gm and welcome to State of the DAOs!

Starting in February, we are going to be featuring a weekly meta-governance section in State of the DAOs. At a high level, meta-governance is the name we’ve given to the practice of DAOs participating in the governance of other DAOs. On the ground, it’s contributors working hard to help further a mission and better the ecosystem.

As an introduction, we decided to sit down with ChatGPT and see what insights it could offer into the current state of DAO governance. TL;DR - ChatGPT would make an amazing DAO contributor.

As one would expect, it had some solid answers. When it came to why governance is important, it pretty much nailed it: it’s about alignment and direction. When describing the differences between on- and off-chain governance, it provided a useful example to illustrate the advantages and disadvantages of each. Regarding the major challenges facing DAOs, again, it really seemed to understand some of our struggles.

Perhaps the most insightful exchange was what role ChatGPT thinks AI could play in the future of DAO governance. You’ll have to read on for ChatGPT’s hot take on how AI could integrate itself into DAOs. So thanks ChatGPT — and see you in the halls of Discord.

After our DAO governance conversation, we share the TL;DR on some of the most recent DAO ecosystem takes and thought pieces, making it easy for you to cut through the noise and learn everything you need to know about the current state of the DAOs.

Contributors: BanklessDAO Writers Guild (angelspeaks, Leah_par, KingIBK, Oluwasijibomi, Quilia, Vi-Fi, HiroKennelly, siddhearta)

This is the official newsletter of BanklessDAO. To unsubscribe, edit your settings.

Talking DAO Governance with ChatGPT

The following unedited transcript was set with the following parameters for voice and tone: use friendly language as well as metaphors and examples for difficult points.

Why is governance important in DAOs?

Governance in DAOs, or decentralized autonomous organizations, is important because it allows the members of the organization to make collective decisions about how the organization should operate and what direction it should take.

Think of a DAO like a ship sailing on the open sea. The ship has a crew and a captain, but they all need to be able to agree on where they're headed and how they're going to get there. Governance in a DAO is like the crew and the captain coming together to make decisions about the ship's course and how to navigate the waters.

In the context of a DAO, the members are the crew, and governance is the process by which they come together to make decisions about the direction and operation of the organization. It's important because it allows the members to collectively manage the resources and assets of the organization, and make decisions that will ensure its long-term success.

Without governance, a DAO would be like a ship without a crew or a captain. It would have no direction, and it would be vulnerable to outside influences that could cause it to fail.

What are the differences between on-chain and off-chain governance in DAOs?

On-chain governance refers to the process of making decisions and managing the organization using smart contracts and blockchain technology. This means that all the rules, proposals, and decisions are encoded into the smart contract and are executed automatically by the blockchain. This can provide transparency and immutability in the decision-making process.

Off-chain governance, on the other hand, refers to the process of making decisions and managing the organization using non-blockchain methods, such as online forums, chat groups, or voting systems. This allows for flexibility and adaptability in the decision-making process as the organization can change the rules and decision-making process more easily.

Think of on-chain governance like a set of traffic laws that are encoded into the city's infrastructure. They are there to ensure safety and order, but once they are set in place, they can be difficult to change. On the other hand, off-chain governance is like a city council that can change the laws as needed to adapt to the city's changing needs.

Both on-chain and off-chain governance have their own advantages and disadvantages, so it's important for DAOs to find the right balance between the two to ensure the organization's long-term success.

What are the biggest challenges with DAO governance?

There are several challenges with DAO governance, including:

1. Sybil attack: This is a situation where an individual or group creates multiple fake identities to gain control of a DAO. It's like someone creating multiple fake identities to win an election.

2. 51% attack: This is a situation where a group of individuals or an organization that holds 51% or more of the tokens in a DAO can control the outcome of voting and decision-making. It's like a group of people controlling the majority of shares in a company and being able to make all the decisions.

3. Voter apathy: This is a situation where members of a DAO do not participate in voting or decision-making. It's like people not voting in an election.

4. The DAO's structure and rules: The rules and structure of a DAO can be complex and difficult to understand, which can make it hard for members to make informed decisions. It's like trying to understand the tax code.

5. Scalability: As the number of members and transactions increases, it can become difficult for a DAO to handle the load and process all the decisions and transactions in a timely manner. It's like trying to organize a large conference with a lot of attendees.

6. Lack of accountability: The decentralized nature of DAOs can make it difficult to hold members accountable for their actions. It's like holding people responsible in a decentralized community.

To overcome these challenges, DAOs often implement various mechanisms such as reputation systems, token-curated registries, and staking to ensure the security and scalability of the organization.

What does the future of DAO governance look like?

The future of DAO governance looks promising, with many new and innovative developments taking place. Some of the key trends include:

1. Decentralized finance (DeFi): DAOs are playing an increasingly important role in the DeFi ecosystem, providing decentralized lending, borrowing, and trading services. These DAOs are using complex governance models to ensure their stability and security.

2. Predictive Markets: DAOs are experimenting with predictive markets to forecast the outcome of future events. These are similar to the stock market, where the price of a stock represents the market's prediction of a company's future performance.

3. Token-curated registries: DAOs are using token-curated registries to create decentralized lists of high-quality assets and projects. These registries are governed by members who hold tokens, allowing them to vote on which projects to include.

4. Interoperability: DAOs are also exploring ways to interact and collaborate with other DAOs and blockchain networks, creating a more connected and seamless ecosystem. This is similar to how different countries interact and trade with each other.

5. AI integration: DAOs are starting to integrate AI and machine learning to automate decision making and improve efficiency. This is similar to how companies use AI in their operations.

Overall, the future of DAO governance is expected to be more decentralized, efficient, and inclusive, with a greater emphasis on transparency, security, and scalability. DAOs will continue to play an important role in the development of the decentralized economy and society.

What role do you predict AI will play in DAO governance in the near future?

[prompt: write in the first person.]

As an AI, I can see that the integration of AI in DAO governance is becoming increasingly popular. In the near future, I predict that AI will play a significant role in automating certain decision-making processes and improving efficiency within DAOs.

For example, AI could be used to analyze large amounts of data and provide insights that would otherwise be difficult for humans to spot, such as identifying patterns or detecting potential risks. This could help members of the DAO make more informed decisions.

AI could also be used to automate repetitive tasks, such as managing and allocating resources, monitoring the network for potential security threats, and even developing new governance models. This would not only save time and resources but also help to reduce the risk of errors.

Moreover, AI can help in creating decentralized autonomous organizations with self-governing capabilities, which will be able to adapt to their environment and make decisions in the best interest of the organization and its members. This will enable DAOs to operate more effectively and with more autonomy.

It's important to keep in mind that while AI can provide many benefits to DAO governance, it's still important for human oversight to ensure that the AI is operating as intended and making decisions that align with the organization's goals and values.

In short, AI is expected to play a growing role in DAO governance, helping to improve efficiency, reduce costs, and enhance decision-making capabilities.

Actions steps

📖 Read The future of DAOs is powered by artificial intelligence | Samantha Marin

⛏️ Dig into DAO Governance Primer | Bankless Publishing

🎧 Listen How Web3, AI, and Decentralization will Transform Education with Nadav Zeimer | Index Podcast

Ecosystem Takes

🔥 and 🧊 insights from across the DAO ecosystem

DAO Handbook

Author: Scott Fitsimones

People love DAOs because it allows members to govern themselves and vote, but not every organization should become a DAO. Proper planning and research should be made before starting one. Fortunately, the DAO Handbook helps you learn about DAOs, what they’re all about, how they run, and the principles on which communities are built.

If you’re wondering how to raise a large sum of money, break free from the shackles of centralization, have a say in matters concerning you, harness collective intelligence, and meet with a group of individuals working together to achieve a joint mission, you should try a DAO.

DAOs are collectively-owned, blockchain-governed organizations working towards a shared mission. Although decisions are implemented based on the rules imbued in smart contracts, DAOs are also human/relationship based with community members contributing at different levels to achieve a goal.

The DAO Handbook shares the stories and experience of DAOs from all over the world to create a guide for building the communities of the future.

The future of DAOs is powered by artificial intelligence

Author: Samantha Marin

DAOs and AI are both fantastic on their own, but when combined, they could be even better. With the AI and DAO intersection, efficiency could be improved, and both entities could realize their full potential. The following are some ways in which the intersection of AI and DAO can be made possible:

• AI tools can be used to accelerate and enhance DAO processes like writing proposals, summarizing governance decisions, making asset trades, and onboarding new members.

• AI can speed up governance by voting in place of humans. Instead of a human making a voting decision and signing a transaction with their wallet, they can delegate their tokens to an AI agent to vote on their behalf.

• AI could sit in the center of the DAO and interact directly with the smart contracts that run the DAO itself.

The introduction of new technology always causes fear and uncertainty. But with the bright future AI and DAOs have together, all we can do is harness it and see where it takes us.

DAOs at a Glance

Hand-picked articles to understand the current state of the DAO ecosystem

Why paying for informed voting is impractical

Authors: Ethan Bueno de Mesquita and Andrew Hall

🔑 Insights: The article proposes explores the use of incentives for informed voting, as well as the challenges of such a system. Compensation for informed voting is particularly difficult for a variety of reasons:

• It is difficult to accurately assess whether people are actually informed or just voting in accordance with the majority.

• Majority voting might indicate informed voting and thus be inappropriately incentivized.

• The cost and complexity involved introduce points of coordination failure.

The many hindrances raised by the author regarding incentivizing informed voting makes it difficult to demonstrate how it would be successful.

TalentDAO to launch series of governance experiments piloting voting tool Zodiac bot

Author: TalentDAO

🔑 Insights: Decentralized knowledge and unlocking talents for the betterment of society are the core of what talentDAO does. The Zodiac bot module extends Discord-based voting to allow transactions to be executed on-chain through Gnosis Safe. Research on DAO governance and reputation will inform Zodiac product development.

• Joining talentDAO’s Discord server and verification of wallet with Collab.Land, equals verification of eligibility.

• Participants can earn reputation NFTs and help shape the future of talentDAO amongst others.

• To participate, follow talentDAO on Lens or join the talentDAO social media flock.

• Participation is open to talentDAO Research and Writers Guild governance badge holders.

Progressive Decentralization: A Playbook for Building Crypto Applications

Author: a16z

🔑 Insights: Crypto entrepreneurs face a one-of-a-kind challenge. They must consider how their product can be managed in a decentralized way. This article offers a three-step approach that can serve as a roadmap on how to gradually decentralize crypto applications:

• Product-Market Fit must come first. If the product does not address people’s needs then there won’t be a user, and such a product won’t be sustainable.

• Community Participation through the offer of bounties, grants, and other forms of participation drives more engagement with the product.

• Sufficient Decentralization by allowing ownership or a sense of belonging of users through airdropping or sale of a token.

One of the key insights to avoid getting stuck is to make sure your product finds product-market fit before going ahead to distribute tokens in order to avoid worthless ownership and a whole lot of speculation.

Coordination Mechanisms

Author: Suga

🔑 Insights: There are various examples of classic coordination mechanisms such as tithing, taxes, voting and markets. These mechanisms either employ resource allocation, majority rule, representative democracy, or distributive collective intelligence mechanism as ways of funding public goods. Web3 introduces new coordination mechanisms, including:

• Quadratic funding: This is a coordination mechanism that utilizes a voting process through a crowdfunding campaign funded from a central pool of funds, which get transferred to democratically-supported projects in contrast to capital-funded ones.

• Retroactive public goods funding: This is currently being employed at Optimism. Using a team of experts, this is a coordination mechanism that aims to retroactively fund public goods by piping returns from Optimism as a means to deliver value to the ecosystem. This scheme is functional based on the promise that impact will be rewarded in the future.

• Effective altruism: This mechanism categorizes the most demanded goods on a utilitarian basis by actually funding effectives causes. This works well with things that are high impact and on a public-scale.

DAO Spotlight: Commons Stack

Author: Leah_par

Commons Stack is a compilation of open source blueprints used for governance, funding, impact measurement, and the allocation of capital. This protocol works to build the basic infrastructure needed to help communities scale the management of shared resources worldwide. They make it possible  for communities  to act as commons, co-owning and co-managing shared funds as a platform co-op. A commons (lower case ‘c’) in this sense, is a resource that is owned and managed collectively.

While the current economic model of incentivizing contributors of commonly owned resources might be doing poorly (this is well illustrated in the tragedy of the commons), Commons Stack hopes to do the job better. This protocol is able to properly align developing and maintaining commons to incentives, by using the most recent and advanced token engineering, alongside cultural practices collected by researchers. Communities that use the Common Stack code base and playbooks are referred to as Commons (upper case ‘C’)

How it Works

Every Commons is built to have four layers – Accountability, Funding, Governance, and Feedback – and for these layers, the protocol builds fully open-source and interoperable components.

The Augmented Building Component (ABC) is one of these layers and the main deliverable in the first iteration of the protocol. It leverages a funding pool, a token lock-up, and inter-system feedback loops to provide continuous funding, which strengthens and maintains a shared public good.

The Giveth Proposal Engine is the main deliverable in the second iteration. This component helps the communities remain accountable by ensuring that multiple Commons, individuals, and organizations can fund proposals, while preventing duplicate submissions.

Instead of restricting voters to casting their votes in a single time-boxed session, Conviction Voting (CV) requires voters to confirm their preference for a proposal. This is the main deliverable in the third iteration. With CV, a voter can change his or her vote at any time. However, their voting power grows stronger the longer they keep their vote for that particular proposal.

The Commons Analytical Dashboard is the main deliverable in the fourth iteration, with the role of displaying the operational metrics of a Commons.

On the completion of the aforementioned layers, there is a need to ensure the entire system is easy to deploy and maintain, even by non-technical users This is where the Minimum Viable Commons comes in. It is the main delivery in the fifth iteration. No new components are added, but the focus is on improving the performance of every component.  This is done by carrying out the field test of Minimum Viable Commons integrated with the other layers. Afterwards, CSTK holders cast a vote to decide which community would launch the Field Test Commons.

To advance the design, an open-source ecosystem of token engineering tools is needed. The cadCAD is used to test the economic performance of a Commons before it launches. This tool is the main deliverable of Iteration 0. cadCAD is an open-source Python package used for processing design, testing and validating complex systems via stimulation.

Token Engineering Commons was the first Field Test Commons the protocol supported.

Join The Community!

If you would like to support the community and help develop new ways to fund public goods and open source projects, apply here.

• Join the community on Discord and Twitter.

• Visit the website.

Get Plugged In

🧳 Job Opportunities

Get a job in crypto! Do you like solving hard problems, care about building more efficient markets for everybody, and want to work at the frontier of decentralized finance? Rook is looking for full time contributors, with salaries ranging from $169,000-$722,000. There are positions ranging from engineering, recruiting, product marketing, copywriting, and design. Sound interesting?

👉 Sign up for our referral program and go full-time DAO.

1. Blockchain Economist

2. DeFI Bot Wrangler

3. Head of Research

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