Governance - General Considerations

Introduction

Recently, CitaDAO had its first successful IRO. On the technical side, things are looking good. The plan is to bring more frequent IROs to the platform, increasing opportunities for investors and DeFi integrations with RETs. The basic work for the IRO side has already been completed.

What is less clear at the moment, is in which direction the DAO is heading. Various ideas for increasing the utility of the KNIGHT token are already circulating in Discord, but a clear roadmap has not yet been presented. On one hand, this is a big burden for the project, as it brings great uncertainties for interested parties and investors. On the other hand, in this phase there is also the possibility to create a solid foundation for further development of the project. There are not many stakeholders yet and few fixed expectations. So the project is still malleable.

Nowadays most people are used to democratic systems and prefer them over closed hierarchical ones. But what is a good degree of democracy? And how do you enforce it in the best way? Is it enough to make sure to let the majority win? In between the ‘loudest’ wins and a ‘path of consensus’, exists an indefinite number of possibilities.

In this proposal, I would like to offer a few basic considerations on which further thoughts can be built. Also I hope this post adds to the discussion about the future of CitaDAO in a productive manner.

Goals of a DAO

When building a DAO, it’s a good approach to define goals. ‘What are the long-term goals of the governance aspect of the DAO?’ There are goals that are obviously beneficial and goals that are rather opposed to each other.

Obvious goals can be, for example:

  • a high level of quality community participation

  • transparency

  • economic sustainability

  • Incentivization of long-term interest in the DAO (e.g. vKNIGHT)

  • security

  • easy and cheap voting

These goals are only examples and do not claim to be complete. Even though these goals are quite clearly desirable, there are also many different ways to implement them. Protocols such as MakerDAO have already done a lot of groundwork in these areas and created a lot of transparency. This pioneering work and public access to these methods and data makes it much easier to draw conclusions about functional approaches.

General Governance Decisions

On the other hand, there are the opposing goals, which are more fundamental and on which further consideration should be based. I will elaborate on these somewhat in the remainder of this paper.

Opposing goals

  • Simple governance vs precise governance vs hybrid forms

  • Security vs Cost

Simple governance (represantive democracy or ‘arranged’ democracy) means, from a user perspective, that governance processes are easy to understand and/or less time consuming.

Possible Advantages

  • Higher participation expected

  • easier onboarding of new users

  • less moderation work needed

  • voting options are easy to understand

  • faster implementation of policies

Possible Disadvantages

  • more complicated to set up (e.g. tasks must be clearly separated from each other)

  • more limited in the areas of application (e.g. community can’t decide very specific things)

  • less (token) democratic (if there are representatives elected, they can say one thing, but do another)

Examples

  • expert committees are elected for specific tasks (eg committee for defi integrations, committee for platform fees etc)

  • only directional decisions are made (e.g. the protocol should spend more budget for marketing or for new products)

Precise governance (direct democracy) means that governance is very flexible, because token holders can vote to change (nearly) anything. But also more technical, because voters need to understand the protocol in depth.

Potential Advantages

  • Token holders can have more influence on the direction of the protocol

  • Thus stronger self-efficacy and possibly higher identification with the protocol

  • Responsibility for good proposals lies more with the community

  • Therefore Proposals have to be defended less, since the will of the token holders can be relied upon.

Possible Disadvantages

  • Risk of endless voting procedures

  • Proposals may be accepted, but counteracted by a later proposal.

  • More moderation work required

  • trench warfare can develop (see: The DAO, Bitcoin block size debate)

  • Creating more educational resources to get new voters on board are needed

Examples

  • MakerDAO: build places for discussing, polling and voting.

  • simplification by delegation of votes (Liquid Democracy)

Hybrid forms

Mixed forms can make sense, for example, when different levels of expertise are needed in distinct areas. This means that there are areas where you always want to let experts decide and the voting aspect is only to be understood as a recommendation or idea. In other areas, the proposals and decisions could be worked out entirely by the community.

Conclusion

There is a lot of room for design decisions. The important thing to remember is to think about the problems from the favoured outcome and to find ways not to get lost in subtleties.

Each way has its ups and downs. Therefore, there is no right or wrong way, but it is situationally different to evaluate which way is the best for which setting.

I am happy if a discussion can be initiated on the basis of the concepts explained above. In addition, I can offer to present a procedure that leads to more nuanced discussions and at the same time brings about a decision.

3 Likes

This is a good starting point for the DAO long overdue discussion on the Knight tokens.

Previous attempts by the DAO at promoting user adoption via random airdrop campaigns led to a number of airdrop farmers intent on realizing the short term economic value of the Knight rather than the long term potential of the DAO.

We would need to focus on getting the DAO tokens into the right wallets, people who are keen to build the future of the DAO together. The obvious utility in this case is to be able to use the tokens to influence the DAO decisions.

Therefore, we should start implementing token governance mechanism to enable growth in this area, as well as community participation. Hence we are really excited to explore implementing the hybrid governance mechanism with you to start engaging our community better and drive more community driven leadership for the DAO.

Looking forward to having a call with you and the team.

3 Likes

Sounds great.

I am on holidays now, but would have time next week.

When are your meetings?