2019 Will it be the "year of DAO"? A text on the past and present of the centralized autonomous organization

Written by: Vu Gaba Vineb

Source: Chain smell

A variety of "DAO" has once again become a hot topic. Want to understand the predecessors of various DAOs, the chain is recommended to read this article.

In fact, the core discussion about "DAO" is about the discussion of blockchain network governance theory and practice.

Decentralized Autonomous Organization (DAO) is one of the most anticipated applications for blockchain technology. After all, this is the first time humans have had the means to make a collective decision for a business, to coordinate cooperation in a way that is not trustworthy (trustless) and anonymous.

This article will take you through the details of some well-known DAOs that have existed, are running, and will be rolled out soon. Be prepared because you may need to spend a little time reading this article.

We will classify these DAOs based on three main attributes, which are:

  1. The nature of the decisions that need to be made;
  2. Incentives for participation;
  3. The degree of decentralization.

In the process, I will present my views on different DAOs and put forward some of my concerns about their operational mechanisms.

Before entering the topic formally, it is necessary to clarify my definition of DAO: DAO is an organization whose operators collaborate through a de-trusted agreement to make collective decisions for a particular cause.

With this definition, let's jump directly to the first DAO in my history.

Bitcoin – original DAO

That's right. Bitcoin is the first decentralized autonomous organization ever, at least in my definition. Essentially, Bitcoin is an organization run by many miners and all nodes that coordinate with each other through the Bitcoin protocol to determine which transactions should be included in the main chain of the Bitcoin blockchain and the ordering of those transactions.

The goal of this organization is simple: to protect the security of the Bitcoin network and to make transactions on it more convenient.

The decision to be made by Bitcoin DAO is at a lower level of the blockchain infrastructure, involving the blocks and transactions of the blockchain itself. In fact, we can say that most other blockchains, such as Ethereum and Zcash, are also DAO in nature. However, this article will focus on DAOs that exist on the blockchain, with a more defined goal. I want to call it " meaningful DAO ." These "meaningful DAOs" inherit the decentralized and de-trusted attributes of their underlying blockchaining protocols and build logic on them that serve more "meaningful" goals.

The incentives to participate in Bitcoin DAO are mainly to obtain mining incentives. If the miners behave well and diligently produce effective blocks, this active participation and efforts to contribute to Bitcoin DAO will result in mining incentives. .

In my opinion, the motivation of a DAO to participate is the key to its success. Rational analysis, participants will make a positive contribution to this DAO only if they are sufficiently motivated. Bitcoin has successfully demonstrated how this simple concept works. It is worth noting that the rewards for participating in Bitcoin DAO are immediate. No delay, instant satisfaction.

Bitcoin is highly decentralized, and the protocol itself is completely decentralized, as long as there are participants in the network. But in fact, we can't say that Bitcoin is completely decentralized. At the time of this writing, the top four Bitcoin pools have more than 50% of computing power, which means they can collude to implement "51. % Attack", which blocks certain transactions or withdraws their own transactions to achieve double spending. In addition, the upgrade of the Bitcoin protocol is currently controlled by a few parties, which is also a centralization issue.

Some people have already understood this truth, that is, it is difficult for us to achieve 100% decentralization. Even if the power of block creation is highly decentralized in some way, even with a highly decentralized voting mechanism to complete the protocol upgrade, issues such as security vulnerabilities in major client/operating systems can still seriously damage the network. . Therefore, like everything else, the reality can never be as perfect as theory because the preconditions are not secure.

To take a step back, do we really have to work hard to achieve complete decentralization? This is another topic that needs to be fully discussed, which we will discuss in detail in the next section.

In any case, Bitcoin is still one of the most beautiful things in human history. Since living in the era of tribal collaboration based on family trust, we have come up with so many concepts and built so many complex systems to try to collaborate with each other. Bitcoin has given birth to a new way of interpersonal collaboration, whose rules are written and executed by immutable logic – Bitcoin is the father/mother of all DAOs .

DashDAO: The first "meaningful" DAO

Dash (foundly known as Xcoin, later changed to Darkcoin) was originally a fork of Bitcoin, and in August 2015 introduced an additional DAO element on top of its core blockchain protocol: 10% block reward Enter the pool of funds to fund proposals that promote Dash network/ecosystem development.

In DashDAO, anyone who pays 5 Dash can create a proposal to seek financial support. Dash's primary node (which needs to lock at least 1000 Dash as a collateral) will vote on which proposals should or should not be funded.

The decision to make in DashDAO is about how to allocate a pool of funds for real-life proposals to ultimately promote Dash for people. Dash's main node is involved in DashDAO's vote, stimulating long-term appreciation from the value of their hoarding tokens, which will support good proposals and prevent bad proposals when voting (which also allows DashDAO to save money to support Better proposal).

DashDAO has a high level of decentralization, and anyone can join the Dash master node or leave. As long as there is a vote for the Dash master node, any proposal submitted by anyone will have a chance to pass.

As the first DAO with a clear decision mechanism above the blockchain consensus layer, DashDAO is at least one of the most active and successful DAOs, if not the best . To date, hundreds of proposals have been adopted in DashDAO, covering areas such as funding development efforts, marketing and community awareness efforts.

As of this writing, there are 31 active proposals on DashDAO for voting, and the next round of grants released in May 2019 is 5735.52 Dash. With the support of DashDAO, Dash has built a strong ecosystem, has an active community in multiple countries, and provides payment support for a variety of services such as VPN, mobile recharge, and even fried chicken.

The DAO: Infamous DAO

The DAO was one of the most exciting projects in the blockchain industry, and since May 2016, the organization has attempted to create a new decentralized business model. The DAO organization is operated by token holders who contribute to token sales and operate on smart contracts. Token holders voted to fund the proposals that might give back to The DAO. The DAO eventually brought together an amazing 12.7 million Ethereum, which accounted for 14% of the total supply of Ethereum at the time.

The DAO's decision-making is similar to DashDAO, including how to allocate funds for real-life proposals that will ultimately return the proceeds to The DAO.

The incentive for the DAO participants to vote is to reward the successful projects and the appreciation of these tokens for possible more returns. To be honest, The DAO's incentive structure also has some problems: First, there is no guarantee that the projects that receive The DAO funding will ultimately and how to bring the rewards to the token holders; secondly, the funded projects will need to sell the Ethereum. To get cash, this will suppress the price of the Ethereum over a period of time, and it is the Ethercoin that supports the value of The DAO token. In fact, the second problem exists in any decentralized autonomous organization, the token used to fund a project, and the token that supports the financial interests of the DAO participant. In addition, the structure of the decentralized autonomous organization will bring other problems, which is beyond the scope of this article.

The DAO is indeed decentralized, but there is a role of "Curator" whose task is to check the identity of the person submitting the proposal and to ensure that the proposal is legal before whitelisting their address. This process, and how Curator initially determines how to choose, is not completely decentralized. Of course, people can vote for or exit the Curator position, and anyone who is dissatisfied with How DAO works can also choose to split, and their share of funds and rewards will be retained.

All in all, The DAO is an interesting and novel concept, and it should be a cool experiment, no matter what the ending. Unfortunately, The DAO ended prematurely in a cool way, and we couldn't see more follow-up stories. There is a vulnerability in The DAO's code that led to a notorious attack, and I believe most readers of this article understand the story.

MakerDAO: Managed DAO

MakerDAO was released on the Ethereum main website on December 17, 2017 and was also created as a decentralized autonomous organization to manage the operation of its stable currency Dai. The value of Dai is tied to the US dollar. Dai can be generated by locking some Ethereum (which may support other assets in the future) in the Mortgage Debt (CDP) . In short, Dai's stability is maintained by multiple feedback mechanisms and is implemented by a system of multiple smart contracts on the blockchain.

The decision to make in MakerDAO is mainly to adjust the configuration of the entire system and trigger an emergency shutdown if necessary. The configurations that need to be determined include: the parameters of the mortgage debt type, the type of mortgage debt to be added, and the set of predictor machines for the price information flow of a certain type of mortgage, and so on. The so-called emergency shutdown is a global solution for the entire system. When the black swan incident threatens the normal operation of the entire system, the emergency shutdown will be triggered.

The main motivation for MakerDAO participants (ie MKR token holders) to participate in governance is that the value of MKR tokens will rise as the Dai Stabilization System works well and grows over time.

In the Dai Stabilization Coin system, the creator of the mortgage debt warehouse pays a MKR-denominated stability fee (if the Dai mortgage is issued, the Dai deposit interest rate is paid) , the MKR will be destroyed, which indirectly increases the MKR. value. Of course, this incentive mechanism is more of a long-term process, unlike Bitcoin, which allows miners to get block rewards in real time. In addition, MakerDAO still has a “free rider” problem, that is, for those lazy MKR token holders, they can enjoy the full benefits of MKR value appreciation without spending any time or effort on the governance process. This is actually a general problem in most DAOs.

On the other hand, sometimes it is not necessary to motivate too many people to vote. After all, having fewer but knowledgeable voters may be better than having more people who are less knowledgeable. This topic is also outside the scope of this article.

MakerDAO has a higher degree of decentralization. In theory, all decisions in MakerDAO are done entirely through MKR voting, but the distribution of MKR tokens is not very decentralized. Moreover, such a complex system is simply difficult to do through decentralized decision making. Many configuration changes, such as adjustments to stable rates, require in-depth research by the Maker Foundation. If anyone is free to propose any configuration values, the result is a weighted average of these offers, which is really crazy.

This leads us to the idea of ​​Vitalik et al. that a completely decentralized, tightly coupled chain of governance is actually overestimated. The current coordination mechanism of mankind has been developed through its own culture for hundreds of thousands of years. In contrast, the new decentralized human collaboration through blockchain technology and DAO, even the bud is not counted. Although DAO and decentralized voting are an exciting breakthrough, it may be too early to think about 100% relying on this model. Combining voting on the chain, informal chain consensus, and input from core development teams may be a more desirable solution, at least for now.

Aragon DAOs: "Plug and Play" DAOs

Aragon said: We heard that DAO is cool, so we created a framework for everyone and created their own DAO with just a few clicks.

With Aragon, you can easily create a simple DAO in just a few simple steps. In Aragon DAO, you can assign a stake to a group of initial members, vote to decide on new members, vote to release funds from DAO, or make a non-binding vote on anything.

For each Aragon DAO, you are free to define the goals of the DAO, the type of decision you want to make, and the incentives to participate in your DAO. Aragon DAO can be used for the operation of a non-profit organization, or with your other half to manage your own family expenses, or it can be your own personal DAO. The degree of decentralization depends on how you set up your Aragon DAO. You can visit this website to view all current Aragon DAOs.

DigixDAO: Gold DAO

The purpose of DigixDAO is to promote the adoption of DGX, the Digix Gold Token, which is supported by 99.99% gold in a one-to-one ratio. There are currently 395,000 Ethereum in DigixDAO to fund projects that promote the DGX ecosystem.

The decisions to be made in DigixDAO are similar to DashDAO, including how to allocate funds for real-world projects and how to promote adoption of DGX.

DigixDAO's participation incentives are slightly different from those of other DAOs: DigixDAO participants who hold DGD tokens receive quarterly earnings, and the proceeds come from the DGX fee that DGX received. These benefits are based not only on how much DGD you have, but also on the contributions you make to DigixDAO by voting or executing projects. In this way, actively participating token holders can be immediately rewarded, and inactive DGD holders who are not involved in the governance process are curbed.

DigixDAO is clearly not one of the most decentralized DAOs, and the sponsor must pass the “Know Your Customer” (KYC) compliance check conducted by the Digix team. In addition, the Digix team can stop funding for certain projects for policy, regulatory or legal reasons. It can be said that by operating a gold product in the blockchain, Digix and DigixDAO have gained a foothold in the real world that requires a more centralized process.

DigixDAO was launched on the Ethereum mainline on March 30, 2019. In the first quarter, 29.1% of the total DGD supply was locked in the participation contract. You can find more information about the details in the DigixDAO guide or go directly to the DigixDAO governance platform for inspection.

MolochDAO: "Incentive Adjustment" DAO

Launched in February 2019, MolochDAO aims to solve the ubiquitous Moloch problem, where individual incentives do not match the optimal results of the global. The most immediate problem that Moloch DAO hopes to solve is the current Eth 2.0 development problem, that is, although some people pay a lot of cost and effort for Eth 2.0, the benefits of their work are disproportionately shared by all other projects. There is no contribution to the development of Eth 2.0 infrastructure at all. Therefore, the act of rational calculation is not to contribute to the infrastructure, which is obviously the result of the overall sub-optimal.

In MolochDAO, new members need to contribute Ethereum to a pool of funds in order to join and receive a percentage of equity that can be used to vote on proposals that drive the MolochDAO cause and increase its value.

There are two types of decisions in MolochDAO: First, who can be admitted to the guild , in order to better align the interests of new entrants with the guild. Second, how to assign new equity (substantially diluting the equity pool) to proposals that increase the value of the entire guild.

MolochDAO members can liquidate their rights at any time to retrieve the appropriate proportion of funds from the guild. In this way, participants have the incentive to increase the value of the guild by funding a good proposal, or to increase their equity by executing the proposal themselves. For example, a proposal calls for the use of 1% of the value of the guild to upgrade the core infrastructure, which is believed to increase the value of Ethereum by more than 1%, and the proposal will certainly receive funding. Of course, people outside of MolochDAO are still hitchhiking, and they also enjoy the benefits of infrastructure upgrades. But cleverly, for the Ethereum whales, if they contribute the idle Ethereum to MolochDAO to help with the infrastructure upgrade, this may greatly increase the value of their net held Ethereum. why not. Instead of complaining about the direction and speed of blockchain development, it is better to take the really important things in your hands, if you want to appreciate the literary Ethereum in your hands.

Of course, these are just theoretical discussions. It will be interesting to see what Moloch DAO will become in practice.

The way in which the founding members of MolochDAO are launched, as well as the restrictions on new members, are not too decentralized. In the initial phase, its upgrade plan was completed by “violently withdrawing” from the old DAO and deploying a new alternative protocol. As stated in the MolochDAO white paper, these chain-down and centralization mechanisms are its characteristics, not its shortcomings.

Chain News Recommendation: In-depth coverage of MolochDAO

What is the popular blockchain governance project Moloch DAO? Why is it so important?

DAO Stack and Holographic Consensus

This section will discuss the DAO Stack , a framework for creating DAOs, and the concept of holographic consensus introduced by DAO Stack.

The first DAOs built using DAO Stack include: Genesis DAO, which was created by DAO Stack itself; DxDAO, created by Gnosis ; and PolkaDAO, which funded the Polkadot community project. Once released, all of these DAOs are accessible through Alchemy, a UI (user interface) framework that supports DAOs that use DAO Stack.

For the sake of discussion, let's take a look at a SampleDAO created with DAO Stack. There are two main tokens in the operation of SampleDAO: a non-convertible "Reputation" token, and a " Predictor" token. "Reputation tokens" as equity can be used as a vote for the SampleDAO proposal, and the proposal can also be upgraded to SampleDAO's own logic so that it becomes a self-evolving DAO. Let's take a look at the problem that Dao Stack's holographic consensus wants to solve: As SampleDAO grows into a large DAO, more and more proposals will need to be tracked, and DAO should focus on its own attention. On more valuable proposals, not worthless "junk" proposals. The holographic consensus of DAO Stack can be summarized as follows: If people think that Project A may pass, then they can bet on the A project and put in some "predictor tokens." If A gets enough "predictive tokens", it can be promoted to a project pool, where more people will notice it, so the voter turnout rate is not so difficult to achieve. If A is finally approved, then someone who has previously placed a "predictive token" on A will receive some predictor tokens and reputation tokens. That is to say, Dao Stack provides a forecasting market that motivates people to screen out better proposals to support them. These supported proposals deserve more attention from voters.

This seems to be a good way to solve the problem of expansion and flexibility. DAO Stack wants all DAOs that use their framework to use the same "predictor token" GEN, which was created by DAO Stack themselves. This will form a “predictor” network that will work around different DAOs and help screen for better proposals.

However, I also have some concerns about this model:

The first concern is that if someone X makes a bet on proposal A, then regardless of whether the A proposal is good or not, the person will vote for A, because X wants proposal A to pass, so that he can get the reward.

The second question is: What measures are in place to motivate holders of “reputation tokens” to vote for proposals that stand out from the crowd? If they don't get enough incentives, then the last active voter is left with the rights themselves, as mentioned in the previous concern. I will discuss this more in the DxDAO section.

The third problem is that since the so-called "predictive success" is entirely determined by the voting results, voters may be more concerned about which proposal is more popular than the public, rather than paying attention to the quality of the proposal itself. The result is likely to be like this: "Oh, I know proposal B is not very good, but the proposal is very popular in the community, so it doesn't matter, I will bet on B and vote for it. Anyway, I have already bet on it. "

I don't think there is a big outbreak of these concerns, and it is very difficult, if not impossible, to find the perfect mechanism. It is also possible that my research missed something and I hope to hear a response to these concerns.

DxDAO: "Anarchist" DAO

DxDAO was launched in April 2019 and was created by Gnosis using DAO Stack, a completely decentralized DAO. After the project is deployed, Gnosis will retreat and will not retain any type of control or pre-emptive assets in DxDAO. Everything is fair and just.

The original purpose of DxDAO was to manage the parameters of the DutchX protocol, a novel and completely decentralized trading protocol using the Dutch auction principle. If you trade on DutchX, you will get DxDAO "Reputation Token" and use "Reputation Token" to vote at DxDAO. In addition, you can get a "reputation token" by locking in Ethereum or other ERC20 tokens traded on DutchX.

Managing the DutchX protocol was the initial goal of DxDAO, but since DxDAO participants can vote to upgrade DxDAO's own logic, DxDAO can actually evolve into anything that is allowed on the Ethereum blockchain.

DxDAO's incentive is to get more “reputation tokens”, but there seems to be no good correlation between the success of the DutchX agreement and the value of the DxDAO reputation token. This is actually the two concerns I mentioned above about DAO Stack. Indeed, the "predictor" has enough incentives to bet the GEN token and filter the proposal. However, if the value of the “reputation token” in the voter's account is not directly related to the success of the DutchX agreement, then the only person who is motivated to vote may be the “predictor” himself – which means that they will only give themselves The proposal to bet is going to vote. I am not missing any information here, please remind me if anyone knows.

As for the degree of decentralization, DxDAO is clearly highly decentralized. Anyone can join and no one has special powers.

With the holographic consensus mechanism, DutchX uses the DAO Stack framework, which is one of the most compelling DAOs. This is a brand new concept. It should be interesting to see how this "anarchic DAO" will develop. As Gnosis said:

"dxDAO either develops its own independent life and identity from Gnosis, or it dies."

Polkadot: "Dual Agreement" DAO

Like Bitcoin, most blockchains are already DAOs, and decisions can be made at the block and transaction levels. However, the blockchain protocol is basically unchanged. If the protocol is to be changed, it needs to be addressed through an offline and traditional human collaboration approach (for example, through opinion leader debate and community support) .

Boca clearly raised this issue to another level. They have a protocol upgrade mechanism on the chain, which means that the stakeholders of the wave card can vote through the chain to decide whether to hard fork. With the upgrade of the agreement, Poca Can evolve smoothly into anything. That is to say, Boca is essentially a "meta-protocol" – a protocol that can change its own protocol.

Boka makes decisions through a referendum, and the referendum can be made publicly or by the "Board of Directors". The Boka Council consists of a number of seats that are increased or decreased through elections. The board can propose a referendum or a malicious or dangerous vote – in the end, the referendum must pass a certain vote-based rate of interest, and the changes it initiates can be implemented.

The incentives for people to participate in the Polkadot DAO or Boka governance process are derived from the appreciation of their own interests (ie Dot tokens) brought about by the success of Boka.com.

Obviously, Boca is highly decentralized. Even a hard fork is determined by voting on the chain. Admittedly, the degree of decentralization of the primaries of the council may not be as high, but at least in theory, the mechanism of rotation of the board of directors over time can effectively solve this less serious "centralization" problem.

Poca is one of the most famous blockchains for protocol upgrades using chain management. Therefore, it is very interesting to pay attention to what Poca will upgrade in the future. As Gavin said, he hopes that Pocar will evolve independently as an entity, and this powerful concept may even change the way society and humans collaborate in the future.


With the launch of Polkadot, MolochDAO, DigixDAO, GenesisDAO, DxDAO, WBTC DAO and PolkaDAO, 2019 can be said to be a "year of DAO. "

Different attributes of different DAOs

I am very happy to see different concepts in the DAO field, some of which may work in practice and some may not. In any case, it is exciting for us to be able to witness early experiments with new methods of human collaboration through DAO.

So, please fasten your seat belt. This will be an interesting journey. Maybe we will catch a glimpse of the future of human organizations.

*Disclaimer: I have been involved in the design and implementation of DigixDAO, but in this article I try to be fair.