Can a New Social Operating System Fix The DAO?

An Ethereum startup led by a Harvard Berkman researcher is submitting a proposal to fix The DAO, the largest autonomous organization.

AccessTimeIconMay 25, 2016 at 8:26 p.m. UTC
Updated Sep 11, 2021 at 12:17 p.m. UTC
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An Ethereum startup led by a Harvard researcher and the founder of blockchain ridesharing startup La’Zooz will submit a proposal to fix perceived governance issues with The DAO this week.

Launched earlier this month, The DAO has quickly become the largest decentralized autonomous organization (DAO) on the Ethereum network, collecting more than $150m worth of the cryptocurrency ether in contributions that could one day be programmatically disseminated to other blockchain startups that meet a threshold of participant approval.

Despite this success, however, the online community quickly went to work dissecting The DAO's proposed governance model, pointing to various issues that could arise relating to taxation, regulation and the incentive methods used to encourage participants.

It’s the latter issue that Backfeed hopes to address with its proposal. In particular, the startup intends to propose that participants approve the migration to a public reputation system that would look to award those who "positively influence" its development.

Backfeed intends to apply lessons it learned from its core product, a "social operating system" for DAOs on the Ethereum network that re-imagines how participants can be incentivized in a blockchain-based system. To date, Backfeed has launched an online magazine where readers curate a web publication based on communal decision-making.

CEO Matan Field sees his firm’s technology as being broadly applicable to issues that the community has raised in the structure of The DAO.

Field told CoinDesk:

"I think it’s a complementary thing for The DAO. The DAO has an economic system, but it’s not decentralized, it’s not resilient and it’s not scalable."

In particular, Field hopes its engagement tech can reduce problems The DAO could face as it begins to allow users to vote on proposed actions.

He cited figures from the BitShares projects, which had made similar attempts at decentralized governance, noting that The DAO could face decision-making issues at present should voting turnout be too low.

But, Field sees Backfeed as having the necessary tools to alleviate this problem given that its tech aims to incentivize users to align with each other in decision-making, rewarding users when they act together, and when those actions are deemed to have a positive impact on all users.

From democracy to meritocracy

More specifically, Backfeed is planning to introduce a proposal that would see The DAO using its technology to better assess the reputation and contributions of individual members.

To start, Backfeed hopes to help The DAO become better at problem solving, relying less on a "simple shareholder democracy" that it believes could produce "mediocre results".

Most notably, Backfeed is proposing that influence in The DAO’s decision-making be proportional not to how much users have invested, but in how much what they do positively impacts the decentralized organization.

"In a decentralized organization, the amount of tokens one holds can’t be the only measure of influence if this organization is interested in fully exploiting crowd wisdom and incentivize positive bottom-up engagement," a representative of the company told CoinDesk.

Backfeed contends the proposal could guard against hostile takeovers, while encouraging shareholders with more minority stakes in the DAO to contribute.

Staged rollout

Backfeed, Field said, intends to introduce its plan in two stages, the first of which he says will be announced before the month’s end and introduced to voters.

This will find the startup introducing a reputation system, followed by a second submission that, if approved, would provide what the representative called a "comprehensive governance scheme".

"This second proposal will be an advanced version of the first and expand the reputation system to the entire community, while presenting an incentive mechanism for participation and mutual evaluation," the respresentative said.

Overall, Field expects to see this work take two to three months, in which time other proposals for how The DAO can be improved are likely to be introduced. So far, proposals are also under development from the team behind Gnosis, an Ethereum-powered prediction market, as well as other community groups.

Despite this attention, however, Field doesn’t believe that his startup is capitalizing on The DAO’s notoriety. Rather, he argues that his company's work has forced the underlying issues with The DAO to become more apparent and more urgent.

Field concluded:

"I think the DAO obviously has many dramatic issues and we know how to fix all of them. It will take time, but I think we’ve made most of the progress."

Circuit work image via Shutterstock


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