A Governance and Collaboration Implementation Framework for the Distributed Autonomous Company (DAC)
I guess the first question is, Why? Why should an internet community become a DAO?
If you are not familiar with the concept of DAO(Decentralized Autonomous Organization), please refer to this article from Vitalik for more details.
The pros and cons of DAO
Simply put, DAO is a perfect structure to organize collective activities in the community, especially when most collaborations in the community are conducted distributedly, multi-disciplinarily, in random occurrence, and without a trust basis. DAO leverages Smart Contract on the blockchain to automatically implement contract terms to solve the trust issues. Also, contribution-based incentives can be allocated to activate the community.
However, DAO’s structure is not perfect and has some limitations for large scale applications.
First, DAO relies too much on the smart contract, while the machine language is not suitable for conveying complex business logic. It’s almost impossible for a general internet community to become an expert to compile all its collaboration needs into the contract. The stake is too high! It is also costly and low in efficiency if every operation step needs to run smart contracts on the blockchain to reach the global consensus.
Second, most of DAO’s governance protocols mainly focus on the voting algorithm, while for the internet communities, voting would only be a small part of all the collective actions. Actually, the community is more caring about how to make the collaborations happen among all the community members.
Third, as there is a lack of an effective management system to regulate the collaborations, the DAO has become only a shell structure without any real value creation activities in it. So, it’s not hard to understand that the DAO’s governance token holders have low intent to vote as they do not care about what is going on in the community, and they are only pursuing arbitrage opportunities.
MetisDAO – a full-function DAO for internet communities
MetisDAO, built on the Metis Protocol, is born to break the limitations mentioned above, enrich the DAO’s content and expand the DAO’s use scenarios by embracing the collaboration management framework into DAO’s governance structure.
Metis Protocol defines a new concept called Distributed Autonomous Company (DAC) as the subclass of DAO. DAC is the counterpart of the company in the traditional business scenario. Every community is actually a DAC, and when you compare the governance and management framework of DAC with the traditional company, you will find it clearly the difference among the company, DAO, and DAC.
Let’s take a developers’ community as an example to show how the Metis Protocol works.
Step 1: Create a DAC and invite your community members to join
Suppose several developers hope to collaborate on an open-source project. In that case, they could easily register a DAC via Metis Protocol, an Ethereum address will be assigned to the DAC, and all the community members can join and connect with this address.
It is quite like other DAO’s governance protocol, but the difference is that you need to stake some “Bonds” first in Meta Staking Contract to create or join a DAC.
Based on the Optimistic Rollup mechanism, the staked bonds will work as the commitment for each community member (aka collaborator) to perform as their promise. Then, another “pullback” mechanism could be applied to take away the staked bonds and punish the party who couldn’t fulfill its promise. With the staking and pull back mechanism, everyone is showing his/her commitment and is also clear about what the bad behaviors could bring.
And that’s where Metis Protocol is different from most other governance protocols. Metis Protocol is not just building a voting tool and leaving it to the community for its own use. Metis Protocol is building a fair-play, transparent, and universal mechanism to empower the community members to collaborate without worries.
Step 2: Activate your community via various collaborations
Now the community members have staked to join the DAC, and then they can use different microservice tools to implement their activities. Metis Protocol provides a Microservice Tools Pool to help community members to collaborate. They can use Task Management to publish new tasks or new grants, or Knowledge Management to ask the community members to contribute to a knowledge term, or Event Management to co-organize a small hackathon. All the collaboration activities and deliverables (and requirements) will be recorded on a time-stamped Wiki with its linkage encrypted and stored on a side chain for future validation.
Well, this is cool, but… not that fancy? Wait, let me explain what’s behind these simple use scenarios.
First, of course, you can use a lot of other tools to manage your collaborations. Still, those platforms do not have the Staking and Pull Back governance feature to make you feel comfortable to start a collaborative relationship with someone you don’t know.
Second, Metis Protocol defines a ComCo Management Framework to connect the off-chain (Layer 2, OR side chain) implementation with on-chain governance. No matter how complicated a collaboration is, you can always break it down to many peer-to-peer collaborations, which we call Meta Collaboration. Since every Meta Collaboration might be different, the ComCo Management Framework places Meta Collaborations onto the OR side chains and leaves the Meta Collaborators to decide(negotiate, not vote) what they should do in the collaboration, how to do it, and what are the measurable results. And the consensus reached will be converted into a Transaction Statement Contract automatically and deployed onto the side chain. The milestones and deliverables in the collaboration process will be recorded onto the Wiki. So it is not like a bounty website, you apply for a task and then later submit your deliverables. With the ComCo Management Framework, all the process is monitored and recorded for future governance purpose.
Third, suppose the Meta Collaborators finish the collaboration on time and with high quality, and no one disagrees with the result. In that case, the OR side chain’s state will be changed to “completed”, which will trigger the Meta Staking Contract on the main chain to allocate the budget and incentives. However, suppose anyone has any concerns about the collaboration. In that case, he/she can always ask for the Arbitration service, which will change the state of the side chain as well and trigger the Meta Staking Contract to freeze the account. The staked bonds of the “Bad” party will be confiscated as the penalty.
But again, these are some of the mechanism design hidden behind. For a community leader or initiator, you can forget the complexity and just leverage all the mechanisms to govern and manage your community.
Step 3: Accumulate Reputation Power and get incentives
The result of all these staking and collaborations in the community is the Reputation Power (RP).
Since staking is the foundation of governance, the amount of staking represents the community member’s commitment and willingness. Also the Wiki-based ComCo Management Framework contains one’s collaboration history, which can be traced back as the credential check.
For a developer or a distributed collaborator, higher RP means higher ranking and more contribution to the community. So, when an employer or sponsor hopes to find someone to work with, they would definitely prefer a higher RP member.
So, the RP accumulated based on staking and collaboration history is a decentralized business credential system that can solve the trust issues in decentralized cross-domain collaborations and expand more possibilities for community members to connect with business opportunities in the physical world.
With the staking and pull back mechanism as the governance foundation, Metis Protocol builds up an executable environment for communities to buildup and facilitate distributed collaborations.
Based on the Metis Protocol, it is super easy for an internet community to upgrade to a DAO.
- It is not an ordinary DAO, but a full-function DAO. You will not just have voting; you will have a solid and governance embedded environment, and various tools to activate your community and manage all the activities.
- It is not an ordinary DAO, but a most advanced DAO on Layer 2 backed by the Optimistic Rollup mechanism, which you can benefit from the high throughputs, low gas cost, and high privacy.
- It is not an ordinary DAO, but a DAO with business credentials. The staking and track record of the collaboration will accumulate the RP for you, which would improve your digital existence in the web3 era.
Contributed by Kevin Liu, the co-founder of MetisDAO