Announcement on Preventing the Risk of Hype in Virtual Currency Transactions” and the “Announcement on Accelerating the Application of Blockchain Technology and Industrial Development” The Guiding Opinions prohibits virtual currency financing and speculation while ensuring the application of blockchain technology. As a new concept, Meta Universe and DAO will also need to comply with relevant national regulatory policies in the future. The Seoul Metropolitan Government of South Korea promulgated the “Seoul Five-Year Plan” issued by the Seoul Metropolitan Government in November 2021. From the perspective of the country, it integrates resources from all parts of the society. From 2022, it will be divided into three stages in economy, culture, tourism, education, petitions, etc. The city government will create an administrative service ecosystem for Metaverse in all business areas. The total investment plan is 3.9 billion won, indicating that the digital world of Metaverse under supervision is gradually approaching. I believe that there will be more considerations for various financial regulations.
V. Investment strategy: DAO accelerates the landing of the meta universe and lays out the “BAND” track
The rise of DAO will accelerate the landing of the meta universe. We expect that more and more meta-universe network forms will emerge in the next 5 years, and promote the upgrade of the four major technological tracks of “BAND” (blockchain, games, network and computing power, and display technology), and individuals will also be more convenient Participating in it is just like getting dividends by driving Didi private cars, sending Meituan takeaways, and participating in crowdsourcing projects, and you can get incentives by contributing ideas, personal IP, and traffic in Metaverse. Looking back on the past, the rise of Roblox lies in the creation of a game UGC platform based on a cloud-native game platform and the introduction of a sharing incentive mechanism, which has triggered the migration of young user groups. Looking to the future, Metaverse may not belong to a certain company, but a parallel digital world that originates from and serves the community.
Code vulnerability risk: The organization of code as the rule means that code vulnerabilities may bring huge economic losses.
Blockchain policy supervision risk: Blockchain is currently in the early stage of development, and there are certain uncertainties in the supervision of blockchain technology, project financing and tokens in various countries around the world. Therefore, there is uncertainty in the development of industry company projects.
The development of blockchain infrastructure fell short of expectations. Blockchain is the core technology to solve supply chain finance and digital identity. At present, the blockchain infrastructure cannot support high-performance network deployment. The degree of decentralization and security will have certain constraints on high performance. Blockchain infrastructure exists. The risk of development not meeting expectations.
This article is an excerpt from the report “Meta Universe (6): “DAO” of the Operation of Meta Universe” published by Guosheng Securities Research Institute on November 25, 2021.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/dao-of-the-operation-of-the-metaverse/
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