How To Build A Better DAO: Creator Abdication

The point of a DAO’s smart contract is to make governance decisions, granting investors voting rights based on their initial buy-in/mint. And the idea is that token holders are meant to be treated as stakeholders, with the power to influence the direction of the shared protocol.

In most cases, crypto communities are made up of three participant archetypes: builders, users & speculators. Each has its own role — and goal — in driving protocol development. The builders are the originators of the DAO’s token, the users deploy the benefits and application of the DAO and the speculators are members who anticipate a rise in the value of their membership and see it as an investment. There is a potential division between the 3 groups, as each will pursue goals that may diverge. The builders want to develop their protocol and increase the value of their property. The users want to deploy it. The speculators simply want to pump value.

The first major hurdle for crypto communities is figuring out how best to build decentralized governance models at scale without sacrificing true decentralization or security, and without leading to incentivized decision making that could be destructive for the community in pursuit of benefits that are isolated or emphasized on one archetype.

One path is for the creators of a token and the founders of the DAO to abdicate their voting rights and investment in the community, stepping away and focusing on the technical roadmap. This will rewrite the dynamics of the decision-making process. They may be bought out by the larger DAO as a form of the acquihire, with their initial holdings becoming collective property, and a regular fee paid to support their development. The benefit of this is simple; the builders will have no reason to become, align with or cater to speculators, and the users will have more authority.

Communities need to focus on what they do well: building trust among community members, fostering organic growth, empowering users to take control of their own destiny. The community should not create blockchain technology — that’s not its goal or function. The community should be able to grow and make decisions autonomously once the tech is there. A healthy community has that capacity.

The original development team should build the protocol and then empower a community to make decisions. This approach will achieve organic growth in the long term — it’s better for value creation, network effects, and ensuring that no one party gains control over the community or can rewrite its values, mission, and purpose.

The right way to reach critical autonomy is through this decentralized approach:

Build -> Govern -> Foster Community Governance -> Transition Authority to the Community -> Let the community take over.

Owners of DAO tokens should be the only people that have voting rights. If the creators of DAO tokens are not allowed to have any voting rights, a power imbalance is removed, giving the collective a stronger sense of self.

There’s a distinction to be made between being community-driven and ceding responsibility to others. In a functional, healthy DAO, it should be possible for the original development team to move from positions of authority and control to roles focused on engineering and building the roadmap, under the guidance of a democratic voting process, led and shaped by the community itself.

The community should be in charge. The one thing that’s not for sale is the soul of blockchain technology; if it remains decentralized and autonomous, no single party can control its direction.

Chaotic good. Award winning creative director & writer, ft. in Wired, Inc, SF Chronicle, TNW. Founder thisisstudioself.com