As our world becomes increasingly digital, cities are reinventing themselves yet again. But the next generation of cities won’t be built with wood or bricks or steel. This time around, cities will be built with code.

The Magic of Cities

Before we dive into the digital city, it’s worth taking a step back to capture what makes cities so magical.

At their core, cities are complex systems – which bring together a variety of parts that interact with one another in ways that allow the entire system to function as a coherent whole.

A simple example of this might be a car, where a set of car parts does not make a car. In order for these parts to become a car, they must be arranged to interact with one another in such a way that allows the entire machine to operate as one. It is the parts of the car and the synergies between these parts that allows the global “car” to exist and the car has different characteristics than the parts that make it up (i.e., the ability to drive). This phenomenon is called emergence.

The impacts of emergence cannot be overstated. Our existence as humans is a product of emergence – from the organs in our bodies to the cars we drive – these are all emergent properties of complex systems, each made up of simpler parts arranged in relation to one another. Cities are no different.

While technological innovations may spark migration to cities, as more people migrate, people begin to specialize and depend on one another. This allows cities to grow even more, creating an interconnected and interdependent network of people, cultures, and resources. From this network of interactions, cities begin to display properties that are distinct from the parts that come together to create them.

This is the magic of cities.

Cities in the Digital Age

To understand the future of digital cities, we first need to understand the parts that make up a digital city. Things like citizens, land, and institutions are all important elements of physical cities. In the digital landscape, this might look like identity, digital spaces, and protocols.

While several web3 projects are exploring identity and protocols, at Metropolis, we think deeply about digital spaces – which make up most of the modern internet. Digital spaces are the places people congregate, chat, build, and work alongside one another. This includes everything from GeoCities to MySpace, all the way to Reddit communities.

Over the past decade, hyperconnected digital spaces have created opportunities for individuals to connect and engage with one another in ways that have never been possible. These spaces have allowed us to express our identities in digital form, explore our passions, and even make a living.

In this way, digital spaces are the precursor to digital cities – places that allow people to connect and create new relationships among one another that enable emergent properties. But we haven’t yet seen the bustling economies or interconnected subcultures one might expect to emerge from a digital city.

This is because digital spaces are built with one fatal flaw: they are instantiated on borrowed land.

The Original Sin

“Instantiated on borrowed land” means these spaces exist on platforms that are not owned by the people who inhabit the space. For example, a digital space on Discord is instantiated on borrowed land because Discord owns it. If Discord decided to change their APIs to limit access to certain data or even shut down a server with no explanation, they have full power to do so.

While this seems like a reasonable tradeoff for spaces at an individual level, the complexity (and thus emergent potential) of digital spaces built on these platforms are limited to connectivity and relations within those platforms. For example, Discord servers cannot plug into Twitter Circles, which cannot easily be tied to Reddit communities. Since these platforms are not interoperable, the complexity (i.e. emergent potential) of these spaces is limited to what can be built within each platform.

Before we dive deeper, it’s worth noting that web2 platforms have no incentive to make these spaces interoperable. Not only would this require data standardization across platforms, but it also undermines today’s dominant business models. With moats that are often driven by network effects and revenue models that are dependent on platform-specific attention capture, interoperability just doesn’t make sense for platforms to prioritize.

Quick note: we use “borrowed land” here to explore an instantiation of the internet which is built on infrastructure that is not owned by those who exist within these spaces. This is distinct from stolen land, which references the illegitimate acquisition of land throughout history (often tied to colonialism and imperialism). This distinction is a topic of discussion that warrants an entirely different essay.

Sovereign Spaces

While web2 platforms are busy trapping users and communities in digital spaces, web3 introduces a new paradigm into the digital landscape.

Rather than digital spaces being instantiated on borrowed land, web3 introduces the potential for these spaces to be instantiated on a shared ledger (the blockchain). This means these spaces are not owned by a platform. Instead, they’re owned by the people who create and participate in them. In essence, web3 enables digital spaces to become sovereign.

This paradigm shift means that digital spaces become interoperable, which in turn allows them to become highly interconnected and interdependent. As the connectivity and interdependence among these spaces grows, so does the complexity of these systems.

This is how digital cities emerge.

DAOs as Digital Cities

DAOs represent a movement toward more sovereign digital spaces. Tools like multi-sigs make it possible for DAOs to instantiate their own sovereign spaces, owned by the people who participate in them.

So why haven’t we seen highly interconnected and interdependent networks of DAOs emerging?

While sovereignty is a precondition for emergence, sovereignty alone will not magically turn fragmented digital spaces into digital cities. If we want DAOs to transform into digital cities, we need to consider the properties that enable emergence in complex systems.

1) Relational Order
Complex systems are made up of many different parts, which are distributed with no central authority, but relate to one another on local scales. This gives rise to new scales, which create hierarchies among systems. In this way, order emerges not from a centralized authority, but from local relationships between parts.

2) Interdependence
Complex systems are also highly interdependent, where parts rely on one another. Often, interdependence is a result of specialization, where elements of a system specialize in one thing and provide efficiency for other elements. This allows systems to benefit from economies of scale.

3) Connectivity
Not to be confused with interdependence, complex systems are also highly connected. As parts of a system become more highly connected, they start to look more like a network. This phenomenon is behind the famous Ship of Theseus, whereby you can replace every individual component of a ship and the ship will still be the ship.

4) Adaptation
Rather than some top-down, centralized authority organizing parts of a system, adaptation and autonomy happen at a local level, where each part has the ability to respond to its local environment based on its own set of logic and rules. This is how ant colonies are able to respond to their changing environment, despite the fact that each individual ant has no conception of this global response.

All of these properties have one thing in common: they define the ways in which different parts of the system relate to and interact with one another, which enables emergence. This type of relationality matters not only within DAOs, but also among DAOs.

Sovereignty and Complexity

Instantiating digital spaces on-chain gives us sovereignty, but if we want digital spaces to transform into digital cities, we need high fidelity frameworks for representing the complex network of relationships within these spaces.

At Metropolis, we’ve built relationality and connectivity into the protocol itself. Pods are a wrapper around a multi-sig, which allow groups to maintain sovereignty, while also giving them the ability to define complex relationality within and between pods. This is the type of infrastructure that will enable DAOs to transform into highly connected and interdependent digital cities.

Networked Cities

As DAOs continue to evolve, we’ll begin to see the newest iteration of cities materialize. FWB, Cabin, and others have already begun using cities as a lens for guiding their organizations and steering toward a future of a localized internet.

But these cities will not exist in isolation. Unlike physical cities, which are bound by geography, physics, and borders, digital cities have no true bounds. The costs of transactions and exchange of information in digital spaces are not limited by the physics of the real world. In this way, there is vast potential for digital cities to be hyperconnected to a degree physical cities could never reach.

People often talk of the DAO landscape as an ecology. We believe the landscape is actually more like a city of cities – a Metropolis of interconnected and interdependent organizations. Much like a city, the richness of this Metropolis stems not from the glitzy buildings or beautiful people. Rather, it is the network of people, culture, and economies coming together to cohabitate that makes these spaces thrive.

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Huge thanks to John Sterlacci for planting the Digital Cities seed, Julia Rosenberg and Chun for the amazing feedback, edits, and support on this piece, and all the web3 frens who inspired so much of the thinking around cities in web3.

Learn more about Metropolis and pods. Stay up to date on all things Metropolis by following us on Twitter at @0xMetropolis. Check if you have beta access to pods at pod.xyz.

DAOs as Cities

Many have likened DAOs to companies. But in their potential, DAOs are a lot more like cities.

Burgeoning hubs of economic and cultural activity, cities bring together people, cultures, and resources to cohabitate, connect, and depend on one another. These interdependent and interconnected networks create conditions for emergence, which allows cities to take on new properties that are greater than the sum of their parts.

This is the magic of cities.

DAOs have the same network potential, creating digital cities that optimize for human thriving and emergence. Organizations like FWB, Cabin, and others already understand the power of seeing their own ecosystems as cities ‒ local spaces for gathering, owned and governed by the citizens who cohabitate these spaces. This framing doesn’t just change how we design our spaces, it also changes what’s possible. By moving beyond company-centric mental models for DAOs, we open up the design space for building rich digital ecosystems that optimize for human thriving.

The Metropolis

If DAOs are cities, the entire DAO landscape can be likened to something of a megacity ‒ a Metropolis, if you will.

In a world where digital organizations seem to have no true bounds, Metropolis is the space that emerges ‒ the city of cities ‒ a rich landscape of interconnected and interdependent organizations. Much like a city, the richness of this Metropolis stems not from the glitzy buildings or beautiful people. Rather, it is the overlapping networks of people, culture, and economies that make these spaces thrive.

New Name, Same Vision

Our name is changing, but our product and vision remain the same – create human-centric building blocks for DAOs.

If we want DAOs to transform into digital cities, we need building blocks that allow these networks to become interconnected and interdependent. Pods are those building blocks.

Technically, pods are a Gnosis Safe multi-sig with a permissions layer for managing signers. In practice, this primitive adds a lot more functionality to Gnosis Safes than just permissioning, including:

1. All your Safes in one interface Proposals across all your multi-sigs are aggregated into one interface ‒ making it easy for signers to quickly approve transactions.

2. Manage signers with zero fuss With admin capabilities and NFTs for managing signers, mass onboarding and off-boarding contributors is simple.

3. Give your Safe an identity No need to waste time and energy identifying multi-sig addresses. Every pod has a unique NFT, ENS name, and matching URL.

Beta Access

We can’t wait for DAOs to start podifying, which is why we airdropped a Built Permit NFT to a select group of organizations. This permit gives DAOs full access to Metropolis, which means multi-sig signers can podify an existing Safe or spin up new pods from scratch.

The best part? Podifying doesn’t even require DAO-wide consensus. Pods can be enabled per-Gnosis Safe, so each working group has the autonomy to decide whether they want to podify – no need for complicated governance or gathering consensus.

Check if you received a permit NFT here. We’ll be releasing new permits every week, so if you don’t yet have access – don’t worry, that will change soon.

Pods as Building Blocks

While pods are powerful on their own, like building blocks, the real magic comes when you click them together. As we continue to roll out pod access across the ecosystem, we’re also building tools so DAOs can fully leverage the interoperability of pods. With everything from pod templates to deploying the entire on-chain structure of your DAO in one click, we’ve got a lot more in store to help DAOs transform into interconnected and interdependent digital cities.

We can’t wait to see what you build. Ⓜ️

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To learn more about pods, visit our docs. Stay up to date on all things Metropolis by following us on Twitter at @0xMetropolis. Check if you have beta access to pods at pod.xyz.

Written by Chase Chapman (@chaserchapman)

Being wrong often is the only way to be right – especially when you’re dealing with complex systems.

This – in a nutshell – is the evolutionary organization thesis.

Premature optimization is a sin when it comes to building software and it’s the best way to stunt learning and growth in DAOs.

The Risks of Premature Optimization

Premature optimization isn’t just expensive up-front, it’s also costly in the long run. When you design systems that try to anticipate how complex organizations will act, you make a set of assumptions. Some of those assumptions will be correct, and some will be wrong.

Ultimately, it’s the constant testing of those assumptions that allow systems to evolve into sophisticated, well-oiled machines.

And so, when you prematurely optimize DAOs, you end up with a system that’s often anticipating the wrong problems and thus creating complicated solutions to address problems the DAO does not yet have. This anticipation and problem-solving introduces new sets of assumptions into a system.

When you introduce more assumptions, it becomes increasingly difficult to pinpoint why a system is failing – is it because of assumption A or assumption B? The more assumptions you have, the harder it is to figure out which assumptions are wrong and which are right.

So why do we prematurely optimize?

Fear of failure. We think if we anticipate problems now, we can design our way out of those challenges.

But often the opposite is true. In fact, it is this fear of failure that costs time and money in the long-run, as we lose the data and learnings that come from constantly testing assumptions (learning which assumptions are wrong and which are right).

The Evolutionary Organization

The key to building complex systems is not designing complexity from the start. Instead, it’s about building simple systems, allowing them to fail, and iterating on those systems based on what works and what does not work.

This is Gall’s Law in action.

One important note: in these systems, failure isn’t just inevitable – it’s actually helpful. By constantly testing assumptions and maximizing learning, these systems become evolutionary organizations.

Flexibility

But evolutionary organizations don’t just optimize for learning – they also optimize for flexibility. Flexible systems allow organizations to leverage learnings and make incremental improvements (constantly testing assumptions!).

When it comes to DAOs (and anything on-chain for that matter), flexibility is rarely designed into systems.

But it really should be.

Modularity is the name of the game in this regard. Unlike monolithic DAO implementations, modular DAO implementations allow for quick testing and iterations, which ultimately allow organizations to evolve quickly and efficiently.

Often when we think about flexibility in systems design, it comes with trade-offs – typically around things like security. But flexibility doesn’t necessarily require sacrificing security. Using tools like pods, DAOs can build modular systems, which maintain security at the local pod level, while enabling flexibility at the DAO level.

Becoming Evolutionary

So you want to build an evolutionary organization, anon?

Start simple. Stop trying to design the most sophisticated governance system. Start with something simple and evolve from there.

Fail intentionally. Make assumptions. Test those assumptions. Repeat.

Build modular. Think about your organization as a car. You can swap out parts and it’ll still run just fine.

Pod-pilled? Ready to go modular? Well you’re in luck – we’ve got some big announcements coming up. Follow us on Twitter to stay updated on all things pods.

Big thanks to Jon Hillis, Cam, Richie Bonilla, Chalice Stroebe, Caryn and Adrian Ricardo for a wonderful chat on Gall’s Law and constant evolution in DAOs. And thanks to Julia Rosenberg and frogmonkee for endless DAO conversations and always giving the best feedback.

Written by Chase Chapman (@chaserchapman)

The atomic unit of a DAO isn’t people or projects – it’s small groups of people working together.

While there has been a push to atomize work through bounties and other ways of defining and compensating work, the fact remains: DAOs are groups of humans coordinating together to solve problems.

We see this through the emergence of workstreams, working groups, guilds, or whatever else you choose to call the small teams that make up almost every DAO.

Pods 101

At Metropolis, we use a singular name for these different types of teams – pods. These pods are usually governed by token holders, delegating responsibility and imbuing pods with authority to enact a certain mandate, whether that be to manage a grants program, build a product, control marketing channels, manage security, etc.

We’ve seen this pattern play out time and time again – Yearn, BanklessDAO, TribeDAO, ENS, MakerDAO, etc. It’s the dominant model for creating teams, empowered by token holders.

That’s why we built Metropolis, a way for DAOs to easily spin up working units while managing them through on-chain governance.

Technically, pods are a lightweight permissions layer around a Gnosis Safe multi-sig wallet, used to create more flexible and composable working units. Access to a pod is authorized through membership NFTs. These NFTs act like office keycards. When you swipe into your office, your keycard is validated against a set of permissions to see whether or not you have access. Changing key cards (adding new members or revoking access) is as simple as updating office access permissions.

Pods create on-chain structures, ensuring DAOs can benefit from the security, permissions, and autonomy of being on-chain while maintaining the flexibility of small working units. You can learn more about pods here.

Benefits of Pods

But why would an organization want to use pods?

1) Give the right people the right type of autonomy

Pods give autonomy to the most fundamental unit of work happening in DAOs – groups of people focused on directed tasks. Autonomy in this context could mean control of funds, governing rights, or even smart contract permissions. Pods need autonomy to operate, otherwise, they risk getting stuck in a bureaucratic maze asking for permission to perform even the most basic tasks.

Example: TribeDAO gives certain pods control over specific protocol features. This means when protocol-level changes need to be made, the right people have the autonomy to make those changes without requiring DAO-wide votes or benevolently trusting a small group of people to make those changes. Instead, pods introduce the needed accountability systems for these groups of people – without forcing them to trade off their autonomy. Read more about TribeDAO’s pod implementation here.

2) Create flexible, on-chain structures

Part of what makes DAOs unique is their ability to leverage on-chain structures to create and scale bespoke organizational structures rather than managing those structures without on-chain activity. But putting structures on-chain tends to create a level of inflexibility – often DAOs are forced to create complex and opinionated mechanisms for things like voting, exiting, membership, etc.

While opinionated structures can be helpful, the inflexibility they introduce can be a challenge as DAOs evolve and change. Different stages, market conditions, etc can all introduce new variables in a DAO’s organizational structures.

Pods give DAOs the benefits of being on-chain, while also creating incredibly modular structures that can be shaped, shifted, and re-imagined without breaking the entire system. These pods can relate to each other in a variety of ways, allowing for sophisticated coordination between them. For example, a contract can manage members, or you could have another pod – where members are elected by token holders – managing members.

This combination of dynamic structure with cryptographically-secure assurances fundamentally comes down to balancing trustware and socialware. The pod-sibilities are endless!

Example: ENS first implemented pods with existing workstreams. After a season of experimentation, they decided that the existing structure didn’t fit the needs of the organization. Typically, this type of change in structure would require a significant rehaul of DAO tooling. But because pods are modular structures that are intended to evolve, the required changes were lightweight and structurally compatible with existing tooling.

3) Make your DAO consumable by people and tools

Understanding who is working on what, which groups exist, and where work is getting done in a DAO is not easy. There’s no design language for understanding the organizational structures of a DAO.

While a person might be able to figure this out by poking around in a Discord, DAO tooling requires someone to act as an oracle, telling it which people are doing the work. This means a lot of configuration and space for errors.

Because pods are on-chain and membership is granted via an NFT, they are consumable by any tool that reads on-chain data. For example, DAO tools can simply read pod structures and relationships to do things like map an organization, identify key members, understand token streams, and more. Pod consumption also applies to web3 social networks, defi protocols, and other products that leverage relational graphs of addresses.

Example: If a group wants to do a Coordinape allocation, they would typically need to select which people to bring into the circle for that epoch. If a DAO uses pods, Coordinape can simply consume pods and immediately have the exact blueprint of who works with who and where work is being done. This could mean automatically spinning up Coordinape circles that are updated with active pod members every epoch.

Note: Coordinape does not have an active integration with pods… yet. 😉 You can read about our existing integrations (like Parcel) and follow our upcoming integration announcements here.

4) People come and go, but pods are forever

DAOs are like the Ship of Theseus. If you’ve built a strong organization, it shouldn’t matter who comes and goes – the organization is still the organization. Pods make this true on-chain.

Pods give atomic groups the power that comes with a multi-sig (including asset ownership, voting power, the ability to perform different actions on-chain, etc), while also creating structures to make sure the right people are holding that power. That means “replacing boards” (members) on the “ship” (DAO) is much less painful.

People come and go, pods are the container that lasts.

Example: FireEyes uses pods for metagovernance delegation – which means people delegating to FireEyes are not delegating their votes to an EOA or even a multi-sig with no clear structures for signer management. Instead, people are delegating votes to a pod with clear membership structures – so delegators don’t need to worry about who is on a pod or how membership is managed, it’s all visible on-chain.

Gimme the pods

Have we pod-pilled you yet? If you read this article and thought “yes, we need pods in our DAO”, you’re in luck! We’re slowly opening our private beta and are onboarding DAOs that we think are a good fit for pods.

For context, we define a “good fit” as:

1. An organization that knows what it wants from an organizational design perspective

2. Can benefit from flexibility and permissions offered by pods

3. Driven stakeholders that understand their organization deeply

If this sounds like you, flag your interest here and we’ll be in touch.

Written by frogmonkee (@frogmonkee), Chase Chapman (@chaserchapman), Julia Rosenberg (@JulzRoze) and John Sterlacci (@johnsterlacci)

In the past few decades, our trust in institutions has begun to erode:

• When government officials lied about invading Iraq, we lost trust in our representatives.

• When banks lied about the creditworthiness of mortgage backed securities, we lost trust in our financial institutions.

• When news outlets began to report false information, we lost our ability to trust credible news media.

Trust is the cornerstone of any organized society, from student clubs to governments. If we cannot be assured that our peers will follow the same rules we operate from, we hamper our ability to cooperate with one another.

And so we attempt to codify trust. We create charters and constitutions to set fundamental rules for the game. Laws help further elucidate the nuances of these rules and we employ physical and financial force to create a cost to not playing fair. In doing so, we create a strong system of assurances that you and I will respect the rules of the game through codification, cultural norms, and consequences.

For most of human history, these structural guidelines existed at the social layer. They required humans to create, disseminate, and enact these rules, which ended up being fraught with operational error, human biases, or limitations on available resources. As an example - we say the law is blind and applies indiscriminately, but because we rely on humans to enact laws, we run into biases around race, gender, socioeconomic status, and other demographics.

However, we live in the 21st century, surrounded by rapid innovations in technology with deep implications for how we organize and trust one another. We are able to encode rules into our technologies and minimize reliance on humans as intermediaries, though even encoded rules have biases.

In doing so, we begin to shift organizations from purely socialware to those aided by trustware.

Trustware vs. Socialware

Contracts, laws, charters, constitutions, and other such agreements are mechanisms that organizations use to set rules between agents in a system in order to assure certain behaviors. This assurance can come from two places:

• Socialware - Mechanisms that create assurances through human relationships, incuring a high social coordination cost

• Trustware - Mechanisms that create assurances through technology, incurring a low social coordination cost

Take, for example, a simple lemonade stand. You could set up your stand and sit there for a few hours, waiting for people to come by and purchase your delicious drink. But the assurance that people will pay is enforced at the social layer - no one will steal or underpay for a drink if you are standing there, monitoring each transaction. Though this method produces high assurance, it comes at the cost of your time. This is socialware.

A form of trustware would be a vending machine. It serves the same purpose as a lemonade stand, but the machine itself produces the assurances through technology. It’s much harder to steal or underpay when the rules are codified into a physical machine that dispenses lemony goodness.

Take another example: Protecting your valuables. You could lock your belongings away  (trustware) or rely on the legal system to protect them (socialware).

In theory, both assure that your property will be protected. The lock provides assurance through its physical presence while the law provides assurance through consequences with decades of precedent. However, in actuality, socialware is only respected when the outcome is enforced through coordination between lawyers, judges, and law enforcement whereas the lock’s enforcement is embedded into its function.

Furthermore, the social cost of the law is high. Setting up contracts involves lawyers, money, time, and knowledge of the legal system. The social cost of a lock is low - it’s easy to install a lock and distribute keys to trusted key holders, all of whom understand how keys and locks work.

Socialware and Trustware in DAOs

Blockchain and smart contracts are a massive technological level-up for trustware. Through code, we are able to create strong assurances that members of a given system will behave as the system permits them. They cannot lie, cheat, steal, or manipulate by breaking or bending the rules.

By using blockchains as our underlying assurance mechanism, we can codify organizational governance through code and not purely documented principles that rely on humans to coordinate around. In doing so, we foster greater trust between parties by minimizing trust in people and maximizing trust in technology.

This is the great “promise” of DAOs - code at the center, humans at the periphery. This is the idealistic model that allows us to maintain flat organizations that rely on consensus because we can outsource the execution of decisions to code. DAOs were envisioned as mostly trustware.

However, anyone that has worked within a DAO in the past year knows this is rarely the case. In reality, many DAOs operate using socialware, relying on documented practices and hoping there is sufficient human attention and coordination to follow these written rules.

Socialware in DAOs

Much of the organizational structure and governance in most DAOs exist at the social layer. Through codified documentation and processes that live on Notion and Discourse, we set rules about quorum, term limits, voting thresholds, etc then proceed to vote on Snapshot, and rely on a multisig to execute the terms of the snapshot vote as per the rules we set.

I’ve had a lot of these experiences at BanklessDAO. We spent dozens of hours working to set proper rules, such as the Project Proposal Framework, Governance Rules, Seasonal Specification, and Writers Guild Governance document.

Although we had systemized our rules, we still relied heavily on human coordination. These rules only mattered if we had the awareness to follow them. And because humans are prone to error and forgetfulness, there were many times we did not abide by our own standards.

The high social coordination cost of socialware often results in a gap between how a system is supposed to operate vs how it actually operates.

Trustware in DAOs

Trustware in DAOs means bringing rules on-chain. Using blockchain and smart contracts, rules defined at the social layer can be brought on-chain and enforced without reliance on human coordination.

There are a number of examples of trustware in DAOs - Juicebox, Moloch, Governor, and Pods to name a few. These tools allow humans to make decisions at the periphery and rely on code to execute the consequences of their decisions, as defined by the rules of the governing smart contracts.

This type of technology is different from simply digitization. Digitization takes something analog and makes it digital, including all sorts of redundant human tasks. Trustware is a subset of digitization that focuses specifically on trust agreements that incur a social cost through coordination. Digitization often reduces social coordination costs, but it doesn’t focus specifically on trust. We cannot digitize trust until we have sybil and censorship resistance - both qualities of blockchains.

Take, for example, the Governor contract. As mentioned above, many DAOs use a combination of Snapshot and multisig, including BanklessDAO and Yearn. In these cases, token holders vote on Snapshot, but rely on coordination between multisig signers to execute their decision - a form of socialware. The governor contract automates this step, automatically executing a transaction as soon as a vote reaches certain governance parameters, like quorum or submission thresholds. The governor contract provides equal assurances as the Snapshot + multisig combination with less social coordination. In other words, trustware.

The trust-minimized environment that trustware creates is what allows strangers to raise $40 million to buy a copy of the Constitution. Such outcomes would likely not be feasible if relying on legal assurances and not smart contract assurances.

Trustware as a Spectrum

One important caveat to note is that trustware and socialware exist on a spectrum. The definitions above are relative to one another, they are not absolute.

Multisigs are a great example. At Metropolis, we had a weeks-long debate on whether multisigs are trustware or socialware. After all, having a treasury managed by multiple signatories reduces the harm of any one bad actor relative to a single address controlling all funds. But at the same time… have you tried wrangling multi-sig signers? It still requires quite a bit of social coordination.

We settled on the fact that multisigs are closer to trustware than a single EOA account, but closer to socialware than something like the Governor contract or even pods.

Balancing Trustware & Socialware

Trustware is not the end-all-be-all for DAOs. DAOs are inherently human organizations that will require systems that adapt to how humans relate and behave, not robots. But successful DAOs will have a combination of socialware and trustware, each with its own healthy balance depending on the needs of the DAOs.

As of now, most DAOs orient heavily towards socialware, for apparent reasons:

• Socialware is flexible and can adapt to changing circumstances much faster than trustware

• Socialware is easier to implement, requiring less technical knowledge and execution

• Trustware can leave a DAO susceptible to governance attack vectors

• Trustware is still underdeveloped and cannot adapt to the granular needs of human governance

At Metropolis, our view is that the assurances provided by blockchain unlocks a new paradigm of trustware technology that is relatively underexplored. One that could potentially reduce the friction and operational overhead that slows down companies and creates unfavorable working environments. Traditional organizations over index on socialware precisely because they have only a smattering of trustware at their disposal whereas in the web3 world, we’re still only scratching the surface of what organizations operating on trustware look like.

Over time, we expect DAOs to transition elements of socialware into trustware and expand the code-at-the-center of their organization, but this will take time, technological advancements, trial and error, and continued mistakes and iterations.

We’re grateful to be a part of that process.

• Visit our website

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• Join our Discord

Written by Dan Wu (@itsdanwu), Julia Rosenberg (@JulzRoze) and zkchun

Introduction

Metagovernance has become an increasingly popular topic within the DAO ecosystem over the last several months. It is commonly defined as holding one DAO’s token in order to influence decisions in another DAO(s). The benefits of metagovernance are clear - DAO2DAO relationships are positive-sum incentive-alignment mechanisms that amplify the voices of individuals.

Some recent proof points of the swift maturation of metagovernance knowledge and practices include:

• DAO2DAO product announcements: PrimeDAO’s soon-to-be-launched Prime Deals product

• Detailed metagovernance analysis and research: Kydo’s breakdown of the Fei-Index-Aave metagovernance play from last fall

• Formation of metagovernance committees within DAOs: Rabbithole’s announcement of the Rabbithole Metagovernance group

• Formation of whole DAOs solely focused on metagovernance participation: FireEye’s Wildfire DAO introduction

But why now?

Over the past year or two, the evolution of governance participation within DAOs has looked something like:

1. Token holders believing they can participate in all governance decisions

2. Token holders realizing they can’t participate in all governance decisions

3. Token holders delegating to individuals with perceived specialized expertise and bandwidth

4. Token holders and individual delegates realizing delegate models have been constructed ineffectively

Looking back, it’s easy to see why individual delegate participation has not yielded the results token holders have been looking for; individual delegates have misaligned incentives, unclear delineation of responsibilities, and an inherent inability to scale their impact. However, not all hope is lost. Metagovernance committee delegate models can improve governance effectiveness and participation that result from individual delegate models.

The remainder of this article will cover:

• Why individual delegate governance models lead to ineffective governance participation

• How metagovernance committee delegate models can lead to improved governance

• Pain points with the metagovernance committee participant and stakeholder experience

• Metropolis as a solution for metagovernance committees

Individual delegate model shortcomings

Token holders lack context and have issues accessing relevant information required to vote on most governance decisions within DAOs. The result? Low voter turnout and little forward progress in DAO growth and maturity.

Governance architects and token holders historically believed that the solution to this apathy was delegation of voting power to individuals with competence, discipline and bandwidth to effectively participate in DAOs. However, we have seen ineffective and poor delegate participation run rampant in some of the largest protocols. For example, nearly three quarters of all $COMP delegates have never voted on-chain (Governance Participation: Perils and Promise).

Some of the shortcomings of most individual delegate models include:

Unclear responsibilities

MakerDAO outlines clear requirements and expectations for Recognized Delegates. There are strict application requirements and code of conduct, performance-based compensation plans tied to governance participation, and explicit expectations on the role played in balancing the power that other governance actors within MakerDAO hold. Most DAOs have not been as diligent.

With a number of delegation problems surfacing recently, it’s evident that governance frameworks must more clearly outline who the governance participants are and the areas of governance they must participate in.

Misaligned incentives

​​Misaligned incentives between token holders and delegates are another reason why expectations are not met, leading to ineffective governance participation. The two primary reasons for this misalignment are:

• Individual delegate reputation is often built on a different set of capabilities: As of today, the reputational capital of delegates today is rarely built through actual governance participation. Instead, they rely on their reputation as builders, investors or thought leaders. The delegate’s credibility with their primary base will continue to depend on their success in these channels. The result of this is that delegates have even fewer reasons to decline requests to speak on podcasts or chat with builders.

  This may change as the space matures, but given the nascency of the ecosystem, reputational misalignment threatens to continue.

• Lack of meaningful financial incentives: Whether we like to admit it or not, financial incentives help motivate humans to work on complex tasks and projects.

  If individual delegates 1) hold a small portion of their net worth in the protocol that they have been granted governance power in or 2) the protocol is not their primary employer, they simply will not be financially incentivized to meaningfully participate.

  In addition, there has been little to no experimentation with introducing formal compensation models to incentivize governance participation of individual delegates. For example, in ENS’ call for delegates in the fall of 2021 there was an explicit call out that there will be no additional tokens awarded to delegates, nor any mention that there will be room for experimentation in the future with the compensation model of delegates.

  MakerDAO, which is one of the oldest (formed in April of 2020) and most mature DAOs from a governance perspective, only introduced their Recognized Delegate compensation framework in October of 2021. In the future, DAOs cannot wait two years after inception to introduce financial incentive mechanisms for delegate roles.

Ultimately, individual delegates have little to lose, because their incentives aren’t aligned with the actions DAOs require of them.

Inability to scale

There are a few reasons why individual delegate models can lead to insufficient governance impact for DAOs:

• Single point of failure: Potential single points of failure are created when you rely on individual delegates to participate in governance. For example, if a specific individual delegate is best equipped to weigh in on topics related to core working group performance assessment, they potentially become the bottleneck that the DAO may depend on for this activity, which leads to inefficiency in the governance process.

  Linda Xie describes the pressure that comes with being an individual delegate best in a recent tweet:

https://twitter.com/ljxie/status/1501277544045293577?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1501277544045293577%7Ctwgr%5E2635231884205ccbc53aca0932dbeb391e04e2fc%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Forca.mirror.xyz%2FD1L4lk9ErqahRYpWFNoPZOF-lSFY5czuJjq6OPn7UOw

Unfortunately, it is not possible for delegates to temporarily assign their voting power to another delegate. This means that if a delegate becomes inactive–either temporarily or permanently–it is the delegator’s responsibility to redelegate their voting power. Most token holders, however, come into delegation with a set-and-forget approach. The forgetting part is made especially easy by the lack of visibility around voting behavior. The combination of delegation limitations and poor visibility around voting behavior creates inflexible and fragile structures and processes and degrade governance system impact and efficiency over time.

• Less effective at analyzing complex decisions: Much academic research has been published related to the advantages that diverse groups provide over individuals when participating in complex decision-making. Even with the potential downside of groupthink and conflict surfacing throughout group decision-making, in general, the knowledge, perspectives and options that groups provide lead to better solutions.

  DAOs are constantly faced with complex governance decisions, which an individual is not always equipped to handle. One example where we can see some of the difficulty associated with an individual coming up with a perspective on a complex decision is when MonetSupply, a highly competent Recognized Delegate for MakerDAO, changed his vote from ‘Abstain’ to ‘No’ for the recent offboarding of the Content Production Core Unit of MakerDAO. The decision-making associated with offboarding individuals/core working groups based on performance is complex, likely driven by objective and subjective factors.

Murky legal liability

Given the general lack of legal clarity in this space, required resources it takes to determine appropriate legal structures, and billions of dollars on DAO balance sheets today waiting to be effectively allocated, governance participation introduces a level of risk that deters individual delegates from proactively and confidently participating in DAO governance.

We’ve seen examples of this governance participation aversion due to legal risk–the MakerDAO Governance Core Unit provided anecdotes of delegate candidates objecting to take delegate positions because their proposed ‘Recognized Delegate’ compensation wasn’t enough to overcome potential legal and regulatory uncertainty.

Metagovernance committee delegate models

Given the shortcomings with individual delegate models, we are starting to see an evolution from individual “protocol politicians” to dedicated voting coalitions that represent a set of values and principles. One example of this is she256–an organization that aims to increase diversity & break down barriers to entry in the blockchain space. In November of 2021, they announced their governance initiative, which was bootstrapped by being delegated voting power to Compound, Uniswap and ENS:

https://twitter.com/she_256/status/1464381039753588738?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1464381039753588738%7Ctwgr%5E2635231884205ccbc53aca0932dbeb391e04e2fc%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Forca.mirror.xyz%2FD1L4lk9ErqahRYpWFNoPZOF-lSFY5czuJjq6OPn7UOw

There are many reasons why dedicated and structured metagovernance committees are better suited to participate as delegates within DAOs:

Aligned incentives

In contrast to individual delegates (whose reputational capital can be built and maintained in many ways outside of their governance participation within DAOs), metagovernance committees serving as delegates have the sole purpose of effectively stewarding governance towards achieving the mission of the DAO, while representing the needs and values of their constituency. The brands, identities and value creation and capture models of these metagovernance committees are intimately tied with their ability to effectively participate in governance. Because of this, metagovernance committees have more skin in the game and much greater downside risk when ineffectively participating in governance, especially relative to individual delegates.

Combining extrinsic reputational incentives with extrinsic financial or social incentives unlocks powerful self-fulfilling flywheels that drive greater levels of accountability and performance.

Scalability

As mentioned earlier, there are several traits of individual delegate models that lead to an inability to scale effective governance participation within DAOs. Individual delegates tend to be over-committed to various projects, introduce single points of failure, and are less effective at complex decision-making relative to groups.

With structured metagovernance pods, a flexible container is created that supports the cycles of onboarding and offboarding individuals dedicated to metagovernance participation. These governance participant entities are highly aligned and responsible stewards of delegated governance rights - which should address the low on-chain delegate governance participation that we have historically seen.

In addition, dedicated metagovernance committees are better equipped to support the complex and nuanced decision-making that DAOs require of delegates. Delegators and stakeholders should have confidence that the decisions being made by this delegate group are informed–the multiple values, perspectives, and knowledge bases of committee participants ensures there is a level of depth and breadth in the decision-making process.

Gaps and Po(d)ssibilities

Even with its advantages, several operational and experiential pain points stand in the way of metagovernance committee delegate models providing an outstanding stakeholder experience.

Improving this stakeholder experience is the primary way in which metagovernance committees will build positive brand reputations, instill confidence from the broader market, and position themselves as long-term leaders in the space.

Metropolis is positioned to help metagovernance committees support their stakeholder’s experience in a few ways:

Improved visibility

Today, there are several areas in the web3 ecosystem where metagovernance committee identities present themselves (e.g., governance forums, governance platforms, etc), but no easy-to-use methods for creating and maintaining a web3 ecosystem compatible visual representation of said identity.

Metropolis pod membership is represented as an NFT with a custom image (of your choice). As metagovernance committees continue to perform the hard work of governance participation with DAOs, this visual brand identity is essential to building constituent loyalty, credibility, and trust. Metropolis is working closely with the web3 ecosystem to ensure this NFT image metadata is presented accordingly within various applications and UIs.

Increased transparency

Providing transparency into the members of a specific metagovernance committee is one way of providing confidence to vested stakeholders. Today, when a delegated wallet address votes on a proposal within a governance platform (e.g., Boardroom, Tally) it is unclear who the individual decision-makers were that were responsible for the vote. The lack of transparency leads to an inability to drive accountability and ultimately opens up room for misaligned incentives.

Metropolis pods address this issue in lack of transparency. We are working with each of the governance platforms to build a standard for what these composable governance units and members look like–from both a data structure and UI presentation perspective.

Fluid and intuitive membership management

Pod membership management provides scalable and modular ways to manage memberships of metagovernance committees. The durability of pods combined with accessibility of pod membership management functionality ensures the most qualified and motivated individuals always have their stakeholders’ best interests in mind. When the right pod members are making decisions the stakeholder experience (and ultimately the metagovernance committee brand) improves.

Metagovernance composability

Pods enable metagovernance committees to click together and recompose into completely new networks, forming an evolving connective web of multi-DAO governance activity. This type of modularity, nesting and network formation is not currently possible with existing standards today.

For example, a metagovernance committee pod could sit on a larger “metagovernance council” – amplifying the voices of their collective stakeholder bases even more in the process.

These metagovernance networks may begin to look like the “multi-hub” network described by David Ehrlichman in his book Impact Networks. In his book, David describes the importance of networks that have distributed hubs in which information flows through and decisions are made, “Reaching the multi-hub stage is a necessary step toward unlocking the special qualities that make networks a powerful force for change.”

Metropolis’ pods support the evolution of these metagovernance networks. And as these metagovernance networks evolve, their stakeholders will become less reliant on central figureheads and groups–ensuring that their voices, wants and needs are represented broadly in governance activity.

Closing Thoughts

While the trend of governance delegation to individuals had all the best of intentions, it is clear that it has fallen short of expectations. The combination of the time-commitment and depth required for participation, misaligned incentives and accountability mechanisms, and legal complexity has made it impossible for governance delegation to fulfill its promise.

Because of this underperformance, it is clear that the rising prevalence of metagovernance committees is the next logical experiment to drive meaningful progress within DAOs. Metagovernance committees are better positioned to create aligned incentives with stakeholders  and have structures suited to provide scaled governance impact.

With that said, Metropolis is proud to partner with some of the leading organizations driving the future of metagovernance, including Wildfire DAO.

https://twitter.com/blockchainjames/status/1493658329192804355?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1493658329192804355%7Ctwgr%5E2635231884205ccbc53aca0932dbeb391e04e2fc%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Forca.mirror.xyz%2FD1L4lk9ErqahRYpWFNoPZOF-lSFY5czuJjq6OPn7UOw

Wildfire DAO is a governance focused community pushing forward partner DAO objectives through deep engagement with proposals, community calls and project updates. Metropolis will support Wildfire DAO by promoting transparency to their committees, proliferating their brand and identity throughout the web3 ecosystem, and driving decentralization goals with flexible and fluid membership management.

About Metropolis

Metropolis builds tools that enable DAOs to reach their full potential by uncomplicating collaboration. The pod primitive is a critical piece of DAO infrastructure that is designed to put people first. This flexibility allows for dynamic and composable structures to be created around any party of actors, while introducing mechanisms for accountability, incentive alignment, and checks and balances.

• Visit our website

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Written by Dan Wu (@itsdanwu)

Improving member participation in governance remains one of the hottest and most nuanced problems facing DAOs today. However, these are not new problems we are facing. Roy Lerner wrote ‘Blockchain Voter Apathy’ describing the barriers for effective governance and potential solutions for increasing voter participation over two years ago. Despite his plea for change, governance participation has made little to no meaningful progress.

The purpose of this piece is to provide a high level primer on the current state of governance and participation. Some topics explored include areas where governance is needed, analysis of on-chain voter participation, common issues with governance today, and recommendations on how to resolve some of these issues identified.

The Basics

It is important to take a step back and understand the “why” behind governance before we reexamine issues and potential solutions.

What Is Governance?

As outlined in ‘Pods: The DAOnfall of Token Voting’,  governance is simply a tool for organizations to decide where power resides and who gets to click what button. By placing rails around operations, organizations can quickly get from point A to point B while minimizing risk.

An ideal governance model is one that maximizes a DAO’s meaningful participation and the realization of its mission.

When and Where is Governance Needed

Tarun Chitra provided an excellent description of when governance is needed within DAOs in his recent piece for a16z,

DAOs work best when the governance burden related to curation, security, and risk can be reduced faster than the natural increase in coordination costs that accompanies the need to have members involved in voting on every decision made.

The need for governance and diligent decision making goes up as:

1. Risk (as a function of things such as treasury balance, market volatility, collective NFT curation) and

2. Coordination costs (i.e., number of stakeholders)

go up.

So now that we know when governance is needed, the next logical question is where is governance usually applied within protocols/DAOs?

Governance is usually required for decisions in which the result is unknown and cannot be derived from on-chain data, thus requiring some human input. These decisions should be made with the mission, vision and goals of the DAO in mind.

A few key areas in which governance is likely needed for the foreseeable future:

• Treasury management—e.g., Balancer DAO <> Fei DAO Treasury Swap

• Project funding—e.g., Season 2 of Bankless DAO funding guilds and projects

• On and offboarding core contributors—e.g., MakerDAO’s somewhat controversial proposal to offboard a core team member

• Complex parameter setting—e.g., Aave adding new collateral types and setting collateral requirements

Breaking Down Governance Participation Today

It’s crucial to leverage the vast amounts of on-chain data available to help set some ground truths about governance participation’s current state.

Some of the questions this data can help answer include:

• What does on-chain participation look like by DAO size?

• What are the on-chain participation levels for the biggest protocols?

• What role do delegates play in all of this?

• Is there an optimal voter participation level

Voter Participation By DAO Size

On-chain voter participation by DAO size seemed like the most basic place to start—how does voter participation change as DAOs scale?

The results are not too surprising—as DAOs scale (# of members), their voter participation (# of voters as a % of members) falls. On-chain voter participation starts out around 50% for the smallest DAOs and falls to around 5% for the largest DAOs. While a simplistic view, this gives a sense of the trend for DAO voters that cast at least one vote within a DAO as it scales.

Compound Voter Participation Breakdown

Examining on-chain voter participation of a large protocol also helps draw more concrete conclusions—Compound turned out to be a good candidate based on its size and maturity. Compound is a decentralized blockchain-based protocol that lets users lend and borrow assets—while also providing these same users a say in governance via their native $COMP token.

Compound’s on-chain voter participation (unique wallet addresses voted as a % of total delegates, including self delegates) has averaged ~3% across the ~70 on-chain proposals that have been executed.

The majority of Compound’s proposals have been related to DeFi-based technical parameter setting and average relatively lower voter participation (e.g., Proposal 65 was a follow-up fix to the COMP bug and had ~3.5% voter participation).

However, there have been a few proposals related to other topics that resulted in different voter participation behavior.

• Proposal 40 - Compound Grants Program - This proposal drew ~11% voter participation. Participation and engagement for this proposal were high because this proposal was 1) going to materially impact treasury funds and 2) appoint grant program committee members in positions to impact the future of Compound.

• Proposal 43 - Governance Analysis Period - This proposal drew ~5% voter participation. The goal of this proposal was to introduce an analysis period before proposals enter a voting state. One possible explanation for the higher participation rate is that the proposal did not require technical subject matter expertise and affected a large portion of Compound voters day-to-day.

Based on the behavior of Proposals 40 and 43, it’s clear that not all proposals are created the same. The subject matter of the proposal, materiality and breadth of impact all play a major role in whether voters feel qualified and empowered to vote.

Delegation

Voter participation as a percentage of total circulating supply is one perspective to understanding governance participation. Delegation is an arguably more important perspective—how are those who have been deemed decision makers for the DAO/protocol participating in governance? While quite popular, delegation is sometimes seen as a solution for low voter turnout (e.g., ENS including delegation at the end of the airdrop claiming flow). The truth is there is more nuance to delegation than meets the eye.

There are two aspects of delegation to analyze given most of the major protocols have token weighted voting:

1. The amount of delegated tokens (COMP in our case) that have participated in a vote

2. The number of delegates that have participated in a vote

Average token voting power of delegates who have voted: ~3900 COMP

Average token voting power of delegates who haven’t voted: ~500 COMP

Shockingly, 3/4 of all $COMP delegates have never cast a single on-chain vote. Despite this, 80% of all delegated $COMP have participated in governance directly identifying a few "whale" delegates with massive amounts of voting power (such as a16z, Gauntlet, and Getty Hill). This is a major gap: the majority of delegate voters—who assume the responsibility of participation—do not participate in governance.

Regardless of governance participation levels, Compound has had success from a financial metric perspective—growing from ~$1.5B in TVL to ~$12B in just under one year. However, it seems that there is still ample room to improve participation where needed, harden governance structures where relevant and minimize governance involvement where possible.

Problems With Governance

Now that we have some context and benchmarks on governance participation, we can further explore some primary issues and paths towards a better tomorrow.

Three primary issues with governance were identified on Week 3 of a recent ‘DAO Vibe Ops’ Twitter space with several DAO / governance thought leaders and operators.

https://twitter.com/itsdanwu/status/1458197565002993670?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1458197565925699585%7Ctwgr%5E1f9589674ee8597fe2a0673d406d2302ed5d2d5b%7Ctwcon%5Es2_&ref_url=https%3A%2F%2Forca.mirror.xyz%2FmBIueg_xTRpzxEfc4ZzSxqVGtDeTgGbZ9aivvY6Xihs

1. Information accessibility—how do we create informed participants?

2. Engagement and participation—are the right people involved in governance processes at appropriate participation rates?

3. Accountability—how do we hold decision makers accountable?

Information Accessibility

Information accessibility problems may best be portrayed by some recent direct user feedback provided in the Discord server of Boardroom, a platform used by DAOs to engage, signal and vote on decisions:

In due time, the UX for governance management platforms will improve to solve some of the pain points identified here. Out of the three governance issues identified, information accessibility is the easiest one to solve.

We are already seeing builders within the ecosystem tinker and attempt to solve some of these pain points:

https://twitter.com/HAL_Team/status/1446138702942674947?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1446138702942674947%7Ctwgr%5E1f9589674ee8597fe2a0673d406d2302ed5d2d5b%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Forca.mirror.xyz%2FmBIueg_xTRpzxEfc4ZzSxqVGtDeTgGbZ9aivvY6Xihs

HAL has built a no-code tool to help teams remain informed on new Snapshot proposals by automating some of the workflow required today. Between the proliferation of workflow automation platforms and tools in the web2 world (e.g., Zapier) and projection that the workflow automation market is expected to balloon to $55B by 2028, there is major promise for tools like this.

Engagement and Participation

Engagement and participation is the flip side of information accessibility. Standards for what proposals look like and processes/tools for how they are shared are important to governance accessibility, but governance thinkers also need to determine the relevant people required to vote for a specific proposal in the first place.

Optimizing for the right people to participate in governance processes is an ever-evolving discussion in governance circles today. It may not be pragmatic to assume that all voters should participate in every governance decision. Participating in governance is a lot of work—reading and digesting a proposal, providing feedback for discussion and going to vote can be mentally fatiguing. In addition, many do not have the subject matter expertise or desire to participate in proposals outside of their domain. I.e., An operations lead may not be able to form a sound opinion on a technical protocol development proposal and vice versa.

Friends With Benefits (FWB) had a recent example of poor engagement related to voting on applicants for the FWB Fellowship Program. The FWB Fellowship Program is intended to create  on-ramps for creative individuals who lack the financial resources necessary to buy tokens on the open market. As long as the FWB Fellows meet participation requirements, they receive a token grant for continued membership.

FWB member sirsu recently made a public plea encouraging FWB members to vote on Season 4 Fellow applicants:

https://twitter.com/sirsuhayb/status/1458916401163522052?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1458916401163522052%7Ctwgr%5E1f9589674ee8597fe2a0673d406d2302ed5d2d5b%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Forca.mirror.xyz%2FmBIueg_xTRpzxEfc4ZzSxqVGtDeTgGbZ9aivvY6Xihs

While sirsu rightfully points out that 46 votes out of 400+ is a little low, asking for more members to vote is a request that can be challenged:

https://twitter.com/sirsuhayb/status/1458922076514000897?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1458922511257817094%7Ctwgr%5E1f9589674ee8597fe2a0673d406d2302ed5d2d5b%7Ctwcon%5Es2_&ref_url=https%3A%2F%2Forca.mirror.xyz%2FmBIueg_xTRpzxEfc4ZzSxqVGtDeTgGbZ9aivvY6Xihs

FWB operates in a specific context and may warrant higher numbers for participation—no two DAOs/protocols are the same. However, as seen in some of the data above, voter participation rate is harder to maintain as the organization scales. With fewer than 500 members and low participation rates today, it’s clear that the “everyone votes on everything” model causes problems in both big DAOs and small-ish social clubs.

Instead of expecting to drive higher engagement across all of FWB, it may be more worthwhile to understand what a trustworthy 10% could look like in the context of the FWB Fellows program. Finding ways to delegate and distribute decision making to the right groups in the future will be essential for FWB to scale.

Accountability

Accountability within a DAO is all about setting and holding contributors and governance participants to a common expectation aligned to the DAO’s mission, values and goals.

One of the problems with DAOs and accountability today is that many are operating too fast, have fuzzy priorities and vague expectations in alignment to the DAO’s mission. This leads to performance minimizing organizational habits in the form of poorly defined roles and responsibilities.

Tactically, good accountability for governance participants within a DAO starts with:

1. Safety, trust and autonomy for governance participants

2. Transparency and clarity on expectations of governance participation

   1. Expectations for work to be done, outcomes and of reward (if relevant)

3. Transparency and measurement of results from governance participation

4. Outcome assessment and consequences (positive or negative) by stakeholders

   1. Consequences can come to fruition formally or informally through praise, more autonomy, more responsibility, promotion, pay raise, etc. OR constructive criticism, closer supervision, less responsibility, warnings, termination

And when accountability is upheld, reputation is forged. Reputation is one of the most important pieces to driving accountability. And as you might imagine, reputation is one of the more important intrinsic motivators for individual and collective performance.

Lucky for us, we are starting to see innovation in the reputation management space. @KashDanda recently outlined how SuperteamDAO is leveraging a federated organizational model to build accountability, reward and reputation mechanisms.

SuperteamDAO’s accountability and reward structure revolves around projects. All projects are assigned 1000 “XP Points” that a Scope Squad and Project Lead allocate across all tasks needed to be completed for the project. Tasks are grouped by skill required to perform the task. Project Leads are ultimately accountable for the completion and success of the project. Once complete, project contributors are rewarded the XP points assigned to the tasks they have completed. The plan is that these points will flow to a transparent “Reputation Leaderboard”.

The transparency and intention of SuperteamDAO’s process should promote performance, ownership, and trust across all of their project teams - and can serve as a benchmark framework for others to follow.

Podifying As A Solution

Information accessibility, engagement and accountability are critical issues for DAOs right now. DAOs are increasingly recognizing the need for governance primitives to address these issues. The elegance of governance primitives, such as pods, is precisely in their simplicity.

The pod primitive is designed with small working groups in mind. With these smaller groups, internal trust naturally increases and the need for formal communication decreases. Information becomes more accessible for relevant individuals as the workflows, tactics and communication behaviors required to close pending decisions simplify - they simply take less time and energy.

Pods greatly help with avoiding the governance engagement traps we have seen in the past, such as the FWB Fellows example outlined above. FWB Fellows selection and overall program progress was delayed due to lack of voter participation. A podified FWB Fellows committee can be used to limit the scope of engagement required for FWB Fellows program decisions. This can be a good thing for FWB: to delegate operational decision making to smaller working groups and simultaneously decentralize ownership of a DAO. This type of structure should empower contributors and allow for increased clarity and focus across the community.

The last thing we will highlight here is that pods drive accountability within and between other pods, which promotes higher quality governance. There are two primary ways in which pods drive accountability:

1. By providing greater visibility to members behind collective decision-making via a pod page. If $COMP delegates leveraged pods, the wallets/identities behind the group would become more visible through their pod page, custom NFT image and custom ENS domain. With this increased visibility, delegates may feel more pressure to be active governance participants and voters may feel more empowered to revoke delegation rights based on inactivity.

2. By creating formal on-chain membership requirements for the groups responsible for decision making. As an example, SuperteamDAO could one day use individual-level reputation to automate membership to certain pods. From an accountability perspective, if there were certain individuals within a pod that were not contributing to the working group in a valuable way or no longer complying with pod membership requirements, their membership to the pod could be revoked.

Closing Thoughts

It’s clear that there are issues with governance participation today. Oftentimes governance participation is low and dominated by the few delegates with the majority of the voting power. Other times, governance participation may be too high and stifle the agility of a protocol/DAO.

Many DAOs and protocols have ample opportunity to improve how they:

1. find/delegate to the right governance participants

2. ensure those participants have the information required to perform their due diligence and

3. hold these participants accountable to the decisions made.

The ecosystem is already seeing innovative solutions being built to address some of these problems, such as HAL’s no-code solution to automate notifications for Snapshot proposal creation and SuperteamDAO’s reputation management system.

The pod primitive will be foundational in improving governance by pushing decision making out to aligned stakeholders, hardening roles and responsibilities, identifying existing power systems and elevating contributors through autonomy.

About Metropolis

Metropolis is the on-chain permissions layer for DAOs.

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gm

2021 has been one of the most interesting years so far for DAOs. As DAOooooors, it is important that we take proper time to look back, reflect and introspect. Maybe we missed out on an airdrop here and there, maybe we burned a bridge or two. But DAOs have shown us their unstoppable power to bring people together, who otherwise would never meet, to build innovative products and grow wholesome communities. We would like to shine light back on some of these memorable moments.

Choose Your Fighter

1. @_jamiis - chief pleasr and team no sleep

2. @alexxzzhang - 24/7 community scaffolder

3. @MonetSupply - keeping us safe, one DAO at a time

4. @nkennethk - eth servitude, needs a vacation grant gratitude

5. @thattallguy - vibe guru and largest web3 onboarding vortex

6. @HelloShreyas - DAO diversifier + undervalued memer

7. @frogmonkee - rare species: part-govinator, part-frunkee

8. @flexxchapman - co-captain and MVP

9. @Pepperoni_Jo3 - he knows the two pizza rule

Themes

1. Big trend of working groups popping up: @MakerDAO Core Units, @iearnfinance yTeams, @synthetix_io Spartan Council, @Metropolis pods :)

2. Compensation with bounties, streaming, circles, oh my! @Coordinape, YIP-57

3. M&A’s activated this year with @FeiProtocol/@RariCapital, @Keep_Project/@Nucypher, @GnosisChain/@xdaichain

4. Successful completion of grants programs by @uniswapgrants, @compoundgrants, @AaveGrants and many others

5. The power of protocol owned liquidity was demonstrated by @FeiProtocol and @OlympusDAO

6. Let’s buy stuff together! @constitutionDAO, @prtyDAO, @pleasrDAO, @KrauseHouseDAO, @cityDAO

7. Fiery discussions about licensing and IP law @CurveFinance, @Uniswap and @AaveAave

8. Two of the (spoiler alert) cutest DAO airdrops this year, $GTC and $ENS, rolled out with required vote delegation

9. As always, security issues and exploits were a bit of a thing: @SushiSwap, @compoundfinance,@RariCapital, @AlchemixFi, there may also have been one or two on @BinanceChain 🤷🏼‍♀️

IVOs: Initial Vibe Offerings

1. @FWBTweets - unlimited houseplant alpha

2. @banklessDAO - breaking the bank

3. @IndexCoop - every owl deserves a home

4. @OlympusDAO - the birthplace of (3,3)

5. @pleasrDAO - In Doge We Trust

6. @FingerprintsDAO - Right-Click, Save As = ngmi

7. @KrauseHouseDAO - we are all jerry

8. @templedao - still trying to figure out if !verify does anything

9. @scribeDAO - which one of you will summarize this?

10. @squiggleDAO - a DAO draped in rainbows

Top DAO Moments

1. @ConstitutionDAO: Raising $41M from 17,437 contributors

2. @PleasrDAO Inception: The birth of pleasrDAO and the first of many historic bids

3. @dhof’s Loot governance experiments: AGLD vs. mLoot: One of the most interesting NFT phenomenons this year that also became a testing ground for gov experiments

4. Clutch @samczsun: Legendary white hat hacker samczsun in a DeFi thriller

5. @awrigh01’s WY DAO bill passes: But don’t forget to add “-DAO” at the end of your DAO’s name

Top DAO Crowdfunds

1. @ConstitutionDAO: An experiment for a DAO with one single purpose: to buy the Constitution of the United States

2. @KrauseHouseDAO (#WAGBAT): Crazy people that are going to buy an NBA team

3. @EthereumFilm: Funding a character-driven documentary film on the challenges and rewards of building a new world

4. @PrtyDAO: PartyDAO enabled degens to purchase NFTs as a collective of degens. Including @sirsuhayb’s Crypto Cookout, a community campaign to buy black cryptopunks, ongoing bid for The Smoke House

5. @FreeRossDAO: The founder of Silk Road received a prison sentence of two lifetimes plus 40 years. In solidarity for Ross, FreeRossDAO gathers funds to buy Ross Ulbricht’s Genesis Collection, and protests the injustices of the American prison system.

Unstoppable DAOgenerates

1. @Cooopahtroopa - fresh prince of web3

2. @chaserchapman - mother of DrAOgens

3. @patrickxrivera - crowdfund maxi

4. @jacksondame - keep your friends close and your enemies closer

5. @lsukernik - DAO wizardry

6. @pet3rpan - slaying captain hook (moloch)

7. @WillPapper - DAO mechanic

8. @0xJim - value-add DAOoooor

9. @divine_economy - shitposting one DAO at a time

10. @TimshelXYZ - loot prophet

Most Contentious Governance Proposals

1. Community-Enabled Analytics: Proposal to administer a $25M grant to Flipside to produce community-enabled analytics for @Uniswap. [FAILED]

2. Facilitator Offboarding: @MakerDAO proposal to offboard the Facilitator of the Finance Core Unit. [PASSED]

3. Treasury Diversification: Proposal to use 51M $SUSHI from the @SushiSwap treasury to onboard institutional investors. [WITHDRAWN]

4. DeFi Education Fund: @Uniswap governance proposal to allocate one million $UNI to create and fund the DeFi Education Fund. [PASSED]

5. Auditing: Invitation to audit firms to post their audit proposals after @compoundfinance’s Proposal 62 exploit. [PASSED]

Most Impactful

1. @Gitcoin - make frens and git coins

2. @Developer_DAO - onboarding our future buidlers

3. @DreamDAO_ - training zoomers for future leadership

4. @EcoDAO_ - minting NFTs to save mf trees

5. @KomorebiFund - funding female and nonbinary crypto founders

DAO Thot Leaders

1. @tracheopteryx - aping DAOvolution

2. @gaby_goldberg - DAMN, she good

3. @ljin18 - you have DAOr attention

4. @JulzRoze - won’t stfu about pods

5. @kaiynne - semi-benevolent dictator

6. @Flynnjamm - learn to earn nerd

7. @keikreutler - DAO historian

8. @lex_node - gov 2.0 founding father

9. @owocki - DAO cartographer

10. @tobyshorin - squad wealth

Cutest DAO Airdrops

1. $ENS: wagmi.eth

2. $GTC: public goods goes public

3. $dYdX: icymi, hope you’re enjoying at-home coffee

4. $PEOPLE: we didn’t get the constitution, but at least we have each other

5. $AGLD: who needs divine robes when you can have gold

Wise Words on DAOs

1. A Prehistory of DAOs by Kei Kreutler

2. The Eightfold Path to DAOism by Maria Gomez, Julia Rosenberg and Chun Poon

3. Moving Beyond Coin Voting Governance by Vitalik Buterin

4. Building and Running a DAO: Why Governance Matters by Tarun Chitra

5. An Old Dictator Appears by Kain Warwick

6. DAO Landscape by Cooper Turley

7. A New Mental Model for Defi Treasuries by Hasu and monetsupply

8. Turing-Complete Governance by Saffron Huang

9. A Legal Framework for Decentralized Autonomous Organizations by David Kerr and Miles Jennings

10. Unlocking the Treasury by Larry Sukernik

Help Is On the Way

1. @Metropolis - org management

2. @Coordinape - compensation

3. @rabbithole_gg - onchain credentials

4. @wonderverse_xyz - project management

5. @UtopiaLabs_ - payments and accounting

6. @0xstation - onboarding

7. @ParcelHQ - treasury management

8. @0xCoinshift - treasury management

9. @clarityteams - team workspace

10. @agora_xyz - community gating

Closing Thoughts

Besides the people we mentioned above, contributors such as @rafathebuilder, @JuliaLipton, @spengrah, @stefdelev, @JonathanHillis, @raihan_, @jaesmail, @SpaceXponential and many others are tirelessly working to improve the DAOs we love. Whether it is finding an entry into social tokens through @ForeFront__ or learning how to start doing sh*t on @layer3xyz, we are all here to perpetuate the vibes and explore the ways that DAOs can change the world.

Web3 gives people ownership of the protocols they use and the communities they vibe in. While it is impossible to predict the technical and social innovations we will see in 2022, it is certain that DAOs will continue their path to unlocking the infinite power of collaboration.

Contributors

DAOs Wrapped 2021 was created by Metropolis, with contributions from @MariaShen, @divine_economy, @eKRENZKE, @lsukernik, @MayaBakhai, @MitchellJHammer, @puntium.

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Written by: Maria Gomez (@MyPaoG), Julia Rosenberg (@JulzRoze), and @zkchun

When not fantasizing about the next 1000x moonshot, many crypto-natives dream about how DAOs will transform the way people collaborate. DAOs are imagined as flat and fluid organizations, the opposite of the rigid, pyramid-like structures dominating the corporate world today—an organization where every stakeholder gets to speak their mind and be heard, whether you are a big whale or just a smol ting. It is a noble end-state to pursue, but the reality is that as DAOs grow, they tend to encounter certain pain points (many of which are brought on by their flatness) that hinder their progress.

This article will briefly look at the scaling problems that DAOs run into today, go over the problem with token voting and offer a high-level introduction to how Metropolis will solve this problem.

What is Governance?

Governance is simply a tool an organization uses to decide where power should reside and who gets to click on what button. This process places rails around operations, which helps an organization get from point A to point B more smoothly. Processes and rules can be restrictive, but for large organizations, having these processes and rules are essential, if only to prevent implosion before it gets the chance to move from point B to point C. So governance is not only about today, but even more about tomorrow. When a group agrees to move forward as a DAO—whatever that might entail—its members can make choices about the processes and rules that help them do that.

Roughly defined, the ideal governance model is one that maximizes meaningful participation and the organization’s efficacy.

DAO Extremism

The point of decentralizing an organization is to remove control from a single entity or group. Decentralization—among other things—creates censorship resistance, a redundancy against corruption, and makes the organization more resilient against technical failures. However, as we will discuss later, some DAOs might appear to operate smoothly, but are not as decentralized as the acronym suggests.

The unfortunate reality of DAO scaling is that it is very difficult to maintain a high degree of participation. As fewer people are willing to participate in the DAO’s coordination and governance, the higher the risk of centralized power. DAOs could integrate coordination tools, but the tool that works well for a DAO of 50 people might be very counterproductive for a DAO of 50,000 people, and vice versa.

Maintaining high participation rates comes at a cost. It takes time and energy to write and edit improvement proposals, as does stimulating community participation—these are costs that DAO participants must eat in order to uphold participation standards. This cost of participation grows exponentially with the DAO’s size. Consequently, as the number of stakeholders increases, a very decentralized DAO tends to lose its ability to stay organized and productive. On the other end of the spectrum, a large and orderly DAO tends to have centralized governance power under the hood.

One caveat here is that being chaotic and disorganized is not necessarily a bad thing. Collusion is much harder to pull off, for example. Broadly speaking, however, we can say that:

• Decentralization tends to make the organization more chaotic

• Keeping operations organized means compromising on decentralization

So the first problem that DAOs face, as they scale, is that they seemingly have to make a choice between the two. But what if a DAO does not want to scale? Can it stay at its current size and just use today’s most practiced governance model and expect things to go well? It kind of depends. Most governance models today have a heavy reliance on token voting. It is a coordination signal that gives stakeholders, other than miners and developers, a voice about protocol developments and treasury management. In this sense, token voting is useful and necessary. However, it is not without its problems.

Token Troubles

As busy as he is being a globetrotting legend, Vitalik Buterin still finds time to think about problems in decentralized governance; specifically, the problems that exist in pure voting-based models. He identifies two primary types of issues with token voting.

The first, that it gives rise to inequalities and incentive misalignment even in the absence of attackers. As mentioned earlier, whales can greatly influence the outcome of a vote, because small bag holders have an insignificant impact on the outcome. And if that is not enough, even if participation rates were 100%, the outcome would only be representative of the wishes of token holders. Token voting is inherently at the expense of the interests of non-token holding stakeholders. This leads to a massive conflict of interest.

The second issue with token voting is that it can be attacked through various forms of vote buying. This is especially true if the governance token combines voting rights with some kind of economic interest in the protocol’s revenue; it is tempting for small holders to lend out governance tokens as their individual vote will not weigh heavily on the outcome. A malicious actor with lots of capital could pay interest in exchange for borrowing tokens and skew the vote.

It is important to point out that the problems of token voting can exist in DAOs that are large or small, organized or disorganized. Sole reliance on token-based on-chain governance—as it is practiced today—is not sustainable. Combined with the structural issues that appear when the community does grow, DAOs are in need of better governance and coordination tooling. The ones that exist today, however, are often prescriptive and opinionated frameworks. DAOs that wish to maintain openness, transparency and flexibility are then forced into shaping their organizations to these tools. While it is possible that a set of best practices emerges, each ecosystem is unique and so is its community. Tools should be shaped to the needs of the DAO, so that it can best empower its community members to take ownership of their actions.

So what is the answer? How can DAOs scale, while keeping the cost of participation low, work around current issues with on-chain governance and stay organized without compromising on decentralization?

The Answer: Pods

Pods are Metropolis’ answer to the scaling problems that DAOs face. Pods are small working groups, usually centered around one expertise. In place of—or in addition to—one massive, centralized DAO treasury, each pod has its own multi-sig wallet that is controlled by the pod members. So pods can be thought of as mini-DAOs within a larger DAO. By creating a pod around an expertise, certain elements of a DAO can be hardened. This means that it is possible for a DAO to codify specific roles and responsibilities within its ecosystem; we like to call this process podifying. Podifying a DAO will turn slow and inefficient, centralized and rigid structures into fast and fluid organizations:

Pods are flexible, malleable and modular. They can exist as neighbors, embed or be embedded in other pods, split, merge, etc. Metropolis recognizes that DAOs are at the frontier of organizational design. As such, it should be left to a DAO and its users to explore the best options for their vision and needs, rather than imposing predefined organizational shapes. Metropolis can, thus, be thought of as a set of governance primitives.

In the image above, the circles represent pods, each with a handful of members and its own multi-sig wallet. The people at the bottom are stakeholders that do not yet have membership to a pod, for example governance token holders or users. To gain membership to a pod, the claimant must meet a set of rules—maybe they have to hold a certain amount of an ERC-20 asset or perhaps they must be voted on to a whitelist of candidates for membership. A future could even exist where membership hinges on a custom reputation system. These restrictions can be almost anything and should be formed around the gravity of the pod’s responsibilities. Membership can also be slashed at any time if the member fails to comply with membership rules. In other words, pods can grow, shrink and extend to the needs of the DAO.

Member-Based DAO

Instead of the DAO’s governance centering around token-based voting, actions are now governed through pod membership. But these pod memberships will not make governance tokens disappear, nor take away their power; instead, some of its powers are delegated to pods to make governance more efficient and flexible to the needs of the specific protocol in question. The pod members are responsible for making decisions, within the field of their expertise, that add value to the DAO. Once in a pod, these decision making processes only have to be as involved as they need to be. Some decisions can be made through simple verbal agreements, while others may require an approval process.

Voting happens on the pod level, rather than on a DAO-wide level.

By delegating some execution power to key decision makers, the cost of participation drops significantly. Issues that token holders are not interested in, should not require the attention of token holders and can be hidden from their day-to-day. This allows the DAO to make decisions more efficiently without compromising on transparency or openness. The pod model also provides a canvas for talent to naturally surface to the relevant parts of the DAO.

All of this stays true, regardless of the size of the DAO. A DAO of one pod can easily add another pod when it becomes large enough, and it can continue to add pods as it grows. Any hierarchies that form in this process are localized, deliberate and impermanent. The DAO just grows organically from day one.

Close

Metropolis is proudly building tools for DAOs. The pod primitive will help DAOs reach their full potential by uncomplicating collaboration. The power of pods comes from the fact that they are designed to put people first. This flexibility allows for dynamic and composable structures to be created around any party of actors, while introducing mechanisms for accountability, incentive alignment, and checks and balances.

About Metropolis

Metropolis is the on-chain permissions layer for DAO working groups.

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Thanks to Bruno Lulinski (@BLulinski) for feedback.

Written by: Maria Gomez (@MyPaoG), Julia Rosenberg (@JulzRoze), and @zkchun

DAOs, decentralized autonomous organizations, have recently regained the attention of the crypto community. A new DAO seems to popup everyday—from collective NFT buyers to syndicate DAO frameworks. Not only has consumer excitement for DAOs exploded, organizations of different shapes and sizes are increasingly eager to begin their journey to decentralization.

Yet, throughout this DAO boom, there has been little clarity on what these new organizations really are. Formal definitions are a good place to start when things are new, but there does not seem to be one for DAO—even though many attempts have been made. What makes a DAO, a DAO? Why is it that we, as end-users, can so freely join and cooperate with new frens in the DAOs we love? And what could be useful tools for DAOs to optimize for cooperation and coordination?

In this article, we will walk through how we think about these topics at Metropolis—starting from the basics.

Back to Basics

DAOs are a new type of organization and to understand the key characteristics of a DAO, it is helpful to review some blockchain fundamentals. A programmable blockchain, like Ethereum, enables applications to run on a decentralized trust system—removing our need to rely on any single actor as an intermediary of trust. The trust system uses a consensus mechanism to ensure that network participants can come to an agreement on the state of the network. If competing parties, each with their own incentives and agendas, can come to an agreement about the state of the network, then us end-users can rest assured that our funds are saifu. Another way of looking at it, is that blockchains convert computing power (in the case of Proof of Work) into trust. Everyone is keeping an eye on everyone else, so that we can all keep performing economic activity on the network.

In truly decentralized systems, no one needs permission to join in on this action. The underlying consensus algorithm is publicly accessible. This means that anyone can become a network participant and help verify the behavior of other participants. This is the key innovation we have all gravitated towards in the crypto space.

Decentralized trust systems have some very nice features to them. They welcome participation from anyone willing to contribute, regardless of borders and nations. Since there is no central point of control, they are censorship resistant, and do not rely on third parties to get trivial tasks done—contrast that with how hard it can be to send money from one country to another using traditional channels. These features culminate in a sufficient level of redundancy against corruption and other failures that traditional, centralized systems are exposed to.

Trust Blanket

So what does the above have to do with DAOs? The public blockchain and its native currency, also known as the base layer, act as a cozy blanket of trust that applications can be built on. The smart contracts of these applications are deployed on the blockchain, thereby enjoying the warmth of the trust blanket provided by the base layer. For the end-user, this means that apps can be interacted with, without having to trust a central figure. Additionally, the app’s functions are automated, so in many cases we do not even have to trust our counterpart—for example, in the case of a token swap. Of course, this is assuming the smart contract code is not faulty to begin with, but that discussion is outside of the scope of this article.

If Vitalik Buterin were the only participant in the Ethereum ecosystem, he would be bored out of his mind pretty quickly. The point of a blockchain is for many people to use it. An application layer, sitting cozily on top of a secure base layer, lowers the cost of trust for the end-user. This low cost of trust can be leveraged to form many new working relationships with other users—even pseudonymous users with gluttonous penguins as avatars. These working relationships between users form the coordination layer: the space where DAOs operate.

DAO Break-DAO-n

We often focus on the three word breakdown of DAO: decentralized, autonomous, organizations. All three are important, but discussing each letter independently does not accurately capture the relationship and prioritization of these three key elements.

The decentralization of an organization, as touched on earlier, is easily the most interesting and powerful aspect of being a DAO. It enables open, credibly neutral and censorship resistant systems, unbound by borders and nations.

Autonomy and automation are essential characteristics. Automation refers to technologies that reduce human intervention in processes. Autonomy refers to the ability to be self-governed. These are not the same things, nor are they both implicitly present in every DAO.

Organization seems to be a blanket term to describe a collective ecosystem. DAOs are more like a country than an organization—made up of different sub-parts, factions, actors that attribute value to the ecosystem as a whole.

Boiling It DAO-n

Currently, there is no formal definition of what a DAO precisely is, nor are we interested in presenting you with a definitive answer here. There are, however, some key features that give a DAO its essence and make it different from traditional organizations. Keep in mind that traditional organizations can exist on-chain as well. This could make the operations of a public company more transparent and accessible, for example. But legal entities on the blockchain deserve an article of their own. From our observations, these are the features that permit DAOs to flourish and build towards a sustainable future.

1 Automation at the Center, Humans at the Edges

DAOs involve people interacting with each other around a protocol with encoded rules, which automates the purpose of the organization—automation at the center—and enforced on the blockchain through a consensus mechanism, i.e. the app layer and its cozy trust blanket. The community of the protocol is formed of loosely affiliated individuals or groups. A DAO emerges from the community working on the protocol. In many cases, a token is provided as an incentive for that work, but work can be performed for social reasons too.

There are some tasks that a protocol cannot perform on its own. It will require a human user to feed it inputs, within the bounds of the protocol’s automated rules—humans at the edges. Where humans are required to click on buttons, governance becomes relevant. After all, which human gets to click on the buttons? These humans at the edges must deal with the jurisdictions and the relevant regulations.

2 Open Source and Blockchain-Based

DAOs that control protocols must provide equal access for potential contributors and users. This helps maintain a level of trust and prevents centralization over time. Economic incentives and social empowerment lead to an emergence of an ecosystem of open source tools and protocols, enabling further growth and development. The infrastructure and tools should be composable with other tools in the DAO’s ecosystem to have staying power. Any participant in the DAO can provide open and transparent contributions for others to reuse. Knowledge sharing in a DAO is an open process; anyone can introduce a compelling new idea to mobilize and attract people to work on that idea. The tools are created for the public, but aggregate in the protocol. That said, members should be able to run whichever version of the protocol they believe the community should embrace.

3 Independent Parties

Participants in a DAO can work independently on projects that they think will bring the most value to the protocol. Ideally, no one is standing in anyone’s way and the participants converge on a path that is mutually beneficial. Even though the participants are legally independent, they share values, goals and incentives, which enable their ability to cooperate, agree on fundamental decisions, and implement the DAO’s rules or architecture. A DAO should not be constrained by the resources or vision of one organization or person. This is one place where the advantage of low cost of trust shines through. A shared vision emerges from independent actors or parties working towards what they think is best for the protocol. The independent parties are agile by default—as new information becomes available, their views, vision, and direction can create new consensus among the community. Whoever does not agree with the consensus can, at any time, peace out from the community and fork the work into another direction. Finally, joining and leaving a DAO must be frictionless; the DAO should not be able to force a participant to work exclusively and indefinitely for that DAO.

4 Internal Capital

Tokens are key for DAOs, because they bootstrap and fund the development of the protocol and its ecosystem. However, a token should not be treated as a fundraising mechanism or investment vehicle. This could lead to some funky legal consequences, depending on the jurisdiction the user is in. The token should not give rights to claim profits or dividends. It should be treated as an economic incentive and consensus medium. Economic incentives are still key to promoting contributions to a system. In exchange for their contributions, participants are rewarded with the protocol’s token. There is a clear incentive to commit time and effort to working for the protocol. The value accrued by the token increases as the protocol gets better at generating value—this could happen through new product launches or optimization of existing products. As long as the DAO’s frens can contribute freely and openly, the results of that work, and the value it brings, aggregates in the system and is captured by the token.

5 Governance

The governance function of the token promotes long-term value and growth. It gives token holders the power to change the rules of the system when necessary and allocate the resources of the ecosystem through a decision making process. This is valuable for users as they become “owners” of the protocol. This results in stronger network effects, because the more useful a protocol is, the more valuable it becomes to govern it. A token-based governance model, however, comes with its own shortcomings—particularly at scale. There are ways to palliate these flaws, but this topic will be given its own article in the future. Governance is complex and difficult to get right—it is impossible to find a system that works perfectly in every organization. Token voting, as critical as we are of it, is and will remain a useful and necessary part of decentralized governance.

6 Enable a Bottom-Up Structure

Bottom-Up does not mean leaderless. In fact, the system could be organized with a combination of bottom-up, modular and top-down processes—which is precisely what Metropolis enables. The community works together as independent parties—we call them pods at Metropolis. It should be possible for pods to freely organize and connect in whatever way they see fit.

This does not rule out the inclusion of top-down design. Actually, it is an essential part of intention-setting within the community. Founders can share their vision of what the protocol can become, and entice and inspire the community to follow that vision. This initial vision is key for the development of fundamental infrastructure, which then drives the emergence of bottom-up participation from individuals. With the right incentives in place, the top-down design can attract participants to build, implement and materialize that vision.

7 Membership is Open

Anyone can run a node to verify blocks and transaction data on the base layer. Or write smart contracts and deploy them on the blockchain to enrich the application layer. The same can be said for the coordination layer. Participating and contributing in a DAO is open and not limited to a select group of people. Mission critical aspects of the DAO, such as the main treasury, are not accessible to everyone but anyone could support or reject proposals, or write a proposal themselves. Participation is rewarded and keeps the system running according to its vision and rules.

8 Collusion is A Bug

In a truly decentralized system, the common behavior of independent participants is to work for their own interests and profit instead of for a collective profit. This doesn’t mean that there are no collective values and missions that form a community. It just means that there is no common enterprise like in a traditional company. Since not every participant shares the same goal, colluding to make the outcome of the system favor specific participants is difficult, and successful collusion should not be seen as a legitimate activity.

Closing Thoughts

These are the essential features of a DAO, as we identify them at Metropolis. They are what makes a DAO different from a traditional organization. So different, in fact, that a DAO does not appear as an organization at all sometimes. A DAO is an ecosystem with loose operational borders that comprise coordination tools.

Metropolis is proudly building tools for DAOs to reach their full potential by uncomplicating collaboration. Metropolis’ key tool is the pod primitive, a modular and flexible body to manage participation, shared assets, and organizational permissioning. This flexibility allows for dynamic and composable structures to be created around any party of actors within a DAO ecosystem, while introducing mechanisms for accountability, incentive alignment, and checks and balances. By creating a wrapper around the people, Metropolis enables bottom-up structures to thrive within decentralized ecosystems by giving collective power to groups of motivated actors—regardless of their initial token status.

Additional tooling is an essential piece to unlocking the true power, and true decentralization, of these project ecosystems. When we empower people to effectively coordinate within the open, public, neutral structure of a DAO, we enable an entirely new wave of work and human collaboration.

Read More

• Cryptonetwork Governance As Capital by Joel Monegro

• DAOs, DACs, DAs and More: An Incomplete Terminology Guide by Vitalik Buterin

• Governance Tokens - The Good, the Bad, The Ugly by Gabriel Shapiro

About Metropolis

Metropolis is an on-chain permissions layer for DAO working groups.

• Visit our website

• Follow us on Twitter

• Join our Discord