Summary

Advances in digital electronic data storage make it possible for the first time in history to record every member’s contributions to an organization. Blockchain technology gives actors and organizations the environment to collaborate on neutral territory.

DAOs, decentralized organizations where each member is given autonomous power, can be more efficient than hierarchical organizations, where power necessarily is organized in a tree structure. We gain greater flexibility and more options for efficiency using the decentralized power structure of interacting domains of expertise.

Decentralized organizations can be more productive because they can distribute the proper amount of power to the proper talent at the proper time. To ensure such dynamic power organization is successfully implemented, the governance structure of a DAO must motivate members to collaborate productively, by fairly rewarding development, work, and the policing of any diminishments.

The first principle for proper motivation is to focus immediate actions on gaining long-term rewards. This is accomplished by apportioning reputation tokens for immediate contributions, which give long-term salaries of the fungible currency the DAO attracts. This changes the dynamic from a zero-sum game where actors pursue as large of a portion of the currency they can achieve, to a positive-sum game where actors can create new lasting value by establishing a record of productive cooperation, improving the DAO.

Secondly, reputation should be reviewable in a slow and stable fashion subject to the judgment of the group weighted by their reputation. This also motivates long-term positive contributions, since actions which improve or diminish the DAO far in the future can be revalued.

The third principle is that the group must remain informed. This is incentivized by a) switching from tightly- to loosely-coupled voting to encourage dissenting opinions, and b) rewarding protocol development through review. This motivates continual DAO improvement.

Finally the governance system must be designed from the start to be eternally dynamic to combat the inevitable gaming strategies that arise in any such open, competitive system. An evolutionary protocol is driven by proper incentivization in a positive feedback loop involving expert members, the record of development in the forum, and the public users.

By manipulating the parameters determining the distribution of power during token creation and review (in validation pools and references), different values and goals can be encouraged in an organization. This paper’s primary purpose is to initiate an analysis of the consequences of these parameter manipulations to DAO security, stability, protocol development, recruitment of members and outside business, and retention.

When such measures are implemented, the technology of an eternal, reviewable record of all members’ actions can enable a decentralized organization to organize effectively and achieve greater efficiency than traditional firms. The slow and methodical development of reputation through the record of productive collaboration of diverse actors, creates secure and lasting value in a trustworthy system for productively organizing business and society.