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Have you ever worked for a “successful” company that was so dysfunctional and toxic on the inside that you couldn’t wait to leave? How do businesses succeed when the managements’ leadership styles have the civility of barfights? I hope to avoid that level of institutional decay in my future enterprises. I think you’ll join me in that aspiration. But first we have to look at the facts of capitalism.
Throughout history, most enterprises have relied on centralized leadership for decision-making to function. Leaders motivate the employees to work toward a common goal that the leaders decided on. Non-leadership employees may be perceived as vying for power if they step outside of their subordinate role. In healthy organizations, gracious leaders entertain ideas from the employees, accepting the consequences if the idea is a failure. Good leaders are hard to come by. The Peter Principle states, a good manager will be promoted to their maximum level of incompetence. In my experience it’s common to for leaders to rise to a least twice that level. Lucky me.
If finding and retaining good leadership is such an impossibility, Decentralized Autonomous Organizations have emerged as a viable model for leaderless organization. Does this mean there will be no pointless breakroom gossip, fewer zoom meetings, rare interactions with HR and a lack of painful socializing at the company picnic? Perhaps, if you choose wisely of your governance infrastructure.
I’m comparing and contrasting two promising decentralized governance platforms; Colony DAO is the aged veteran of bear markets and the upstart is Governor DAO. Neither appear on page 1 of your favorite crypto price site. In fact, Colony has not started their CLNY token sale yet, and Governor’s token is barely for sale, ranked sub-1000s with a market cap of 3.6 million dollars. These aren’t moon tokens, they are sober, important experiments in the new great shift in human governance. To get as excited as I am, we need to dig deeper into the ideas surrounding the DAO concepts.
DAOs in General
From the Governor DAO litepaper “At a high level, a DAO-type project is one that is entirely
owned and operated by its participants via tokenized ownership.” This has significant implications for everything we know about how to run companies. Some would say this is anarcho-capitalism or voluntaryism as a business model. Others point out that the best and most successful DAO is Bitcoin. Perhaps. Either way, in this world of rapid decentralization, distributed LEDGER technology (AKA crypto) has several tools emerging to turn imperfect human governance over to smart contracts.
DAOs are “…designed to operate ‘solely with the steadfast iron will of unstoppable code.’ The core idea here is that the code is the contract, and that it does not require or allow human intervention or interpretation. It is automatic and ‘autonomous’. Deterministic outcomes based on code — that is the value.” As we have seen in the recent past, ‘steadfast iron will of unstoppable code’ can be a major liability if done incorrectly. Governor and Colony DAOs are working around these pitfalls to get it right.
Brief History of DAOs
Colony DAO went public in 2017 as a surge in crypto investment led to the Initial Coin Offering craze. There were many scams to be found. The famous “hack of the DAO” in 2017 caused the Etherium Hard Fork, creating ETH Classic, all because someone neglected to add a recursive call (I’ll explain more when you are older). Then a well-meaning and very popular MakerDAO was caught in the crypto meltdown of March 2020 where a poorly written smart contract causes billions in value to disappear. In late 2020, during another fantastic bull market, Governor DAO was unveiled.
Colony DAO
Age before beauty, Colony DAO had a rough start that the well-known founder Jack Du Rose graciously lives up to in his honest and very readable Medium. Jack modeled the platform after the brainless symbiosis and harmonious function of an ant colony. How many project founders model their enterprises after insects? Props! Check out the whitepaper.
First off, what is the use case? “Governance DAOs are designed for infrequent, large-scale stakeholder decision making, not the fast-paced environment of day to day organisational operation.” Yes, some de facto leaders will likely emerge in every colony, but with reputation based on achievement and quantified by “reputation” ratings. The self-organized team will gain respect and prove competence from one another, rather than it being ordained via CEO in a typical company.
Use Case
Colony seeks to provide “…everything an organization needs to operate on-chain. Payments, Teams, Authority, Governance, Fundraising, Revenue sharing, Arbitration, the ability to interact with any other smart contract on Ethereum…” should be easy to provide, right? Apps are simple but business is hard. The level of complexity in the business world is impossible to grasp. It turns out that their first implementation was an acknowledged failure, however, such is crypto. Iterate, break things, repeat, hope you get it right.
After the dust settled, the approach became a more agile system of ‘lazy consensus’, meaning you don’t have to vote on every single thing. Jack follows the ant analogy with the concept of Stigmergy, which is a kind of self-organization that deserves a deeper dive (perhaps later).
Onboarding
I onboarded with Colony DAO. It took 30 minutes with a very professional customer service fellow. He gifted me some xDAI, which was nice because it’s a pain to get it. This is a good guide to using the bridge. The amount of xDAI needed to set up your own Colony is a fraction of a dollar. After that, I was able to access the impressive functionality. You can start your own DAO and even mint your own governance token. All I need to do is get my friends on to start playing around with all the features and try to break the thing.
Would you like to be my DAO friend? It’s a super-cheap education in DAO governance and I can promise you we can have fun with it.
Ay’ Governor!
I have to start by gushing that Governor DAO is the first legally recognized DAO. What does that mean? We don't know yet. Wyoming is a new regulatory sandbox for crypto development, and in keeping with the state's history, it really is the Wild West. In sandbox mode, a firm simply has to inform regulators of their actions and intentions. If someone messes up, the hope is that regulators will turn a kind eye, perhaps with a polite cease-and-desist. Hopefully.
Tokenomics
Governor DAO relies upon maximizing engagement by rewarding cooperation. The tokenomics under the hood is a fixed supply of 3 million tokens, ERC-20 and burnable. Mining rewards have come and gone. Why would you make a governance token (essentially a utility token) burnable and fixed? For liquidity, of course! There’s a farm involved, and the whole funding scheme appears to be in avoidance of an outright token sale. This was all to capitalize the treasury, rewarding those that did. Now with GDAO pretty much distributed between the existing participants, they can govern their own development treasury without the risks of a whale buying in and bossing everyone around, but still allowing early participants a way to buy in without using fiat. Their development timeline and biweekly briefs are great ways to investigate further.
Onboarding and Use Cases
Onboarding centers around ensuring the human trying to onboard is indeed a human. They do this with their Proof of Existence protocol. I'll give my take on this in Part 2.
For use cases, Governor DAO Goverance-as-a-Service seeks to guide orgs to the best practices. This sounds staggering considering the average enterprise has email, chat, sharepoint, accounting software from hell, CRM and who-knows-what-else. Having three different supervisors enforcing rules can be supplanted by automation. Governor DAO is not aspiring to take this on.
That's for Colony, perhaps?
What I do find fascinating is the possibility of using this as a forensic tool they call: Unrug-as-a-service. Too many projects have promised the moon, wowed investors with their previous achievements, raised a ton of excitement, emptied the treasury, then took a flight to the Bahamas, never to be seen again. This happened in the case of the CBDAO, which was not a cannabis-meme project but a “coin breeder” test and evaluation environment. Shame, would have been a cool project. All that remains are some screen captures of the Medium articles, and some folks that still believe in the idea despite the rug being pulled out from under them.
Can Governor’s Unrug-as-as-Service serve the jilted members of CBDAO? I suppose it will take capital and participation, which could be generated from the salvaged Medium articles. Even so, the psychological scar of CBDAO having been rugged is enough to frighten investors. I’d like to see HatchDAO rise from the ashes using GovernorDAO and some competent folks that can take the nascent idea and run with it.
Okay, on to a deeper comparison of both platforms in Part 2!
