Q3 Preview: Governance & Organizational Design for DAOs
In this community call, Jason and Guard discuss the challenges of forming a DAO and the legal implications of governance structures.
- Jason works on governance and organizational design. He focuses on governance processes, getting the DAO caught up on executing in-flight work, and looking ahead towards the next stages. Jason recently completed a Ph.D. in organizational and institutional sociology, with a focus on how people organize to implement blockchain projects.
- Guard is a lawyer by trade and a legal academic. His specialty is in non-corporate forms of group organization, which is particularly applicable to crypto today.
- When Guard first joined the DAO, there was no explicit legal structure in place.
- One challenge of reforming a DAO is honoring previous promises while still being able to move forward with change.
“What I didn't appreciate until trying to think about it as a whole, is how sensitive individual pieces become to changing other pieces. So if you change how voting happens, for example, but you don't change how the Sophons work, then you potentially create an attack vector… or you create something that could become sort of a legitimacy trap or could have all sorts of other problems.” – Jason
- Governance is a complex system, and there is no one-size-fits all answer. Learning from others across the industry helps identify pitfalls.
- Translating the desired governance process into a defined legal structure is a challenge. The crypto industry currently underestimates the need to design the legal frameworks that are needed by DAOs.
- Jason and Guard are designing the legal structure for Rook from scratch, rather than picking existing ill-fitting frameworks “off the shelf.”
- Arbitrary decentralization, in which every single change needs to be brought to a vote, is not optimal. Hybrid systems that allocate power and decision-making to defined roles are more meaningful.
“I think what we're looking for is more clearly articulated actors — clearly articulating what their powers are and what they're accountable for and to whom — and thinking about where are the checks and balances in the process so that no one actor has too much power.” – Jason
- Identifying asset ownership, accountability, and decision-making abilities are some of the challenging questions that need to be addressed on the legal side of a DAO.
“...of course the structures that I design have to support and match the ones that Jason is working on. So if he comes up with a new brilliant governance structure, I have to come up with the corresponding legal structure that supports that, so that there's… actual teeth in the governance process.” – Guard
- Operating a DAO is particularly challenging due to cross-border jurisdictions. Designing a legally defensible structure is part of the work Guard does.
“My arrival in the organization was a little bit like going into a building site. You can see there's a lot of really good bricks around, but you need to put them together. And the process of doing that in a way that supports the kind of structural designs that we want crypto to have and to support the governance structure that we want to have… it's a big overhaul, basically.” – Guard
- The DAO governance reform process is largely an invisible behind-the-scenes effort, but it will ultimately give token holders more power and improve the structure of the organization.
- KIP-0 started the governance reform process and defined the base structure of the DAO. Moving forward, the monolithic KIP-0 will be broken out into three separate KIPs which will allow more focused discussion on individual aspects of governance. Templates will be used to facilitate a clear thinking process for proposals.
- The three KIPs will be: templates categories, Sophons, and an overarching governance process KIP that will define the various actors in the process, as well as the lifecycle of a proposal.
- After the reform, the governance process will look different for the average token holder. Most notably, the new KIP templates will force more well defined proposals.
“We are playing an infinite game, and you don't win an infinite game. You just play it in accordance with your values. […] But at the same, from my point of view… the law exists because there are bad actors. You only make a contract for the day that somebody is going to breach it.” – Guard
- The DAO is looking for community involvement in the DAO process and new governance proposals. Guard would like to hear the community's questions and concerns, and it may be prudent to have a regular “legal hour community call” as a venue to ask these questions.