Skip to content
How to Dao
Share
Explore

Session 1

How to DAO

Sep–Oct 2021
A four-week, better-than-free course on the future of co-operation
Lead facilitator
Funded by

Session 1 prep


Welcome to the How to DAO course! We will be 100 people from across the globe tuning in live for 2 hours every Wednesday 4pm-6pm UK time, starting 22nd Sep.

If you haven't already, please join the How to DAO Discord via
and introduce yourself in #introductions.

A reminder: You will be sent prep tasks at least a few days before each session (allow 1 hour), and homework at the end of each session (allow 1 hour). To get the most out of the course you should also set aside at least 2 hours per session to go back through the notes, read some of the links provided and make sure you've understood everything we've covered. So that's a minimum of 6 hours per session for maximum benefit (1 hour prep, 2 hours live, 2 hours revision, 1 hour homework).

The first hour of the live sessions will be used to underline some of the key points from the preparatory reading/watching, as a tour of the rest of the notes from the session, and sometimes to give live, on-chain walkthroughs of certain tasks. The second hour will feature presentations followed by Q&A with a number of experts from the DAO space.

For this first session, my approach is to provide you with a 'map of the territory' along with a ton of high quality content, and then leave it up to you to pick which areas you want to go into deeper. We won't have time to cover everything in detail. I suggest you use the 2 hours revision time to read more about anything you found particularly challenging or interesting.

OK, here's the prep for the first session:

Let's generate some excitement by starting with this pair of high-rhetoric/high-production value/low-on-specifics videos from the first DAO hype wave in 2018:

From there, check out some content on the development of organisations, game theory and coordination failure:
Watch
(until 6m45)
Read
by Kevin Owocki (one of our guest experts for session 1)

Read at least one the following articles:
(by Kei Kreutler)
(by Coopahtroopa)

Listen to at least one of the following and start/join a thread offering some reflections in #session-1 in the How to DAO Discord:
(audio version of the well-known
)

Finally, read the DAOhaus docs pages:
,
and
.

Note, I won't be going into detail about how blockchains work. If you need that background, watch

You're encouraged to start discussions about anything from this session you find interesting in the #session-1 channel in the How to DAO Discord.

See you on 22nd Sep at 4pm UK time at

Best,
Stephen

Session 1: Introduction to DAOs (22nd Sep)

Our guest experts for this session:

Kevin Owocki
(
) is the founder of Gitcoin, whose mission is to empower communities to build and fund open source public goods. In May, Gitcoin launched the GTC token and the Gitcoin DAO — two crucial components allowing Gitcoin to decentralize and build an equitable protocol for funding open source development. Kevin has a BS in Computer Science and 15 years of engineering leadership experience in Open Source Software and Web Startups.

Featuring Kevin:

Santiago Siri
(
) is the cofounder and president of Democracy Earth, a non-profit organisation backed by Y Combinator that is behind the UBI Universal Basic Income token on Ethereum and the Proof of Humanity protocol. He is also Executive Director of DAO Education and the author of
Hacktivismo
,​ published 2015 by Random House.

Featuring Santi:

Game theory & coordination failure



How to solve coordination problems:
Formal standards: Rules that are codified by certain parties/rules about how parties are supposed to act, and/or
Social conventions: A regularity followed by people belonging to a group/a shared expectation of the correct way to behave

(It seems to me this isn't really a binary, it's more a spectrum of formality. What's important is that there's
communication
and
agreement
.)

: an interactive guide to the game theory of why & how we trust each other

Conclusions from The Evolution of Trust:



"Build relationships. Find win-wins. Communicate clearly."

Key passages from
(OG essay on slatestarcodex.com,
)

"Things are easy to solve from a god’s-eye-view, so if everyone comes together into a superorganism, that superorganism can solve problems with ease and finesse."

"The two active ingredients of government are laws plus violence – or more abstractly agreements plus enforcement mechanism.
Many other things besides governments share these two active ingredients and so are able to act as coordination mechanisms to avoid traps.

For example, since students are competing against each other (directly if classes are graded on a curve, but always indirectly for college admissions, jobs, et cetera) there is intense pressure for individual students to cheat. The teacher and school play the role of a government by having rules (for example, against cheating) and the ability to punish students who break them.

But the emergent social structure of the students themselves is also a sort of government.
If students shun and distrust cheaters, then there are rules (don’t cheat) and an enforcement mechanism (or else we will shun you).

Social codes, gentlemens’ agreements, industrial guilds, criminal organizations, traditions, friendships, schools, corporations, and religions are all coordinating institutions [that aren't governments] that keep us out of traps by changing our incentives.
"


"If only there was a technology that allowed groups of humans to choose to easily coordinate with one another! A transparent substrate for trust games where everyone knows where they stand and whose rules can’t be changed on you.

My belief is that this is the ultimate legacy of Ethereum [/smart contracts].
We can now program our values into our economic system—the final form of a stateful internet could allow us to coordinate the actions of multiple economic actors and therefore could solve coordination failures.
"

More on coordination:

More on multipolar traps


The evolution of coordination

Coordination in nature



Computational biology


Ownership and decision making in the legacy legal system

Provocations on property/ownership

(take note of
Step 11. Share the ownership!
:)

"My concern is that words like “non-hierarchical” and “self-organising” [can] create a smokescreen, masking the real power dynamics that are ultimately determined by the
ownership structure
."

(Investopedia)

Pierre-Joseph Proudhon from
(video, 17m)

In his 1840 book
What is Property? Or, an Inquiry into the Principle of Right and of Government,
claimed "
" (
La propriété, c'est le vol!
– see
for more).

From
(Psychology Today, 2019):

"Interestingly, a careful reading of Proudhon shows that he might have had some workable, realistic ideas, consistent with human nature and evolution. He did not believe that economic change could be obtained by revolution, but only by gradually increasing acceptance of his proposals. He believed that some wealth inequality was inevitable and acceptable; his long-term goal was simply decreasing grotesque wealth inequality. As an anarchist, he did not see government ownership of the means of production (socialism) as a solution, although he accepted the inevitability of government because there will always be people who want to regulate the behavior of others. His goal was simply to minimize governmental control.
His hope was that people would see and embrace the wisdom of economic mutualism, which involves voluntary, cooperative, mutual assistance among laborers, resulting in benefits to all workers. There would be no violent overthrow of the government or economic system, but rather a gradual replacement of the politico-economic system as mutualism slowly increased over time."

Ursula K. Le Guin & The Dispossessed


Illustration of Ursula K. Le Guin as a young writer from


1
The Dispossessed
Worlds of Ursula K. Le Guin (2018 documentary film)
There are no rows in this table

“You cannot buy the revolution. You cannot make the revolution. You can only be the revolution. It is in your spirit, or it is nowhere.”
― Ursula K. Le Guin, The Dispossessed

(2018 documentary film. Those in the UK can watch on
)


"The existence of an explicitly anarchist society on the moon of Anarres has led many critics of
The Dispossessed
to focus only on the traditional anarchist themes of this novel. Yet
the truly radical legacy of this novel is that it transgresses the boundaries of conventional anarchist thinking to create new forms of anarchism that are entirely relevant to life in the postmodern condition
. Le Guin updates the conventional anarchist project and positions anarchism to move into the third millennium...

The strongest and most direct statement of Le Guin’s anarchist vision appears in her 1974 novel
The Dispossessed
. In her attempt to embody anarchism, Le Guin constructs a highly traditional anarchist society on the planet Anarres.
Drawing on the nineteenth-century and early twentieth-century anarchist writers Proudhon, Bakunin, and Kropotkin, she imagines a society [without] the state, organized religion, and private property.
"


"A key concept in the social imaginary on Anarres is the idea of society as an ecology, within which people have a ‘cellular function’ – a way of living that is their ideal contribution to the whole. This is a vision of economics built on biology and ecology rather than physics and mechanics... The central values of this society are solidarity and freedom.
There is also a rejection of the idea of private property. This runs counter to our familiar notions of individuals and their stuff. This ideology is manifested when people are accused of being ‘propertarians’, or of ‘egoising’ when talking about themselves. The emphasis on non-possessiveness is also found in a sentence such as ‘You can share the handkerchief I use’ [as opposed to, 'You can borrow my handkerchief'].
Le Guin skillfully investigates the tensions that emerge between individual desires and a sense of the common need."


"The “dispossessed” of Anarres are, of course, those who attempt to live without property, but also without a certain kind of language.
They have no possessive pronouns
(not “you can borrow my handkerchief”, but “you can share the handkerchief I use”) and abjure possessive sexuality. “The language Shevek spoke, the only one he knew, lacked any proprietary idioms for the sexual act … The usual verb, taking only a plural subject … meant something two people did, not something one person did, or had.” Like much of Le Guin’s writing, this is marked by her engagement with the women’s movement, and the notion that a patriarchal language will produce a patriarchal world."

Ownership of organisations


There are
two distinct types ownership rights
relevant to organisations:

Voting rights (green):
who gets to make the decisions (most importantly, who can fire you!)
Economic rights (blue):
who has a claim on company profits
Traditional

Worker-led/steward-led

More on co-ops:
Content from Co-ops UK:

Golden shares



"
A golden share is a type of share that gives its shareholder veto power over changes to the company's charter.
It holds special voting rights, giving its holder the ability to block another shareholder from taking more than a ratio of ordinary shares."


"
The Golden Share holds veto rights on all decisions that would effectively undermine the company’s commitment to steward-ownership.
This veto-share is held by a “veto-service” foundation such as the Purpose Foundation. To be a veto-share provider, a foundation must be self-owned and have clear provisions in its own charter that enable it to use this veto right
to protect the provisions of steward-ownership."

Case study: Equal Care Co-op: a multi-stakeholder platform co-operative

are building a new, co-owned social care platform that puts care givers and receivers in charge. By incorporating as a multi-stakeholder co-operative, their digital product and accompanying service is owned by and accountable to the communities using and sustaining it. They arrived at the platform co-op model as a response to systemic inequities within the social care system, seeing it as a practical route to centering choice, power and ownership with the two most important people in care – the person giving and the person getting support.




1
Supported member: You are being regularly supported by Equal Care Co-op (whether that's voluntary or paid support) Advocate member: Your relative or friend is being supported by Equal Care Co-op but they cannot be a Member themselves.
Investor member: You support our aims and have invested in our Community Share Offer.
Worker member: You are regularly contributing your labour to Equal Care Co-op, whether that's paid or voluntary work.
There are no rows in this table

Participatory budgeting




"Participatory budgeting comes in all shapes and sizes, but basically it looks like this:

Ideas are generated about how a budget should be spent
People vote for their priorities
The projects with the most votes gets funded"

Online (web2) tool for participatory budgeting:

"Cobudget is a tool and a methodology that makes resource allocation participatory. It enables all members of an organization to get involved in decision-making by proposing projects and allocating funds to the proposals they like."

Blockchain 101

Bitcoin: the first cryptocurrency


From the spacemesh blog:

From Balaji Srinivasan:

"Perhaps the most enduring source of conflict within the Bitcoin community derives from incompatible visions of what Bitcoin is and should become. Businesses building on Bitcoin, believing it a cheap global payments network, eventually became nonviable when blocks filled up in 2017. They weren’t necessarily wrong, they just had a vision of the world that ended up being a minority view within the Bitcoin community, and was ultimately not expressed by the protocol on their desired timeline… Visions of Bitcoin are not static. Technological developments, practical realities and real-world events have shaped collective views."


E-cash proof of concept
Cheap p2p payments network
Censorship-resistant digital gold
Private and anonymous darknet currency
Reserve currency for the cryptocurrency industry
Programmable shared database
Uncorrelated financial asset

Ethereum: the world computer




(story of the most famous hard fork in the history of blockchain)


"Ethereum proposed to utilize blockchain technology not only for maintaining a decentralized payment network but also for
storing [and running] computer code
which can be used to power tamper-proof decentralized financial contracts and applications."


"Ethereum is an open source, globally decentralized computing infrastructure that
executes programs called smart contracts
. It uses a blockchain to synchronize and store the system’s state changes, along with a cryptocurrency called ether to meter and constrain execution resource costs…

Ethereum’s purpose is not primarily to be a digital currency payment network. While the digital currency ether is both integral to and necessary for the operation of Ethereum, ether is intended as a utility currency to pay for use of the Ethereum platform as the world computer.

Unlike Bitcoin, which has a very limited scripting language, Ethereum is designed to be a
general-purpose programmable blockchain
that runs a virtual machine capable of executing code of arbitrary and unbounded complexity. Where Bitcoin’s Script language is, intentionally, constrained to simple true/false evaluation of spending conditions, Ethereum’s language is Turing complete, meaning that Ethereum can straightforwardly function as a general-purpose computer…

The original blockchain, namely Bitcoin’s blockchain, tracks the state of units of bitcoin and their ownership.
You can think of Bitcoin as a distributed consensus state machine, where transactions cause a global state transition, altering the ownership of coins. The state transitions are constrained by the rules of consensus, allowing all participants to (eventually) converge on a common (consensus) state of the system, after several blocks are mined.

Ethereum is also a distributed state machine. But instead of tracking only the state of currency ownership, Ethereum tracks the state transitions of a general-purpose data store
, i.e., a store that can hold any data expressible as a key–value tuple... In some ways, this serves the same purpose as the data storage model of Random Access Memory (RAM) used by most general-purpose computers. Ethereum has memory that stores both code and data, and it uses the Ethereum blockchain to track how this memory changes over time. Like a general-purpose stored-program computer, Ethereum can load code into its state machine and run that code, storing the resulting state changes in its blockchain. Two of the critical differences from most general-purpose computers are that Ethereum state changes are governed by the rules of consensus and the state is distributed globally. Ethereum answers the question: "What if we could track any arbitrary state and program the state machine to create a world-wide computer operating under consensus?"

From the
:

"The intent of Ethereum is to create an alternative protocol for building decentralized applications, providing a different set of tradeoffs that we believe will be very useful for a large class of decentralized applications, with particular emphasis on situations where rapid development time, security for small and rarely used applications, and the ability of different applications to very efficiently interact, are important. Ethereum does this by building what is essentially the ultimate abstract foundational layer:
a blockchain with a built-in Turing-complete programming language, allowing anyone to write smart contracts and decentralized applications where they can create their own arbitrary rules for ownership, transaction formats and state transition functions… protocols like currencies and reputation systems can be built in under twenty [lines of code].
Smart contracts, cryptographic "boxes" that contain value and only unlock it if certain conditions are met, can also be built on top of the platform, with vastly more power than that offered by Bitcoin scripting because of the added powers of Turing-completeness, value-awareness, blockchain-awareness and state."

Smart contracts



"
While the word "contract" brings to mind legal agreements; in Ethereum "smart contracts" are just pieces of code that run on the blockchain
and are guaranteed to produce the same result for everyone who runs them. These can be used to create a wide range of Decentralized Applications (DApps) which can include games, digital collectibles, online-voting systems, financial products and many others."


"The term smart contract has been used over the years to describe a wide variety of different things. In the 1990s, cryptographer Nick Szabo coined the term and defined it as “a set of promises, specified in digital form, including protocols within which the parties perform on the other promises.” Since then, the concept of smart contracts has evolved, especially after the introduction of decentralized blockchain platforms with the invention of Bitcoin in 2009. I
n the context of Ethereum, the term is actually a bit of a misnomer, given that Ethereum smart contracts are neither smart nor legal contracts, but the term has stuck.
In this book, we use the term “smart contracts” to
refer to immutable computer programs that run deterministically in the context of an Ethereum Virtual Machine as part of the Ethereum network protocol
—i.e., on the decentralized Ethereum world computer.

Let’s unpack that definition:

Computer programs
Smart contracts are simply computer programs.
The word “contract” has no legal meaning in this context.

Immutable
Once deployed, the code of a smart contract cannot change. Unlike with traditional software, the only way to modify a smart contract is to deploy a new instance.

Deterministic
The outcome of the execution of a smart contract is the same for everyone who runs it, given the context of the transaction that initiated its execution and the state of the Ethereum blockchain at the moment of execution.

EVM context
Smart contracts operate with a very limited execution context. They can access their own state, the context of the transaction that called them, and some information about the most recent blocks.

Decentralized world computer
The EVM runs as a local instance on every Ethereum node, but because all instances of the EVM operate on the same initial state and produce the same final state, the system as a whole operates as a single "world computer.""

DAOs

Great recent overview articles hosted on web3 writing platform mirror.xyz:
– essential piece by Kei Kreutler

Overviews elsewhere:

Paradigm's great DAO Biweekly newsletter:
Boardroom's This Week in DAOs and Stateless Weekly:

What is a DAO?


"magic internet communities that allow members to coordinate funds and resources" (
)
"internet-native entities with no central management which are regulated by a set of automatically enforceable rules on a public blockchain, and whose goal is to take on a life of its own and incentivize people to achieve a shared common mission" (
)
"A DAO is an online community that jointly controls a cryptocurrency wallet to pursue common goals, such as running a business or charity." (
)
"A DAO is a commitment to share value with a community. A Telegram group with 10 members and 1 ETH is a DAO. A DeFi protocol with $1B+ of assets governed on-chain by 10,000+ token holders is a DAO. Regardless of size, DAOs look to solve core missions - evolving a group chat into a success-driven community." (
)
"A DAO is an organization that meets the following criteria:
All members have at least some direct control over the org's assets and actions, and
Nobody other than the members can shut it down" (
)
"a blockchain-based multi-stakeholder co-operative" (Stephen)

Is a DAO still a DAO if it's just a 1/n multisig? 🤔
If I quit this 'DAO', can I take with me a proportional share of the assets of the DAO's treasury?

From Aragon's
:

DAOs allow people to:
Attract and incentivize contributors:
DAOs incentivize contributors by giving them a say in the future of the organization.
Pool funds:
DAOs use cryptocurrencies, allowing people all around the world to pool funds.
Govern those funds together:
DAOs allow people to collaboratively channel common funds towards common missions.

From
:

Shared Treasury:
Community funds are held by the DAO itself and distributed through Proposals.
Voting & Proposals:
Proposals can be used for all types of decisions like distributing funds, allocating shares, and even interacting with other applications and communities.
Fluid Membership:
Members are added and removed through proposals and may leave at any time. Shares allow for truly distributed ownership.


Why DAO/what problems do DAOs solve?

Via

Why DAO? Check the manifestos of some of the DAO platforms:

The common theme:
freedom!

On the benefits of DAOs over traditional partnerships and co-operative structures:

Via
:
DAOs are global:
DAOs allow people to come together and work on common missions just as easy as joining a chat group.
DAOs are transparent:
DAOs allow anyone with an internet connection to check their members, financials and decisions taken.
DAOs are fluid:
DAOs scale their workforce dynamically. There are low barriers to entry, allowing new members to join.


"There are some structural issues that have worked against cooperative enterprises, from coordination costs to growth to governance.

For instance,
cooperatives are more difficult to bootstrap than corporations because they don’t have access to the same capital markets. Historically, it’s been a lot harder to coordinate investment from members with shared values than it is to raise funds with the singular goal of maximizing profits.
There are also logistical challenges in everything from distributing information to bootstrapping the co-op so that it reaches a minimum viable threshold where it actually delivers utility to its members.

Then, even once over the bootstrap hump, cooperatives can struggle to compete with more traditional entrants, who are often better funded. For example, in the early 1990s, many member-owned stock exchanges elected to “demutualize” or convert from member-owned organizations to for-profit, investor-owned ones (Visa did this as well when it went public). This coincided with the advance of the internet, which democratized access to markets and increased competition.

Finally, cooperatives tend to have more complex governance processes than companies with simple top-down management structures. The challenge for co-ops is to ensure that the often pluralist values of their members are accurately represented and upheld, while also preserving operational efficiency. Many successful cooperatives have therefore combined formal management hierarchies with thoughtful permissioning by members (as opposed to flat, direct democracies)."


"DAOs are all about maximizing stakeholder value. The users and contributors are also the investors and owners.
While community ownership seems weird and novel and almost hippie, it’s actually a more natural model than a few outside investors and board members dumping a bunch of money into a company and deciding what it should do.
The reason we do it the way we do is that, until now, it’s been too hard to coordinate having a lot of small owner/stakeholders who all get a say in decision making. Technology is finally enabling the more natural model. "

An overview of the DAO space


: DAO Ecosystem Overview

Breakdown of different types of DAO, based on
:

DAO OSs
Grants DAOs
MetaCartel Grants
Protocol DAOs
Stories of some protocol DAOs:

"Right now Gitcoin is known for Gitcoin Grants, which is based on a really powerful coordination mechanism, quadratic funding. But what if instead of building ONE coordination mechanism, we built a generalized generator function of ALL coordination!!!
If GitcoinDAO can successfully be a Schelling point for builders of all types of coordination tools, then we could help solve some of the systemic coordination problems in the world.
"

Voting platforms for protocol DAOs:
(off-chain voting)
(on-chain voting)
Investment DAOs
MetaCartel Ventures
The LAO
Service DAOs
Raid Guild
LexDAO
YAPDAO
dOrg
DXdao
1hive
Social DAOs
Collector DAOs
Media DAOs

Structure of DAOs

Something the co-op movement figured this out a long time ago: DAOs (like co-ops) don't need to be totally non-hierarchical!


In the DAO context:


"The proposal above attempts to balance speed of iteration with avoiding a descent into plutocracy. It attempts to remain close to the status quo of one person one vote by allowing smaller holders to delegate to a council member that will represent them."

Coin voting

The elephant in the room: are we simply creating new plutocracies?

Proof-of-personhood


The technology now exists to allow one-person-one-vote voting:

Quadratic voting


"Under quadratic voting, each additional voice credit buys less voting power on an issue,
making extreme views more expensive to express and compromise more likely
. Individuals, therefore, are more willing to spend their voice credits on current, immediate issues instead of radical, unrealistic ones."

Articles/papers:
(towardsdatascience.com)
(Wikipedia)

Videos:

Vote delegation/liquid democracy

Tally's delegation UI

Beyond coin voting: Separation of voting and economic rights (and DAOhaus!)



DAOhaus DAOs differentiate between (non-transferable) voting-economic rights (called 'Shares') and (non-transferable) economic rights without voting power (called 'Loot'):

"
To allow the DAO to issue non-voting shares, we introduce the concept of Loot
. Just like Shares, Loot is requested via proposal, issued to specific members and non-transferrable, and can be redeemed (via ragequit) on par with Shares for a proportional fraction of assets in the Guild Bank. However,
Loot does not count towards votes and DAO members with
only
Loot will not be able to sponsor proposals or vote on them
."

The next version of DAOhaus will totally decouple voting rights from economic rights with separate 'Voice' (voting) and 'Exit' (economic) shares.

Thus you can think of DAOhaus DAOs as
blockchain-based multi-stakeholder co-operatives
.

More on the parallels between DAOs and co-ops:







Want to print your doc?
This is not the way.
Try clicking the ⋯ next to your doc name or using a keyboard shortcut (
CtrlP
) instead.