Science: A Brief Analysis of DAO Ecology

While the idea of DAOs and governance mechanisms has been around for some time, such organizations have sprung up as mainstream DeFi protocols have increased user participation.

This article provides a comprehensive overview of the tools and projects in the DAO (decentralized autonomous organization) ecosystem, and is intended to complement introductory articles such as Linda Xie’s “A Beginner’s Guide to DAO”. This article hopes to help contributors and participants better adapt to the various projects and related infrastructure that are leading the development of capital, talent and community collaboration within the ethereum ecosystem.

What is a DAO?

A DAO is an entity that allows a group of dispersed participants to coordinate with each other according to a set of rules enforced on the blockchain to form an organization, either to achieve a goal or to reach a broad/specific mission. (In most cases) this set of rules is encoded within a smart contract with the help of a “governance framework”. We will discuss the “governance framework” in more detail below.

” A decentralized organization is not a hierarchical structure formed by a group of people who interact and control property based on a legal system. In a decentralized organization, the parties involved interact according to a protocol described through code and executed on the blockchain.” — VB

Many of these organizations do not necessarily rely on automated processes to run, but rely heavily on the subjective collaboration of a group of human participants. The degree of autonomy depends on the type of project and the governance framework it uses, as the personal traits and decision-making styles of stakeholders vary widely compared to more clearly defined traditional corporate governance processes. In this paper, I will use DAO and DO interchangeably. a detailed introduction to the basic concepts of DAO is given by the Ether Foundation.

DAO will slowly (or maybe not so slowly) take an important place in the development and product development of cryptocurrency networks, as more and more projects with tokens start to transform in various ways into community-driven, self-built, self-owned, self-operated systems. — @OKDunc

Why is DAO so important?

As human activity and value shifts to the digital realm, collaboration between distributed communities and stakeholders becomes increasingly important. a DAO or DO provides a mechanism that can bridge the gap between market and corporate dynamics by reducing external information, bargaining and execution transaction costs, and by engaging participants around the globe in certain activities around the same mission. These activities may be as simple as gathering funds or creating a website on the surface. But the real significance behind this is the ability to bring capital and talent from around the globe to collaborate at scale almost instantaneously.

These types of organizational structures are gaining in popularity. The most obvious example of this is the progressive decentralization of cryptographic protocols through new token distribution mechanisms to allocate ownership and decision-making power. In return for user participation and contributions, the platform ties user success to the success of the platform in the form of equity rewards. These experiments with DAOs put governance (and sometimes management) in the hands of the community, rather than a centralized participant. Last summer, the DeFi industry boom fueled this trend toward a “new ownership economy where users create, own and operate the network.” –The Ownership Economy

In this new paradigm of DAO, protocols are only one category. Moreover, given the objective nature of protocol parameter tuning, protocols are the most likely to automate decision-making. However, smart communities have discovered that these flexible frameworks and enforceable rules allow anyone to collaborate with each other and work toward any common goal.

This has given rise to a plethora of new DO types: from small membership organizations that curate NFT art shows to investor entities that gather capital to invest in early-stage projects, whose members can leverage economies of scale and attract talent and capital from around the world to provide specialized (and sometimes lucrative) services. All of this operates in a fully distributed and digital way and is not dependent on a centralized coordinator (i.e., a company in the traditional sense) to scale up the supply and scale of services.

There are certainly risks involved. “It’s important to note that these entities are just tools and cannot solve humanity’s own problems. Tokens can introduce a profit-seeking mentality into a community, thus crowding out behavior that is not for profit. Every community has the potential to develop into a profit-driven network, abandon all ‘community’ values, and end up with nothing but economic egoism.” — @dazucks’ tweet. Stakeholders also need to recognize the importance of building culture and ideology around these entities, as culture and ideology create social incentives rather than economic incentives, and turn these entities into extremely powerful social and human collaboration tools.

The State of DAO

We are in the early stages of change. While the idea of DAOs and governance mechanisms has been around for some time, such organizations are springing up as mainstream DeFi protocols increase user engagement.

We will see large ecosystems split into more niche, segmented markets, and specialized DAOs or DOs that can provide a valuable and convenient service to the cryptocurrency industry and beyond.DAOs are already beginning to develop different application scenarios. Smaller entities (such as curated DAOs or association DAOs) have cleverly leveraged existing community tools and channels (such as Discord) for coordination, and opted for simpler and more advanced frameworks (such as Moloch and Snapshot).

It is important to highlight that we have recently discovered that networks of relationships have formed within DAOs, most notably, small communities are interacting with and servicing large, high-quality DeFi projects and communities. In order to understand these relationships across multiple governance frameworks and ecosystems, it is becoming increasingly important to be transparent and standardize information, and the way we communicate with these entities. To this end, let’s look at a few broad categories of DAOs and specific examples.

Science: A Brief Analysis of DAO Ecology

The protocol gives new and existing users the right to vote on network decisions by assigning governance tokens to them. These decisions include protocol parameter adjustments and smart contract upgrades. Due to the high complexity and technical nature of such decisions, a small group of learned representatives has emerged within the governance communities of some protocols to lead other members in thought and action.

Project DAOs are closest in organizational form to traditional corporate structures. They are created around the development and launch of products and services, sometimes with the help of token economy models and incentives. The resulting revenue goes into a treasury governed by the token holders. Project DAOs sometimes hold governance tokens from other agreements and are strong meta-governance decision makers in the external governance process.

Stakeholders decide the investment decisions of the DO by injecting funds into the DO to receive one (sometimes less than one) vote. Token holders work together as a group to create a portfolio that meets their mission and investment objectives. The future is likely to see the emergence of activist investor DOs that can quickly coordinate to drive markets and agendas. Click here to learn about the 2016 DAO.

Creators can split the NFT of their high-value work and distribute it to fans and backers, allowing them to share ownership of this NFT. The new owners can co-create, promote, sell, and distribute that work, resulting in collective ownership, identity, and experience. mirror and RAC have conducted some interesting experiments in this area.

The Curator DAO is similar in structure to the Investor DAO, but is currently more focused on assets and NFT art exhibitions. In the future, its members may contribute expertise, branding and capital to curate everything (both people and projects) and share in the appreciation of the curatorial portfolio and even the fee income from curatorial services.

Tokenized communities can be organized around a person or common interest and represent access to a social space (such as a Discord server or Telegram group) by issuing DO tokens. Members can enjoy the benefits of a closed network and privileges and work together to advance the program and project process.

This type of entity aims to provide high-quality contractual services to customers through talent coordination. Freelancers and individual contributors can enjoy access to the Association DAO’s outreach channels and get in touch with top talent from top programs to make a splash across the ecosystem. Members can contribute in many forms, such as code, products, collaborations, education, contracts, or content. To learn more, read this article. For example, early development work on Boardroom was done with the help of dOrg.

The DAO Infrastructure Stack

To drive these organizations to thrive, a vibrant ecosystem of tools has been created. These tools establish new types of governance and management mechanisms and reduce the friction that arises when interacting with governance processes. Because of the open nature of most frameworks, projects have gone through numerous iterations and adaptations to meet the needs of their communities. The following table lists some of the most common tools used by DAO.

Science: A Brief Analysis of DAO Ecology

A governance framework is a smart contract that enables decentralized governance process rules to be executed on the blockchain. Compound’s Governor Bravo contract is a good example.

Some of these frameworks have controllers that allow users to interact directly with the governance contract through a user interface. Controllers are usually created by the team building the framework. They provide data and interfaces to help developers pull and index information, as well as more comprehensive functionality to help integrators better develop their DOs.

Vaulting and fund allocation needs to be decided jointly by DO members. Funds can be held in multi-signature wallets (each transaction must be agreed to by no less than a certain threshold of signatories) or other types of smart contracts (the size of these vaults is growing significantly). There are a number of teams building contracts and tools for signatories and members to seamlessly interact with locked-in funds or portfolio assets that are allocated and managed through governance mechanisms.

People and contributions are at the heart of the value DO creates internally and externally. Tools are being built to measure labor and output from contributors and members because in a multidisciplinary environment, products, knowledge and services are ultimately delivered in multiple forms and can be strongly subjective. There are also complex issues of identity, contributor reputation, and trust that need to be addressed.

Aggregators can act as the glue between different tools and frameworks. They aim to abstract away the nuances and complexities of infrastructure and middleware, thereby reducing friction for users when interacting with DO. They are also well positioned to index and provide global statistics, and to examine the more “meta” relationships that arise from interactions across DAOs.

These project categories are unlikely to stand the test of time. In the coming years, DAO tools will and will change dramatically. Nonetheless, at Boardroom, we are excited about the rapid growth of DAO and the global experimentation of contributors and stakeholders. While the above categorization may not be accurate, it can help newcomers who are not yet familiar with the new entity structure of DAO to better understand the relevant application scenarios.

Posted by:CoinYuppie,Reprinted with attribution to:
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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