PDA Summit Panel 2 | Current DAO Governance Status and Future Prospects

The heated discussion of “Democratic Governance of Polkadot “ in the Polkadot DAO Alliance Summit Panel 1 has sparkles of many brilliant ideas, and Panel 2 continued to give us profound insights!

Recently, Wyoming has created a piece of legislation that will recognize Decentralized Autonomous Organizations (DAOs) as legitimate enterprises in the United States. The Wyoming Senate voted 28–2 to push a law that many are calling ‘the Wyoming DAO bill’, to Wyoming’s house of representatives, where it will be voted on next. This is undoubtedly an amazing piece of news for all following DAO closely.

Polkadot DAO Alliance Summit Panel 2 concerns current DAO governance status and future prospects.We invited several outstanding contributors on Polkadot ecosystem to share their views. They are,

  • Moderator: Maggie Dong, Parity;
  • Lipeng Yue, Founder&CEO of Patract;
  • Alex, Founder of Darwinia;
  • Bova, Founder of Crust;
  • Tyrone, Bifrost Product Manager;
  • Eyal, Founder of DeepDAO.

Recap on Panel 1 livestream

Maggie Dong: To an outsider, and even a considerable number of blockchain practitioners, they do not have a particularly concrete understanding of DAO. Can you give us a few vivid examples to imagine what convenience DAO will bring to people in the future?

Lipeng: The traditional charity organizations are un-transparent due to the centralized fiat bank and company system, so the cost of globalized collaboration is high. Global charity organizations on chain can accept donations anonymously, pay their own employees, and disclose their expenses.

Bova: Imagine a vending machine that not only takes money from you and gives you a snack in return but also uses that money to automatically re-order the goods. This machine also orders cleaning services and pays its rent all by itself. Moreover, as you put money into that machine, you and its other users have a say in what snacks it will order and how often should it be cleaned. It has no managers, all of those processes were pre-written into code

Alex: In most cases convenience is not the primary goal of DAO. But if you look at the DAO, there are several keywords there. Decentralization is the first one. What really matters is the voting power and the influence. Then when it comes to autonomy, we need a proper governance process. We will have several advantages like transparency by using blockchain-based DAO, which has never been achieved in the traditional world. Those decisions or proposals on blockchain can be enforced by the blockchain smart contract or modules whatever.

Tyrone: In fact, most public chains are developing in a DAO way, because decentralization is the core of DAO. Here is an example that everyone is familiar with: Vitalik Buterin played World of Warcraft during 2007–2010, but one day Blizzard removed the damage component from his beloved warlock’s Siphon Life spell. He cried himself to sleep, and he realized it’s horrible that centralized services can bring. So he decided to quit, and he found Bitcoin and established Ethereum. In this example, we may see how centralized service broke a child’s sugar, if it didn’t happen, Vitalik might be an eSport player right? So, DAO is all about separating the right and giving it back to people.

Eyal: To put it simply DAOs allow people to organize and manage assets together, so that everyone is involved, and everyone is able to observe and participate in all the group’s activities. With a DAO groups of people can manage money together, art works, and other real world assets like for example real estate.

Maggie Dong: For now, with the development and maturity of blockchain technology, more and more blockchain projects have chosen DAO as a form of decentralized autonomous governance. However, we know very well that there still remains a long way to go until its mass adoption. What do you think is the biggest obstacle?

Lipeng: I think it is because we still lack a large number of secure DAO contract templates and protocol standards for the Polkadot ecosystem. Only with this, we can allow everyone to customize the development and deployment of DAOs at a very low cost, and also allow large scale of composability to be integrated with other contracts. Patract provides basic support for contract development, and SubDAO is here to design and develop such templates and SDKs. We will fix the problems for the community.

Bova: First of all, there is still little understanding of this technology. In the early stage, failures are highly possible.From a legal point of view, there is no legal classification for DAO yet.This is an issue because even if a DAO succeeds, it would not be able to legally be this autonomous entity.

Alex: First obstacle I would like to share with you is the developers’ mindset. Developers tend to think they are the creator of the project so as to have a greater say in the governance process. However, in DAO, developers need to change their mindset and revolutionize themself so that the stakeholders or users can have the equal influence to the project. Besides, I think there is not a good solution to voter apathy. In general, people don’t want to spend much time in the political discussion of the governance process. So, I think we need some well-designed governance process. A single majority of voting is not good enough to prevent tyranny of majorities, which might lead to collective stupidities. I think Proof of Headcount is not a good idea when it comes to voting power because it’s subject to civil attack and vote buying. And Proof of Money is not sufficient as well. The Proof of Stake system is a waste of coin age. In the design of Darwinia Network, we take a step forward allowing users to voluntarily lock up their tokens for a longer time.

Tyrone: I think it is the design of the operating mechanism and economic model. In fact, this is a sociological problem. It is very difficult for a decentralized organization that can truly enable multiple parties to operate independently, satisfy the interests of multiple parties from different angles and allow an “invisible hand” to continue to operate. This first requires a powerful enough application to attract more users to come in and form a stronger consensus.

Maggie Dong: Which criteria do you use to judge which DAO is doing better? Is it the future trend, prospectiveness, and engagement? Or the number of people involved in governance, the number of proposals? Please feel free to share your thoughts.

Lipeng: I think it is the value of the assets under management by the DAOs, and the cost of gas fee consumed for the management. Other indicators can be faked. There is also the degree of decentralization, which is difficult to measure with an indicator. It is necessary to prevent a DAO from being monopolized by some people, because as long as it is monopolized, it is no longer a DAO, and it will quickly lose its vitality and die.

Bova: Dao is still in its early stages. Most projects still involve few people and few proposals. So this is not the best way to judge the project. From my perspectives, the platform and mechanism that DAO chooses is crucial. The code of DAO is difficult to alter once the system is up and running. A DAO project should have a way to guarantee/ensure security, while at the same time balancing the barriers for user and designer to join a new DAO is like a startup. It requires a product/ market fit and a solid business model

Alex:I think the outcome of governance is important. But what matters more is the process about how consensus has been reached. I will judge DAO projects from these perspectives. First one is who has a say. Secondly, I will say the voter’s turnout, that is voter apathy I mentioned. If there is a delegate system helping people cast their opinions, the voter might be more engaged in the governance than before. Thirdly, how they reach consensus is also important. Do they have ample time to discuss? If the stakers are well-informed about the changes, they can behave well upon that. And how the outcome is executed also matters.

Tyrone: Activeness and the number of people participating in governance are crucial. For a system that requires a democratic form to define decision rights, more participants voting means that decision-making is done in a sufficiently decentralized form. If only a few hundred users in a system with tens of millions of users participate in the governance of important proposals, this is obviously not decentralized enough.

Maggie Dong: How can DAO realize the real collective intelligence instead of collective stupidity?

Lipeng: Most blockchain projects need to distribute their tokens to the community to incentive some valuable actions, besides directly selling. I think we should vision, design and guide the long-term positive value, rather than short-term mining, farming and speculation.

Bova: This is a difficult question. Actually, sometimes, the truth lies solely in the hands of a few. How to avoid collective stupidity? There are two points — one is that DAO has its own barriers to entry, those who are involved in DAO need to possess certain knowledge, they represent knowledgeable people to a certain extent, so it brings together people who are making intelligent decisions. The other point is market selection — that means, if a DAO project represents collective stupidity, it will perform badly, and ultimately be eliminated by the market.

Tyrone: Darwin said: “There is no need to have a role like God, as long as there is variation between individuals, plus choices, everything will come out.” This is a great example of self-organization. Such simple rules are usually divided into two categories, two opposing types of rules, one is conservative, the other is radical, which means one is stable and the other one keeps changing. It’s the same as evolution. The stable rule is heredity. Once a species is formed, its basic form remains unchanged from life to death. At the same time, it must be mutated so that it can continue to survive when the environment changes. And DAO will be intelligent by people’s expectations for better things.

Maggie Dong: For the organization or institution you are currently working for, when is DAO needed? What do you think is the most ideal DAO for the organization or institution you are currently in? Where else about DAO can be optimized?

Lipeng: We are organizing many Wasm contract projects and council members to define the Wasm contract standards in Polkadot ecosystem, such as Ethereum’s ERC20 and ERC721, as well as more applications such as DeFi, games, NFT, and DAO. This work is very complicated and need to work through many steps, including proposing, discussing, modifying, re-discuss, pre-standards, and finally form a formal standard, and it need to be written as a standard library in two languages, ink! and Ask!, and placed under our Metis project, similar to the Ethereum’s OpenZepplin library. This meeting is a big work for us, the community and the council will be involved.

Bova: Due to the lack of a hierarchical structure, the innovation process within a DAO is potentially significantly better compared with a traditional organization. In a DAO, any innovative idea can be put forward by anyone and considered by the entire organization. There are two kinds of business that can be improved by DAO. The firs is a fund — we can use DAO to make investment decisions. The other is project governance — DAO can make the process more transparent. There will come a perfect point, if a DAO can be upgraded by Artificial Intelligence.

Tyrone: Bifrost is just a defi infrastructure that provides liquidity for pledged assets. As for what it should develop on top of this, all the imagination is not only formulated and implemented by our team, it is determined by the social layer. It is difficult to say what an ideal DAO looks like. After the birth of Bitcoin, people debated the issue of block size. Today, people are arguing about the EIP-1559 proposal. I think a DAO that continues to run and has tension has greater potential.

Maggie Dong: Which field do you think needs DAO the most outside blockchain? How could DAO be implemented in that field? Please give a few examples to illustrate your point.

Lipeng: Except the charity mentioned above. Some people know that the naming of Patract’s product line is from Jupiter and its moons. We also feel that the discovery and serial numbering of asteroids can be made into DAO, and their naming rights auction can be made into a NFT in DAO market. First of all, it is fully digital of the discovery registration and review process. Astronomy enthusiasts and institutions all over the world can register their discoveries. Second, It will be reviewed by peer institutions and voted according to weight. Third, the naming rights are valuable. There are hundreds of thousands of asteroids that have been discovered and numbered but have not yet been named. I believe that many people are willing to buy one and support the finder to finance the astronomy industry.

Bova: Open-source projects need DAO. Usually, open-source project is operated by a non-profit organization. The organization needs a transparent, non-hierarchical structure. For example, I think github should be operated on a DAO; a project can manage fundraising, grants, and any other decisions based on a DAO system.

Tyrone:I think it is the financial field. The source of all responsible procedures for financial services and financial products lies in trust. Everyone in the DAO can inquire about the open, auditable, and non-tamperable general ledger in the organization, and use this to accurately know every capital flow of the organization. At the same time, the output of financial products through governance will be more applicable to the public.

The above is the highlights of the Panel 2 discussion of PDA summit. We will regularly hold online DAO popularization and opinion sharing sessions. Just stay tuned!

About PDA

Polkadot DAO Alliance, or PDA, an organization initiated by SubDAO and joined by a dozen of Polkadot ecosystem members. The founding members of PDA are including Plasm, Phala, Stafi, Crust, Litentry, Bifrost, Patract, Darwina, Zenlink, DeepDAO and SubDAO.

Polkadot DAO Alliance is a DAO alliance aiming to promote the development of decentralized governance in the Polkadot ecosystem. The ultimate goal of PDA is to realize the true decentralization of Web 3.0.

About SubDAO

SubDAO is a DAO infrastructure based on Polkadot, where any decentralized organization is allowed to conveniently create and manage a DAO. SubDAO does not only connect DAO with DApps to realize DAO’s cross-chain management, but also bridges Web 2.0 and Web 3.0.

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A Cross-chain Platform built by SubDAO Labs to link DAO and DApp on Polkadot. For more: https://www.subdao.network/.