Minimizing Capital Extractability – The Roots of Decentralized Governance

Maximizing the governance rights of small holders ensures that the agreement is not at the mercy of giant whales

Previously, in the article “Governance Capital is the Value-Driven Governance Right”, RLI discussed the impact of capital on the governance of decentralized protocols, and pointed out that the ultimate value provided by each group in the protocol determines its governance capital, and the forkability of on-chain protocols limits the extent to which equity capital can manipulate the development path of the protocol.

However, if we want to essentially stop the giant whales from extracting the rights and interests of other groups within the protocol through capital, protect the value of decision rights of all participants, and achieve fair decentralized governance, the optimization mechanism is the only choice.

This article is from Status and 1Hive core contributor Sacha. The Gardens governance template (Gardens) maximizes the governance rights of small holders by combining conviction voting, community contracts, and a blue sky court (Celeste) to ensure that the protocol is not swayed by mega whales.

Minimizing Capital Extractability - The Roots of Decentralized Governance

Ideally, people’s income, as well as their assets, would be in crypto networks. But the premise is that it needs to limit the ability of the big players to be able to use their capital for value extraction. So we need to put some more effort into the design of the mechanism.
When governance is entirely determined by capital, all decisions are centralized and the rich get richer. People who are not whales do not have any representation in governance decisions, and the will of the whales is not changed by what the community thinks.

On the other hand, however, attracting capital is critical to the success and sustainability of tokenized communities. When all decisions are backed by the principle of ‘shared risk’, this also ensures that decisions made by those who are not interested in the long-term interests of the community do not unduly influence the allocation of resources, and the enactment of policies.

So how do we balance these opposing forces and create a more efficient community with more aligned goals?

Let’s take a look at the “Garden” governance template.

The Garden Governance Template
The Garden Governance Template was pioneered by the 1Hive community to create a template for the public community that would coordinate shared resources in a bottom-up manner (essentially the template draws on lessons learned in the 1Hive community and enables any DAO to plug and play).

The three core pillars of the Garden template.

  1. a new voting system (conviction voting)
  2. decentralized social contract (community contract)
  3. a dispute resolution protocol (Celeste Blue Sky Court)

All three are required to achieve effective community-driven on-chain governance in the present.

Belief Voting

Minimizing Capital Extractability - The Roots of Decentralized Governance

(Note: Belief voting is the best tool for the future of decentralized governance)
Belief voting is at the heart of the garden governance template, allowing people to express their preferences on an ongoing basis, rather than forcing them to ‘make a one-time decision’. From the community user’s perspective, the user experience is intuitive and users will only see the events they care about and support.

A quote from Jeff Emmett’s article.

Belief voting provides a novel decision process for funding different proposals based on the overall preferences of the community, and the community can express preferences on an ongoing basis.

In other words, voters need to support the proposal they want to be approved all the time, not just in a single Time-Boxed Voting session.

Voters can change their preferences at any time, but the longer they maintain a preference for the same proposal, the “stronger” their belief in it.

This “belief” mechanism allows members of the community who have supported a proposal for a long time to have more influence than participants who are only trying to influence the vote pattern in the short term.

Belief voting is resistant to witch attacks and complicity in evil, and blocks many of the avenues of attack found in time-limited voting mechanisms.

In conviction voting, not everything requires majority consensus. This allows us to achieve true “proportional representation”. Community members can propose and support things they care about without fear of whale opposition. That is, even with a large number of interests, there is no way to sway the community’s decisions.

Proposals only need to have enough support to pass – the less money a proposal needs, the less support it needs to have. This is where everyone really does have a say. The only thing token holders need to consider is whether they want to support a proposal, and that’s it.

In this framework, various different proposals can be proposed and opened in parallel. This allows DAO to explore, trial and error, and innovate seamlessly and at high speed. If the experimentation works, more complex proposals can be pursued.

An underrated advantage of conviction voting is that it allows the DAO to grow into a “headless brand” that iterates in a cycle of deviation and aggregation and constantly reflects the preferences and interests of coin holders.

In summary, by empowering small coin holders to contribute, conviction voting can help lay a good foundation for the community and solve all kinds of common governance problems: governance attacks, low participation, and the inability to make preferences given the many competing proposals.

Community Contracts (putting value into code)

Minimizing Capital Extractability - The Roots of Decentralized Governance

Is anyone considering making applications on Ether? I’m curious if it will enable a decentralized social contract.
The second core pillar in the garden template is the community contract. You can think of it as something like a ‘charter’ or a ‘decentralized social contract’.

On a practical level, the contract is a document, stored on IPFS, that explains what DAO means in the most concise terms. It establishes values, rules, and customs of all kinds. And it protects the DAO from evil-doers without sacrificing the rights of its members.

The key point here is that a contract subjects behavior within an organization to subjective rules that may not be programmed into a smart contract, or may make the organization complex and slow to act.

Take 1Hive’s contract as an example.
1Hive is a community of activists working to create a future that is freer, fairer, more open, and more humane.

1Hive is also an economic protocol, similar to Bitcoin or Ether, with a native token, Honey, that is programmed to be issued and distributed. Unlike Bitcoin or Ether, the 1Hive protocol does not narrowly define what counts as valuable activity, but rather allows community members to build token distribution proposals and back them up by pledging Honey tokens.

The goal of the 1Hive protocol is to promote a healthy community economy by continuously distributing Honey tokens to the community for development, maintenance, and upgrading of public goods that bring the most value to the 1Hive community.

Anyone who interacts with the 1Hive protocol must abide by this contract. Any proposal that violates the spirit of the covenant can be referred to the “Blue Sky Court” (Celeste Decentralized Court).

In a nutshell, the covenant holds DAOs to a consensus value agreement and outlines subjective rules for proposal standards. This also allows for more granular and complex governance.

Blue Sky Courts (Value Protection)

Minimizing Capital Extractability - The Roots of Decentralized Governance

Blue Sky Court is a dispute resolution protocol integrated with BrightID. In the 1Hive community, we use Blue Sky Court to uphold our core values (as stated in the Compact). Blue Sky Court allows even small holders to challenge proposals that do not comply with the Compact regulations.
The third core pillar of the Garden Template is the Blue Sky Court, which acts as a window into the DAO’s shared values, beliefs, and hopes. The Blue Sky Tribunal provides a way to resolve subjective disputes and harmoniously solidify the Compact.

From a technical dimension, Blue Sky Court is a fork of Aragon Court with BrightID integration – the integration with BrightID allows for limiting the total amount of pledges an individual can make in the system.

The details will be covered in the next podcast, but one thing to note here is that Blue Sky Court is only invoked when an action is challenged (i.e., only in exceptional circumstances).

Once the Blue Sky Tribunal is invoked, a group of decentralized (randomly selected) BrightID verifiers – called Guardians – will be selected to conduct the dispute adjudication (their task is to decide whether the disputed behavior is compliant with that community’s contract).

If the guardians decide that the proposal is compliant, the chain will continue to enforce it. If they decide that the proposal is not compliant, the proposal will be blocked.

By allowing small coin holders to challenge proposals that are not in line with the community’s values, the Blue Sky Court provides a de-trusted way to uphold the core values of DAO.

Closing Remarks

Minimizing Capital Extractability - The Roots of Decentralized Governance

DAOs ∩ better voting systems ∩ soft-enforceable social protocols = hope for a better world
The Garden Governance Template provides the roots for public communities to coordinate shared resources in a bottom-up format.

By combining the three most important pieces of decentralized software – Belief Voting, the Community Contract (Aragon Agreement), and the Blue Sky Court (an Aragon Court with BrightID integration) – we are now able to enable community-driven on-chain governance.

With these building blocks, we now essentially have the ability to have a fully decentralized and fully autonomous organization.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/minimizing-capital-extractability-the-roots-of-decentralized-governance/
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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