Transforming siloed strengths into repeatable success for Impact DAOs

Impact DAOs are communities with positive externalities rooted in collective action for a shared cause³. They amplify their impact by stacking on each other and derive compounding effects from the mutual collaboration to build a regenerative economy.

While no two Impact DAOs are the same, their shared DNA leads to similar organizational challenges such as:

• finding value-aligned talent

• securing funding

• program management

• establishing reputation systems

• creating a cohesive contributor experience.

There are potential synergies in codifying scalable solutions for these challenges and then applying them in the context of the respective Impact DAO. Without coordination, there is a risk of the knowledge remaining stuck in silos. By effectively re-deploying the tribal knowledge gained in the trenches, the Impact DAOs can re-focus on what they do best — drive outcomes for the shared cause.

A solution services entity that offers advisory, implementation, and support services to Impact DAOs for a subsidized cost. In return, the Impact DAOs provide sweat equity for collaborating to craft clear problem definitions, early adoption of solutions, and active feedback of services. A shared token economy captures the value of the collaboration. Early adopters gain the benefits of token appreciation with time as solutions and services gather a wider reach and adoption.

Sef-sustaining liquidity to deploy solutions and services for Impact DAOs

(Quote from the book Greenpilled)

There is inherent value in overcoming coordination challenges across Impact DAOs and using the learnings and repeatable solutions across the ecosystem. The success of this project depends on executing the following:

• Codify the value from collaboration with Impact DAOs into a community token that offers self-sustaining liquidity

• Organize people and processes transparently that utilize this token to operate a services business

• Spawn off mature solutions as product DAOs with their own micro-economy and user base of Impact DAOs

Mechanism design using token-based curve bonded crowdfunding

Here’s a conceptual view of the building blocks to achieve these outcomes.

Mechanism design⁵ is a sub-discipline of economics that deals with designing protocols that incentivize rational actors to behave in socially desirable ways. The Augmented Bonding Curve⁶ as a mechanism design provides continuous funding to establish and maintain a shared public good. It incentivizes group behavior around the collection and prudent use of shared community resources².

For brevity, the rest of the proposal does not delve into the technical design of the bonding curves to codify these incentives. Also, the design allows optionality for the specific types of governance to apply on top of the mechanism design.¹⁰

Progressive decentralization of modular governance based on scale and context

The section for phase-by-phase execution outlines the approach progressive for decentralization. The specific choices are based on the following guiding principles.

1. Solidarity Before Scale: Establish and align on the higher purpose for a sustainable ecosystem for protecting public goods and codify the enabling behaviors that will bond the member community of Impact DAOs before adopting decentralized tools and technology for scale

2. Governance Before Growth: The glove that provides the most warmth isn’t the most expensive one, it is the one that fits you the best. Commit to tailored choices for a nimble governance model in the context of the culture and needs of the community

3. Stewardship is the Soul: Establish strong stewardship practices to serve as the guiding light for workgroups to make progress cohesively to avoid the baggage in centralized orgs — blind spots, tunnel vision, unresolved conflicts, false starts, etc.

4. Tokens Alone Don’t Build Communities: Tokens have the potential to capture and build a previously impossible economy around the many intangible aspects of value for nurturing the builders in Web3. However, without a sense of belonging rooted in a shared value-driven purpose, the spikes in token values are often short-lived.

OBJECTIVE: Identify the initial group of value-aligned Impact DAOs who will collaborate with the core team of stewards, designers, engineers, and product managers to set up a core set of solutions for recurring needs. In addition, also screen a set of impact investors who can blend purpose and profit as early funders.

WHY: The rest of the proposal remains bullish on the ability of judiciously coded contracts to build a community. Yet, the proposal also recognizes the limitations of relying only on “economic incentives as institutional glue”.⁹

How can a community exploit the possibilities of self-governance without entirely relying on economic incentives?

It is important to seed the effort with value-aligned members to be the vanguards in this journey.

HOW: Leverage a known reputation system⁴ or create a new setup to codify and rank Impact DAOs based on their proof of work to evaluate fitment membership.

GOVERNANCE CONSIDERATIONS: At this stage, the control for seeking Member Impact DAOs and evaluating fit for initial impact investors relies solely on the founding team of the DAO. A self-appointed board sets policies for membership and removal. The board is responsible for making decisions and implementing them, including delegating necessary work to others in the core team. The board elects its own members. The board makes decisions by majority vote.¹

EXIT CRITERIA: This phase identifies a diverse set of Member Impact DAOs who can work collaboratively with the core team to create an initial set of solutions.

OBJECTIVE: Bootstrap the community by funding an initial goal from the identified Member Impact DAOs and investors. In return, the members receive tokens locked in a vesting period.

WHY: The tokens are slowly unlocked in correlation to how much capital has been allocated to fund “labor” and create the core solutions. This avoids speculative selling right after the initial token distribution. There are now opportunities to assess governance mechanisms to fund initiatives and resources.

HOW: From a conceptual standpoint, a bonding curve is an interface between the internal economy of the community and the outside world. It creates liquidity to provide incentive-aligned funding for what matters most to the community while putting multiple safeguards for manipulation and speculative activities.

• The Member Impact DAOs have ownership rights and will receive control rights through progressive decentralization.

• Investors only have ownership and are not eligible for control rights.

• The initial funds are placed in two separate pools — a Reserve Pool (bonded to the curve) and a Funding Pool (unbonded floating source of capital). The two pools work together to create a self-sustaining funding mechanism.

• With the vesting process and introduction of a governance model, the token holders are economically incentivized to allocate funding to curated proposals

GOVERNANCE CONSIDERATIONS: The control structure with the self-appointed board is dissolved and transformed into an elected board, with seats shared between the core team and the Member Impact DAOs. Any participant from the Member Impact DAOs and the core team can be a nominee for board positions. In regularly scheduled elections, the nominees with the largest number of votes become board members. The board makes decisions by majority vote.

EXIT CRITERIA: Initial funds are raised and distributed between the Reserve Pool and Funding Pool.

OBJECTIVE: The elected board votes on proposals for creating and building a core set of solutions as a collaboration between the core team and Member Impact DAOs. The Member Impact DAOs pay for labor from the core team at a subsidized rate.

WHY: The community builds the core set of solutions and services in collaboration between the core team and Member Impact DAOs to set up the portfolio of offerings for the wider market. The limited set of curated and prioritized proposals offer defined scope and focus for the core team to serve the needs of those closest to the community — the Member Impact DAOs who invested in the long-term success of the effort.

HOW:

• The approval of the proposals unlock the funding pool to pay for operating expenses such as salary for the core team members

• As solutions are successfully engineered for Member Impact DAOs, these offerings are marketed to the wider community of Impact DAOs who could be potential clients

• Core team earns revenue against their labor from (a) Charging subsidized rate for Member Impact DAOs for solutions engineering (b) Charging a markup over subsidized rate for advisory, implementation, and support services for other non-member clients

• The earned revenue is treated based on a voted distribution between (a) Contributing the earnings to the funding pool (b) Minting new tokens and distributing them to current (Member Impact DAOs and investor) token holders

GOVERNANCE CONSIDERATIONS: A elected board is still responsible for making critical decisions that have an impact on profitability, the scope of services, and growth, including delegating necessary work to others. However, dedicated councils are now set up to manage the decisions within the scope of each solution being built out. The councils are represented by members of the core team and Member Impact DAO for which the solution is being built.

Each council (or solutions team) is comprised of units called circles (e.g. design, data, engineering) that have the ability to decide and act on matters in their domains¹. Representatives of circles regularly meet in a council to coordinate efforts and determine the domains of each circle, as well as to add or remove circles from the council. A circle can create roles for its members and assign authority over specified sub-domains.

Circles and the council use consent to make decisions. Consent means that nobody presents a serious objection to a proposal.

EXIT CRITERIA: New solutions are being built on a predictable roadmap with Member Impact DAOs and existing services have a foreseeable demand from the client Impact DAOs. The community could use the additional funding to scale operations and expand its footprint.

OBJECTIVE: Attract new investors and qualify new Member Impact DAOs that see the impact of the community and want to be a part of the movement so that the Funding Pool can grow. As with the prior phase, the investor tokens enable financial returns but investors cannot participate in the governance.

WHY: The system reserves control for the most direct value creators. Thus, the qualifying Member Impact DAOs keep long-term control of the organization. The liquidity by attracting investors makes the organization more resilient.

HOW: Interested new investors can mint tokens by contributing funds into the curve in return for tokens. New qualifying Member Impact DAOs identified by the reputation system can also buy tokens. Both contributions go into the Reserve Pool.

Build phase members can liquidate their tokens based on:

• a predetermined vesting period, and

• the extent to which funds from the Funding Pool are allocated to building solutions

Lastly, whenever members liquidate their tokens, a small percentage of their returns go into the Subsidy Pool as “Exit Tax”. The Subsidy Pool allows setting up a discounted rate for communities with strong proof of impact who approach as clients for solutions and services.

GOVERNANCE CONSIDERATIONS: The elected board is now dissolved in favor of making decisions that affect the group collectively by involving the participation of all participants. A community of stewards with representation from the core team and current/new Member Impact DAOs drive the operations of the community.

Any participant may make a proposal for critical decisions that have an impact on profitability, the scope of services, and growth. The proposal should be discussed and modified through open conversation in order to address all concerns. A decision is made based on weighted consensus in the proportion of tokens held.

At the solution level, the council and the circles set up in the build phase continue to operate and make decisions based on consent i.e. passed when nobody presents a serious objection to a proposal.

To see the world’s first Augmented Bonding Curve in action, check out Token Engineering Commons building token engineering public goods without donation. Bonding curves are helpful in low-liquidity environments and an efficient primary market maker.

At the same time, tokens alone don’t build communities — a sense of belonging rooted in a shared value-driven purpose does.

As we apply the construct of bonding curves to create a services entity, it would be shortsighted to ignore potential challenges in enabling governance using cryptoeconomics¹¹. Here’s a preliminary list of topics that need further exploration to avoid narrow incentives overpowering the common good.⁸

1. Personhood of Impact InvestorsImplementing a reputation system to identify qualifying impact investors is a high-cost activity and increases friction for new members. The investor members do not have governance rights similar to the Member Impact DAOs. However, with obscured identity, there is a risk of a single actor masquerading as many users.

2. Holistic Representation of Community InterestsThere are early attempts⁴ to set up a Ratings DAO to systematically evaluate the reputation of Impact DAOs. However, until such a mechanism is widely adopted, there is an overhead effort to evaluate which communities can qualify as Member Impact DAOs. How can the governance structure be designed so as to respond to the needs of:

• Client Impact DAOs who consume services but don’t have governance rights

• Future members, who did not have a chance to participate in the initial design?

3. Technical Complexities of Bifurcating Ownership and ControlTokens belonging to Member Impact DAOs have a stake in ownership as well as control in decision making. Investor tokens only offer ownership. The implementation details to mint and burn the dual-natured tokens on the same bonding curve need to be assessed for feasibility.

4. Managing Horizontal Growth to Spawn Product DAOsThere will be a need to spawn off mature solutions as product DAOs with their own micro-economy and user base of Impact DAOs, as existing governance structures will reach their limits. The mechanism design proposed in the form of Augmented Bonding Curves is not hard-wired to specific forms of governance. This should simplify the split and enable the creation of multiple Product DAOs with roots in this community.

¹ Cassandra Dana, Drew Hornbein, Vincent Russell, Nathan Schneider, 2021, Community Rules: Simple Templates for Great Communities ² Jeff Emmett, 2018, Rewriting the Story of Human Collaboration, Good Audience (Medium) ³ Kevin Owocki, 2022, Greenpilled ⁴ Kevin Owocki, 2022, Proof of Impact, Proposal Discussion — Gitcoin Governance ⁵ Laina Emmanuel, 2018, Crypto-economic incentive design for public goods, Medium ⁶ Michael Zargham, Jamsheed Shorish, and Krzysztof Paruch, 2019, From Curved Bonding to Configuration Spaces ⁷ Nathan Schneider, 2021, Beyond Cryptoeconomics: Platform Cooperativism and the Future of Blockchain Governance, The Reboot ⁸ Nathan Schneider, 2022, Policy Proposals for Crypto Protocols to Make Them Less Dystopic and More Inclusive, HackerNoon ⁹ Nathan Schneider, 2022, Cryptoeconomics as a Limitation on Governance (DRAFT v.20220121) ¹⁰ Thibauld Favre, 2018,

(This is a submission for FF x Coinvise Hackathon hosted April 6–8)

Transforming siloed strengths into repeatable success for Impact DAOs

Impact DAOs are communities with positive externalities rooted in collective action for a shared cause³. They amplify their impact by stacking on each other and derive compounding effects from the mutual collaboration to build a regenerative economy.

While no two Impact DAOs are the same, their shared DNA leads to similar organizational challenges such as:

• finding value-aligned talent

• securing funding

• program management

• establishing reputation systems

• creating a cohesive contributor experience.

There are potential synergies in codifying scalable solutions for these challenges and then applying them in the context of the respective Impact DAO. Without coordination, there is a risk of the knowledge remaining stuck in silos. By effectively re-deploying the tribal knowledge gained in the trenches, the Impact DAOs can re-focus on what they do best — drive outcomes for the shared cause.

A solution services entity that offers advisory, implementation, and support services to Impact DAOs for a subsidized cost. In return, the Impact DAOs provide sweat equity for collaborating to craft clear problem definitions, early adoption of solutions, and active feedback of services. A shared token economy captures the value of the collaboration. Early adopters gain the benefits of token appreciation with time as solutions and services gather a wider reach and adoption.

Sef-sustaining liquidity to deploy solutions and services for Impact DAOs

(Quote from the book Greenpilled)

There is inherent value in overcoming coordination challenges across Impact DAOs and using the learnings and repeatable solutions across the ecosystem. The success of this project depends on executing the following:

• Codify the value from collaboration with Impact DAOs into a community token that offers self-sustaining liquidity

• Organize people and processes transparently that utilize this token to operate a services business

• Spawn off mature solutions as product DAOs with their own micro-economy and user base of Impact DAOs

Mechanism design using token-based curve bonded crowdfunding

Here’s a conceptual view of the building blocks to achieve these outcomes.

Mechanism design⁵ is a sub-discipline of economics that deals with designing protocols that incentivize rational actors to behave in socially desirable ways. The Augmented Bonding Curve⁶ as a mechanism design provides continuous funding to establish and maintain a shared public good. It incentivizes group behavior around the collection and prudent use of shared community resources².

For brevity, the rest of the proposal does not delve into the technical design of the bonding curves to codify these incentives. Also, the design allows optionality for the specific types of governance to apply on top of the mechanism design.¹⁰

Progressive decentralization of modular governance based on scale and context

The section for phase-by-phase execution outlines the approach progressive for decentralization. The specific choices are based on the following guiding principles.

1. Solidarity Before Scale: Establish and align on the higher purpose for a sustainable ecosystem for protecting public goods and codify the enabling behaviors that will bond the member community of Impact DAOs before adopting decentralized tools and technology for scale

2. Governance Before Growth: The glove that provides the most warmth isn’t the most expensive one, it is the one that fits you the best. Commit to tailored choices for a nimble governance model in the context of the culture and needs of the community

3. Stewardship is the Soul: Establish strong stewardship practices to serve as the guiding light for workgroups to make progress cohesively to avoid the baggage in centralized orgs — blind spots, tunnel vision, unresolved conflicts, false starts, etc.

4. Tokens Alone Don’t Build Communities: Tokens have the potential to capture and build a previously impossible economy around the many intangible aspects of value for nurturing the builders in Web3. However, without a sense of belonging rooted in a shared value-driven purpose, the spikes in token values are often short-lived.

OBJECTIVE: Identify the initial group of value-aligned Impact DAOs who will collaborate with the core team of stewards, designers, engineers, and product managers to set up a core set of solutions for recurring needs. In addition, also screen a set of impact investors who can blend purpose and profit as early funders.

WHY: The rest of the proposal remains bullish on the ability of judiciously coded contracts to build a community. Yet, the proposal also recognizes the limitations of relying only on “economic incentives as institutional glue”.⁹

How can a community exploit the possibilities of self-governance without entirely relying on economic incentives?

It is important to seed the effort with value-aligned members to be the vanguards in this journey.

HOW: Leverage a known reputation system⁴ or create a new setup to codify and rank Impact DAOs based on their proof of work to evaluate fitment membership.

GOVERNANCE CONSIDERATIONS: At this stage, the control for seeking Member Impact DAOs and evaluating fit for initial impact investors relies solely on the founding team of the DAO. A self-appointed board sets policies for membership and removal. The board is responsible for making decisions and implementing them, including delegating necessary work to others in the core team. The board elects its own members. The board makes decisions by majority vote.¹

EXIT CRITERIA: This phase identifies a diverse set of Member Impact DAOs who can work collaboratively with the core team to create an initial set of solutions.

OBJECTIVE: Bootstrap the community by funding an initial goal from the identified Member Impact DAOs and investors. In return, the members receive tokens locked in a vesting period.

WHY: The tokens are slowly unlocked in correlation to how much capital has been allocated to fund “labor” and create the core solutions. This avoids speculative selling right after the initial token distribution. There are now opportunities to assess governance mechanisms to fund initiatives and resources.

HOW: From a conceptual standpoint, a bonding curve is an interface between the internal economy of the community and the outside world. It creates liquidity to provide incentive-aligned funding for what matters most to the community while putting multiple safeguards for manipulation and speculative activities.

• The Member Impact DAOs have ownership rights and will receive control rights through progressive decentralization.

• Investors only have ownership and are not eligible for control rights.

• The initial funds are placed in two separate pools — a Reserve Pool (bonded to the curve) and a Funding Pool (unbonded floating source of capital). The two pools work together to create a self-sustaining funding mechanism.

• With the vesting process and introduction of a governance model, the token holders are economically incentivized to allocate funding to curated proposals

GOVERNANCE CONSIDERATIONS: The control structure with the self-appointed board is dissolved and transformed into an elected board, with seats shared between the core team and the Member Impact DAOs. Any participant from the Member Impact DAOs and the core team can be a nominee for board positions. In regularly scheduled elections, the nominees with the largest number of votes become board members. The board makes decisions by majority vote.

EXIT CRITERIA: Initial funds are raised and distributed between the Reserve Pool and Funding Pool.

OBJECTIVE: The elected board votes on proposals for creating and building a core set of solutions as a collaboration between the core team and Member Impact DAOs. The Member Impact DAOs pay for labor from the core team at a subsidized rate.

WHY: The community builds the core set of solutions and services in collaboration between the core team and Member Impact DAOs to set up the portfolio of offerings for the wider market. The limited set of curated and prioritized proposals offer defined scope and focus for the core team to serve the needs of those closest to the community — the Member Impact DAOs who invested in the long-term success of the effort.

HOW:

• The approval of the proposals unlock the funding pool to pay for operating expenses such as salary for the core team members

• As solutions are successfully engineered for Member Impact DAOs, these offerings are marketed to the wider community of Impact DAOs who could be potential clients

• Core team earns revenue against their labor from (a) Charging subsidized rate for Member Impact DAOs for solutions engineering (b) Charging a markup over subsidized rate for advisory, implementation, and support services for other non-member clients

• The earned revenue is treated based on a voted distribution between (a) Contributing the earnings to the funding pool (b) Minting new tokens and distributing them to current (Member Impact DAOs and investor) token holders

GOVERNANCE CONSIDERATIONS: A elected board is still responsible for making critical decisions that have an impact on profitability, the scope of services, and growth, including delegating necessary work to others. However, dedicated councils are now set up to manage the decisions within the scope of each solution being built out. The councils are represented by members of the core team and Member Impact DAO for which the solution is being built.

Each council (or solutions team) is comprised of units called circles (e.g. design, data, engineering) that have the ability to decide and act on matters in their domains¹. Representatives of circles regularly meet in a council to coordinate efforts and determine the domains of each circle, as well as to add or remove circles from the council. A circle can create roles for its members and assign authority over specified sub-domains.

Circles and the council use consent to make decisions. Consent means that nobody presents a serious objection to a proposal.

EXIT CRITERIA: New solutions are being built on a predictable roadmap with Member Impact DAOs and existing services have a foreseeable demand from the client Impact DAOs. The community could use the additional funding to scale operations and expand its footprint.

OBJECTIVE: Attract new investors and qualify new Member Impact DAOs that see the impact of the community and want to be a part of the movement so that the Funding Pool can grow. As with the prior phase, the investor tokens enable financial returns but investors cannot participate in the governance.

WHY: The system reserves control for the most direct value creators. Thus, the qualifying Member Impact DAOs keep long-term control of the organization. The liquidity by attracting investors makes the organization more resilient.

HOW: Interested new investors can mint tokens by contributing funds into the curve in return for tokens. New qualifying Member Impact DAOs identified by the reputation system can also buy tokens. Both contributions go into the Reserve Pool.

Build phase members can liquidate their tokens based on:

• a predetermined vesting period, and

• the extent to which funds from the Funding Pool are allocated to building solutions

Lastly, whenever members liquidate their tokens, a small percentage of their returns go into the Subsidy Pool as “Exit Tax”. The Subsidy Pool allows setting up a discounted rate for communities with strong proof of impact who approach as clients for solutions and services.

GOVERNANCE CONSIDERATIONS: The elected board is now dissolved in favor of making decisions that affect the group collectively by involving the participation of all participants. A community of stewards with representation from the core team and current/new Member Impact DAOs drive the operations of the community.

Any participant may make a proposal for critical decisions that have an impact on profitability, the scope of services, and growth. The proposal should be discussed and modified through open conversation in order to address all concerns. A decision is made based on weighted consensus in the proportion of tokens held.

At the solution level, the council and the circles set up in the build phase continue to operate and make decisions based on consent i.e. passed when nobody presents a serious objection to a proposal.

To see the world’s first Augmented Bonding Curve in action, check out Token Engineering Commons building token engineering public goods without donation. Bonding curves are helpful in low-liquidity environments and an efficient primary market maker.

At the same time, tokens alone don’t build communities — a sense of belonging rooted in a shared value-driven purpose does.

As we apply the construct of bonding curves to create a services entity, it would be shortsighted to ignore potential challenges in enabling governance using cryptoeconomics¹¹. Here’s a preliminary list of topics that need further exploration to avoid narrow incentives overpowering the common good.⁸

1. Personhood of Impact InvestorsImplementing a reputation system to identify qualifying impact investors is a high-cost activity and increases friction for new members. The investor members do not have governance rights similar to the Member Impact DAOs. However, with obscured identity, there is a risk of a single actor masquerading as many users.

2. Holistic Representation of Community InterestsThere are early attempts⁴ to set up a Ratings DAO to systematically evaluate the reputation of Impact DAOs. However, until such a mechanism is widely adopted, there is an overhead effort to evaluate which communities can qualify as Member Impact DAOs. How can the governance structure be designed so as to respond to the needs of:

• Client Impact DAOs who consume services but don’t have governance rights

• Future members, who did not have a chance to participate in the initial design?

3. Technical Complexities of Bifurcating Ownership and ControlTokens belonging to Member Impact DAOs have a stake in ownership as well as control in decision making. Investor tokens only offer ownership. The implementation details to mint and burn the dual-natured tokens on the same bonding curve need to be assessed for feasibility.

4. Managing Horizontal Growth to Spawn Product DAOsThere will be a need to spawn off mature solutions as product DAOs with their own micro-economy and user base of Impact DAOs, as existing governance structures will reach their limits. The mechanism design proposed in the form of Augmented Bonding Curves is not hard-wired to specific forms of governance. This should simplify the split and enable the creation of multiple Product DAOs with roots in this community.

¹ Cassandra Dana, Drew Hornbein, Vincent Russell, Nathan Schneider, 2021, Community Rules: Simple Templates for Great Communities ² Jeff Emmett, 2018, Rewriting the Story of Human Collaboration, Good Audience (Medium) ³ Kevin Owocki, 2022, Greenpilled ⁴ Kevin Owocki, 2022, Proof of Impact, Proposal Discussion — Gitcoin Governance ⁵ Laina Emmanuel, 2018, Crypto-economic incentive design for public goods, Medium ⁶ Michael Zargham, Jamsheed Shorish, and Krzysztof Paruch, 2019, From Curved Bonding to Configuration Spaces ⁷ Nathan Schneider, 2021, Beyond Cryptoeconomics: Platform Cooperativism and the Future of Blockchain Governance, The Reboot ⁸ Nathan Schneider, 2022, Policy Proposals for Crypto Protocols to Make Them Less Dystopic and More Inclusive, HackerNoon ⁹ Nathan Schneider, 2022, Cryptoeconomics as a Limitation on Governance (DRAFT v.20220121) ¹⁰ Thibauld Favre, 2018,

(This is a submission for FF x Coinvise Hackathon hosted April 6–8)