Tracer Drop Episode #07: DAO Communities & Employment

DAO Communities and Employment

Agenda

  • Introduction
  • Economics of the DAO
  • Experimental Tokenomics
  • DAOs from a Labour Market Perspective
  • DAO Design - Productivity
  • Gift Economy
  • Reputation
  • Regulation
  • Public Perceptions of DAOs
  • Contributing to the Tracer Community

Call Recording Link: https://www.youtube.com/watch?v=7eQjiulVY6s

Call Notes

Introduction

  • The Tracer Drop #7 livestream where Mycelium and RMIT take questions from the community
  • Discussion on the economics of the DAO, employment and outward perceptions of DAOs
  • A brief overview of the ways in which interested members can contribute to the Tracer community in the future through the Growth Fund

Economics of DAOs

  • A DAO is a new type of institutional organisation technology
  • There are already many different ways in which people can coordinate their actions for the goal of achieving a collective purpose using different rules - institutions, markets, firms, co-ops, clubs
  • Rules have historically been created by governments - legislation and regulation
  • Essentially human made rules, enforced by humans in the human economy
  • Seen development of increasingly sophisticated methods - such as firms which are a way of coordinating economic activity in a less costly manner
  • From an economist’s perspective the institutional technology that minimises transaction costs, the costs of gathering information and enforcement is a firm - it is viewed as the most efficient organisation technology
  • Millions of people necessitate a nation state organised with markets which require governments, laws, market mechanisms and prices
  • DAOs are the new answer to collective coordination to create value
  • They share similar properties to a firm (inside and outside groupings), a club (members and non-members), commons, and a nation state (constitutional rules)
  • The other important aspect is automation - this is the massive advantage of DAOs
  • Instead of being made for humans by humans there is now the added element of software - this addition brings certainty, transparency, speed and ultimately efficiency
  • The revolution of blockchain - idea of automating governance into the foundations of an economy
  • In the blockchain space all information is local - however, at the same time all limits to geography and communication have been dismantled
  • Previously in order to cooperate with strangers institutional structures were necessary - blockchain creates a new space to facilitate universal cooperation
  • There is a trust problem to universal cooperation - however, blockchain industrialises trust opening with new and exciting implications

Experimental Tokenomics

  • In response to the Tweet: “DAOs are for 1000 people to do one thing but really they are for 10 people to do one thing while being supported by 1000 people”
  • As with all new technologies - entering into a world of huge experimentation and discovery
  • New organisation technology - the question becomes where does this work?
  • Notion of 10 people doing and 1000 people watching - similar to a company with investors
  • The rules of the DAO need to incentivise investors to stick around - the other way to think about this a co-op which has a similar structure of a core organisational committee with other members benefitting
  • Issue - no one wants to run the co-op but everyone wants to be a member
  • With DAOs there is the ability to tweak those parameters - just in terms of design their is an ability to make investors better or worse off, or give the committee more or less power
  • Experimental and theoretical tokenomics - aid in understanding what type of design aligns with the desired outcome
  • The difference between a DAO and a corporation - driving the dynamics of the decision making not just to the centre but to the public
  • The challenge faced with any sort of cooperative behaviour is free riding
  • The tension faced in any DAO is - who is going to do the work?
  • Challenge with the modern corporation is high levels of asymmetry - cannot see into an organisation when a decision has been made
  • DAOs have perfect transparency - easy to identify who is free riding and who is not
  • Tokens come in and incentivise everybody to work and cooperate
  • DAOs overcome many of the agency problems of the modern corporation
  • The issue is there has been no thought to the unique issues DAOs may create

DAOs from a Labour Market Perspective

  • Firms can be described as a nexus of contracts - group of people who come together and organise themselves through employment contracts
  • From an economist’s perspective - a firm is a device for dealing with incomplete contracts, specifically incomplete employment contracts
  • Firms are large centralised collections of people - there is the need to monitor employees
  • DAOs are the opposite, yet similar - in terms of working for DAO, there still needs to be a contract that specifies the employees relationship with the DAO
  • Similarly to a corporation, there needs to be some mechanism to monitor compliance with said contract - a boss, manager etc.
  • With a DAO this unclear - best assumption for the future is that this function will be filled by technology (cameras, AI devices, keystroke monitors etc.) or possibly a vote by other DAO members
  • The challenge in this space will be monitoring the relationship
  • Encourages piecemeal work - work that can be clearly specified in advance and assessed at the end
  • Work for DAOs will resemble that of creative industries - lots of ad hoc teams coming together for specific creative tasks that have never been done before with more retainer work
  • The model for the DAO isn’t the industrial corporation, it is the creative industries - high skilled and unique skilled people collaborating on temporary and important projects
  • Resembles the 17th century labour markets - roaming piecemeal approach of skilled independent contractors coming together in ad hoc teams

DAO Design - Productivity

  • Coordination problem - need someone to do the initial work; create the institutions; set up the markets, processes; and then decentralise away
  • Do not want to have a traditional market economy firm with a hierarchy
  • Firstly, need to ensure the underlying principles of the markets being established are sound
  • Then ensure people can come together under the division of labour:
    • Are there buyers/sellers?
    • Are there people offering services?
    • What are the institutions needed in this economy?
  • Building from scratch - need to ensure there are dispute resolution mechanisms and incentivising mechanisms
  • All manner of things must be built but with enough flexibility to accommodate the uncertainty of how users will actually engage with each other in the system
  • Need to also consider the business model:
    • Can everybody make money?
    • Is everybody properly incentivised?
  • Careful consideration needs to be given to how all the moving parts fit together
  • Conversely from firms, DAOs need voluntary participation in the economy at all times
  • Therefore, it’s going to be more a gig economy - more voluntary participation and less command and control in DAO employment
  • Necessary to have mechanisms to attract people to build the DAO - often these will be volunteers working for tokens, rewards and prizes
  • The notion of salaries will become increasingly rare - there will be some salaried employees of DAOS, however most will be gig employees
  • When building the economy there needs to be mechanisms in place for people to come, build and earn tokens - effectively buying in
  • Resemble an employee share ownership scheme
  • Clearly in the bootstrapping phase - careful thought needs to be given as to how everything will fit; the future evolution of the system; and then as decentralisation occurs that there is enough governance to tweak the system

Gift Economy

  • Gifting can be described as long-term contracting - based on the notion of “we’re in this together” so a collective set of books is kept, essentially another way of doing payments
  • DAOs create broader options for payments - specifically internal payments
  • Truck barter and exchange proposed by Adam Smith - paid in the product of what you’re making
  • Works well with digital objects - can be immediately move into a DeFi secondary market

Reputation

  • Critical in a digital global economy
  • An employer needs to be able to verify that a hire is trustworthy and can deliver on the specified task
  • Trust is an expensive thing to build - normally employers hire locally because you can trust what you see
  • Global digital world - most of the people an employer will hire they have never met, nor most likely, ever will
  • Need for strong identity mechanisms and reputation mechanisms
  • Explosion of avatars at the moment is a positive step towards permanent digital reputation

Regulation

  • Regulations often revolve around either consumer protection or governments collecting money
  • Large challenge facing the blockchain community - it is new, different and largely misunderstood by regulators
  • The agenda of the majority of blockchain users to replicate traditional uses - trading goods and services; and making money
  • Their is an inability of regulators to see the necessity of this platform when there are still existing mechanisms for trade and profit
  • Regulators logic - something new is only necessary if it is being used to do something wrong/illegal
  • The goal (also challenge) of blockchain is to change existing institutions - however, existing institutions only change when the gatekeepers want them to change
  • Necessary to engage with regulators - something that has yet to be done well
  • Much effort has been made to engage with various crypto communities - however, at some point engagement of the wider community is necessary to dispel the perceptions surrounding blockchain (criminal behviour, money laundering etc.)

Public Perceptions of DAOs

  • Firms have a public face, which is useful for public engagement
  • Conversely, a DAO has no single person owns/runs them - there is little-to-no avenue for public engagement
  • A firm (shareholders) hires a manager to run the firm
  • Similarly, the only solution - the DAO contracts a manager to be a public point of reference or a ‘scapegoat’
  • In time, protocol politicians will come to occupy this space - they will become the people who deal with regulatory authorities
  • It is necessary in promoting the DAO economy that there is an external regulatory environment conducive to DAOs
  • There is optimism surrounding this conducive relationship - comparable to the history of joint stock companies (essentially the modern firm) which were initially regarded as scams where investors would be defrauded
  • This is a similar to the perception most people have of DeFi
  • A failure has been to properly explain to regulators what open source actually means

Contributing to the Tracer Community

  • Proposal for the Growth Fund is currently being voted for on snapshot - voting for 28% of the Tracer DAO treasury to be locked into a fund
  • Working on managers being voted in to delegate this fund
  • Future plans for ‘working clans’ - clans of various groups (UX/UI developers, normal developers, artists, Discord monitors etc)
  • From these clans work can be seeded and proposals can go to the Growth Fund so services and work can be funded