Key Lessons Learned About DAO: Creation, Practice, and Culture

A decentralized autonomous organization (DAO) is a group organized around a specific mission. DAO collaborates through a set of shared rules that are executed on the blockchain. The DAO itself is just a specific organizational structure that is used to control shared economic resources and the rules of the organization’s protocols, so each DAO operates differently. Some DAOs are closed, others are open and anyone can join and contribute. In some DAOs, active contributors can get paid for their work from the DAO.

DAO has always been one of my favorite areas of web3. People from all over the world can come together and work for a common mission. This trait is very exciting, especially when this group cannot be formed under a traditional corporate structure due to many barriers (e.g., location, age, part-time, non-traditional education/work experience).

This article covers some of the main takeaways from my work at DAO. Much of this comes from my experience representing Gitcoin DAO, but I have also participated in and observed many other DAOs. I don’t think there’s a perfect DAO structure because each DAO has its own culture, so what one DAO enshrines as a guideline doesn’t necessarily work for another. The following reflects my personal experiences and opinions, and others are likely to disagree with me. The entire industry is also constantly iterating, trying to find out what is feasible and what is not.

When starting a DAO:

  • Clarify the mission of this DAO. A clear mission is critical to maintaining a diverse and evolving community like DAO, ensuring that the consensus of community members is consistent over time and that decisions are guided. For example, if someone submits a grant that is beyond the affordable range, the DAO should be able to easily reject the proposal. But if the priorities of the DAO are not clear, it will be very challenging for the DAO to focus on its mission.
  • Consider progressive decentralizationWhile the intent of many DAO is to completely decentralize operations and decision-making, putting a community into a fully decentralized DAO structure without guidance or leadership often leads to a lack of effective communication and collaboration. The founding team is usually the most informed, so they are the right people to set the course for the DAO and gradually empower the wider community over time.

     

    For example, the newly formed Optimism Collective has a charter of work that defines the role of the Optimism Foundation as a steward in its early days, and how the Foundation will help guide the community, and plans to become increasingly decentralized over time.

     

Key Lessons Learned About DAO: Creation, Practice, and Culture

3. The Optimism Foundation will be the steward of Optimism and its early governance model. The Optimism Foundation is registered in the Cayman Islands and is responsible for guiding the growth and development of the Optimism Collective. The Foundation, through its Board of Trustees, will do the following:

  • Promote and supervise collective governance.
  • Allocate treasury assets to fund public goods, motivate active contributors to the Optimism community, or otherwise promote the Foundation and the Optimism community.
  • amend this Statute of Work; and
  • Take other measures that facilitate its managerial role.
  • The Foundation will assume all of these responsibilities in a manner consistent with Optimism’s mission and is committed to gradually decentralizing this role over time.

Executive level:

  • The smaller the workgroup, the more efficient it is. Not all DAO members are required to vote on every decision in the DAO, large and small. It’s impossible to keep up with everything, and it’s a waste of everyone’s time, especially as the DAO grows. Therefore, I like the delegation model of DAO such as Gitcoin and ENS, which allows token holders to delegate their voting rights to a person or group that can devote the necessary time to making an informed decision.

     

    Similarly, delegated delegates are not required to be involved in every aspect of the day-to-day operation of the DAO. Delegates do not become experts in every field of financial investment, technology research and development, economic design, etc., and may not care about highly specific audit details. It would be more efficient to set up smaller working groups that could focus on a specific area.

     

    In Gitcoin DAO, for example, each quarterly working group shares the results of the previous quarter’s work and the budget needed for the next quarter, and then delegates vote on the proposal. ENS DAO uses Orca to advance work. Orca is a governance tool designed for DAO to work together in small working groups, and every such group in Orca is called a “pod.”

     

    Another example is Aave V3, which allows whitelisted address holders to update parameter settings without the need to go through governance voting. However, governance voting will have the ability to revoke these whitelisted addresses or add new ones.

Key Lessons Learned About DAO: Creation, Practice, and Culture

Gitcoin DAO workflow for requesting a budget (Image: Credit: Annika Lewis)

  • Explore ways to build accountability. The participation of every delegate and working group contributor in the DAO proves to be very important. Gitcoin DAO is experimenting with using the Representative Health Card to measure the participation of the Representative, the Representation Health Card will count forum activity, voting participation, etc. At the same time, Gitcoin DAO is building workflow health cards and is beginning to quantify the contribution in the DAO, so that some contributors in the workflow can become more vocal representatives by participating in the DAO. These indicators should improve over time, ensuring that it is serious and fair, thereby reducing the wrong behavior, such as voting just for the sake of voting, without regard to relevant knowledge or professional experience.

     

    The representative’s evaluation system helps DAO members decide where they want to deliver. Sometimes people may just entrust it to someone they know, but in reality that person may not be an active representative. I’m also open to the idea of a delegate election cycle, which can be a way for people to step out of DAO when they don’t want to continue working, and get delegates thinking about whether DAO is an organization they want to continue to put in their time and effort.

Key Lessons Learned About DAO: Creation, Practice, and Culture

  • Explore incentive systems. When members or representatives need to make a significant contribution or contribution, the compensation structure should be openly discussed. Not everyone can afford to work part-time on the DAO for free, so they should be compensated for their work. In the model delegated to delegates, I think all key delegates should at least be compensated for the fees they spend on voting on-chain and submitting on-chain proposals. This provides a relatively equal opportunity for each delegate to participate. Ideally, DAO will also work to standardize compensation mechanisms to ensure that DAO does not significantly underpay or overpay.

     

  • Plan for the long-term sustainability of DAO. Consider diversifying DAO’s treasury funds, whether it’s a round of public offerings or swapping the funds for more stable assets such as USDC or DAI (such as Forefront’s treasury funds diversification public offering). Cryptocurrencies are an area prone to volatility, and like companies, it’s important to ensure that DAO can operate over the long term. This requires strict control of expenses spent from the DAO, especially for costs that are incurred on a recurring basis and do not have a clear replenishment.

Culture:

  • Foster a culture where you can say “no” and have tough conversations. With no CEO who is the ultimate decision maker and can quickly say no to things that don’t meet the company’s goals, DAO members and delegates are tasked with maintaining the DAO’s resources (time, attention, treasury, etc.). When anyone can initiate a financing proposal, the DAO vault can quickly get out of hand. It’s hard to say “no” when you’re working with many friends and people you respect; When there is a proposal to request resources for some project that is not in the best interest of the DAO, the entire discussion process can also become difficult. So early on there is a need to foster a culture of saying “no” where everyone knows that decisions are in the best interests of the DAO and that rejection is not directed at a particular individual, or for whose personal interest it is.

     

  • Establish a schema to enable members to rest. The world of crypto is 24/7, with DAO collaborating asynchronously by people from all over the world. If a DAO does not have a standard of rest or rest, it can be exhausting, leading to burnout of members. Therefore, DAO needs to give clear guidance to members that they should take a break. Forwards, for example, even take vacations as part of their compensation. After 3 years of full-time employment at Forward, contributors can receive up to 6 months of paid leave for rest, travel, research or training. Among the DAOs that represent the voting system, it would be ideal if there is a mobile vote. In liquidity voting, if a delegate is inactive for a period of time (or the area of voting is not their specialty, allowing them to vote will lead to less efficiency per unit of time), they can delegate voting rights to someone else. It’s no different than having a colleague take over his job at the company while someone is on leave.

     

  • Experiment as early as possible. Experiment with different systems and processes to see which ones work for the DAO and what doesn’t. The cost of early experiments is relatively low, and only the transparency of the communication process needs to be guaranteed. However, the larger the DAO, the more difficult it is to experiment, change, or introduce the process. One area worth exploring is the governance of Lego bricks from the Element voting repository, which can fit many use cases, such as giving voting rights to GitHub contributors or allowing members who have staked their tokens to vote.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/key-lessons-learned-about-dao-creation-practice-and-culture/
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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