Original source: Hacker Noon; Author: Kevin Liu

Joint compilation: Bochain Finance & Apifiny team (authorized by the original author)

Although at the beginning of 2020, mankind has faced considerable challenges. But for most DAOs governing protocols, they have made relatively impressive progress this year alongside DeFi.

According to media reports, Tim Draper, a billionaire who has previously invested in Tesla, SpaceX, Coinbase and Baidu, bought the token ANT of the Aragon network valued at $1 million in February this year; Moloch has just launched the V2 version, And introduce LAO; DAOstack has added a new focus: collaborative network.

secondary title

Why is governance important?

The world is full of chaos and uncertainty, and it is law and order that keeps it running without sleep.

Governance has been in operation for over 400 years in corporations, one of the modern human organizations. Through the clear governance structure design of shareholders, board of directors, and management team, as well as related documents and practices, the boundaries of the company are clarified, and different stakeholders are organized to collaborate in a centralized manner to achieve business goals.

Depending on the collaborative effort, stakeholders can be incentivized by sharing in the company's profits. It is thanks to governance that companies can thrive and become the primary value-creating entities that dominate the dynamics of society and the economy.

In the Web3.0 era, each individual sovereign constitutes a DAO (Decentralized Autonomous Organization) and plays a related role. Distributed and cross-domain collaboration is the main way for DAO to create value. Indeed, since DAOs have no predetermined boundaries or practices, the governance structure will become even more critical.

Most distributed collaborators may come from different backgrounds and have no basis of trust among each other. DAO needs to establish a governance and management framework to regulate the relationship between these distributed collaborators, provide them with a fair, protectable, and easy-to-follow mechanism, and encourage collaboration within the community.

secondary title

Comparison of Governance Protocols

DAOstack

DAOStack creates a platform where blockchain projects can launch a DAO to manage their ecosystem funds and applications through a collective vote of the community.

Strategic focus: The focus of DAOStack is how to effectively conduct decentralized governance (decentralized decision-making).

When it comes to decision-making, DAOs need to seek to determine:

1) who can make recommendations, and how;

2) Which proposals should get voters' attention;

3) Who should be involved in each decision based on reputation or topic credibility.

Therefore, DAOStack introduces an encrypted economic mechanism of holographic consensus, using a small number of participants (with voting rights) to make decisions. The mechanism works by incentivizing a network of "predictors" to bet on whether a proposal will pass or fail. Predictions are then used (among many other rules) to emphasize or downplay proposals, and to modify the quorum requirements required for proposals to pass (e.g., fewer total voters may be required to approve a proposal). DAOs using holographic consensus can scale their proposals and number of participants without sacrificing decision-making speed and quality.

2020: DAOStack turns its focus to a collaborative network, extending the influence of traditional social networks (usually limited to conversation and content sharing) to financing and budgeting through DAO. As such, Alchemy Mars (coming soon) will support the fundamental collaboration needs of large communities that want to collaborate on a clear and straightforward agenda. These needs include creating a community, defining its mission, growing it, bottom-up funding, shared decision-making, and discussion.

Aragon

Aragon provides a suite of applications and services that build new types of communities around the world. Aragon provides mechanisms to incentivize contributors to join the community and work together, raise funds from multiple sources, and make financial decisions with transparency and collective participation.

Strategic Priority: Aragon wants to enable new organizations to reach their full potential, freeing them from the jurisdiction of authoritarian governments and biased judicial systems.

To this end, Aragon not only provides basic financial tools such as tokenization, but also creates replicable and widely applicable templates to define the boundaries of the community and provide liquidity to contributors through the Internet without traditional intermediaries. value.

Aragon Court is also a powerful mechanism for the quick and fair resolution of disputes. The basic idea is that when an organization must escalate its dispute to Aragon Court, a small number of jurors will be randomly selected from the jury pool to review and adjudicate the dispute.

Moloch

Moloch is seeking to create "minimum viable processes" that allow people to allocate shared resources toward a common goal. Moloch DAO is providing grants to advance the Ethereum ecosystem.

Strategic focus: Moloch focuses on how to manage collective action to address misalignment of individual incentives with collectively optimal goals.

This is a common phenomenon, and when the cost of investing in developing infrastructure for any one entity is disproportionate to the benefits it generates, it often results in infrastructure not being developed at all.

To solve this problem, Moloch introduced several mechanisms. The Moloch DAO pools users' funds and locks them in a contract called the "guild bank". Guild bank donors are given voting rights to decide how to use the funds, and the voting ratio is proportional to their contribution to the fund pool, so the costs and benefits are consistent. Joining a guild is also not an easy task, with existing members voting on new members in a similar way to funding proposals. Moloch DAO also has "exit" and "guild removal (V2 version online)" mechanisms. If participants are dissatisfied with other members' decisions, they can withdraw or use their own rights to remove members. These innovative moves inhibit the generation of malicious behavior and apply "collective pressure" to align participants on organizational goals.

Moloch 2.0: A major leap in Moloch V2 is that it can acquire and invest in an unlimited portfolio of assets to support a variety of decentralized applications, including venture funds, hedge funds, investment banks, and incubators. In order to limit the legal liability of Moloch V2 profitable deployment members, members can choose to set up LAO, which is a DAO included in a legally compliant entity, such as LLC or C-Corp. LAO can sign legal contracts, keep off-chain assets, and distribute dividends. Investors in LAO must be certified, but service providers compensated in LAO shares can earn shares in their LAO portfolio.

Colony

The Colony protocol was built for local Internet organizations to enable people to collaborate and manage shared funds without requiring mutual trust. Different colonies (such as smaller DAOs) exist to facilitate collaboration among their members and guide everyone towards a common goal.

Strategic focus: Some of the essential functions of the Colony protocol include facilitating an efficient division of labor, managing incentives, and allocating resources.

The Colony protocol does not require voting in day-to-day operations. Instead, like traditional corporations, the Colony Protocol utilizes a top-down hierarchy, defining certain autonomous colonies that can make their own decisions within boundaries. The allocation of resources among different colonies is based on the accumulated reputation (decaying over time) and the amount of work that has been done.

Metis

The Metis protocol is a second-layer protocol on Ethereum that utilizes the Optimistic Rollup mechanism to provide a governance and collaboration implementation framework for distributed autonomous companies (DAC, a subclass of DAO).

Strategic focus: Metis Protocol aims to bridge the gap between current DAO governance protocols and real business needs.

For general Internet communities or distributed businesses, most DAO governance protocols focus on voting, which is only a small part of all business scenarios. Enterprises are more concerned about: how to easily establish a DAO, how to allow trustless distributed collaborators to establish collaboration and complete tasks, and how to protect the interests of all collaborators.

The Metis protocol believes that the best governance is no governance, so it uses pledge as the basis of governance (including: relationship establishment between collaborators, dispute resolution, collaboration termination). The pledge will serve as a security deposit, and if all goes well without governance, the pledge will be returned. However, if something goes wrong along the way, implicit governance mechanisms will be triggered. Stakes are frozen and off-chain arbitrators are involved to adjudicate "good guys" and "bad guys". The deposit of the "bad guy" will be confiscated and used to repay the "good guy", and at the same time, the reputation of the "bad guy" will also be downgraded.

secondary title

Governance Protocols: A Whole New Field

As you can see, with the continuous development of DAO's governance protocol, it is no longer limited to blockchain enthusiasts or experts, and its audience is growing.

1. At present, the usage scenarios of governance protocols have been extended to real business situations, such as sharing economy, gig economy, Internet community, DeFi, etc.

2. There is no pure decentralization. For most web3 applications or Internet communities, even decentralization is driven by initiators or some key people/teams. A popular decision-making mechanism is essential, but it is definitely not an entire part of the governance structure. So, it can be seen from Aragon, Colony and Metis Protocol that they are building a more comprehensive framework to cover.

What kind of SPV (Special Purpose Vehicle) should be established to include cooperation? Just like in the traditional scenario, the company or department is the SPV.

How to establish collaboration between people who don't know each other?

How to motivate (reward and punish) people to achieve goals?

How to protect the interests of all partners, especially when dealing with disputes?

3. On-chain governance is not enough, the most important thing is to provide these distributed collaborators with an environment that they can use to complete their work. From the practice of Aragon, Metis Protocol and DAOStack, we can know that it is very necessary to interact with off-chain.

Off-chain and digitized tools will be used for collaboration. All implementations are tracked on the blockchain to serve the governance mechanism. Off-chain governance, that is, human intervention is also necessary. Business scenarios are very complex. When you encounter some disputes, it is not just "Yes" or "No". Human intervention outside the chain will increase the flexibility of business operations.

4. DeFi will become a valuable tool for DAO projects to obtain funds from the society. But the practice of the project in the community will be different from the DeFi projects on the market.

• A legal structure may be needed, as Moloch DAO is introducing the concept of LAO.

• If you want to get funding from the community, you should show your work to prove that you have done what you promised, so there needs to be a framework to support the performance of the project. And that's exactly what Colony, DAOStack, and Metis Protocol are doing.

Finally, although the popular trend of governance projects is not as attractive as DeFi, the governance layer is the key to determine which DeFi project can last for a long time.

With the support of the governance protocol, distributed and cross-domain collaboration (value creation) and DeFi (value application) will become the infrastructure that will boost the Cambrian explosion in the Web 3.0 era.