Swarm Targets Blockchain Governance in Platform Pivot

Swarm is pivoting toward decentralized governance, a decision that finds the project shifting away from its original focus on distributed crowdfunding.

The move follows the release of a research paper commissioned jointly with DATA's Constance Choi and Harvard Berkman Center research fellow Primavera de Fillippi that suggested distributed collaborative organizations (DCOs), which utilize cryptographic tokens to denote membership in a decentralized organization, are among the 'crypto 2.0 models' that are unlikely to attract negative attention from US regulators.

The subject has been fiercely debated in recent months, following rumors the US Securities and Exchange Commission was seeking to crack down on projects that sell cryptographic tokens.

However, Swarm CEO Joel Dietz indicated that with this legal due diligence completed, Swarm is now focusing on encouraging other groups to create "collaborative networks" by providing a suite of solutions that allow its users to issues tokens for organizational management.

Dietz told CoinDesk:

Within the DCO model, organizations can then endow certain token holders with the right to participate in decision-making processes such as approving budgets and conducting voting.

"It's not all that different from a traditional C-corp where there's delegates, board members of the organisation and stakeholders, anyone with a token or coin," Dietz explained.

Swarm said its DCO product is expected to be live on the bitcoin blockchain by 4:00 UTC 28th April, and that a version is currently working on the testnet for Ethereum, the decentralized publishing platform for developers expected to be launched later this year.

The announcement coincides with new steps by the startup to adjust its own model in a way that mirrors guidance for US-based DCOs issued in its February report.

Launching today is Swarm basic income, a program that will distribute tokens for all Swarm projects to its members. Dietz categorized the new tool as one that serves as a proof of concept for how societal participation could be conducted and managed in the future.

"The idea is that everyone who is part of Swarm is constantly getting these tokens from other projects that are launching through us. That's significant in a number of ways, we have the possibility today to be doing what governments should be doing, better than how they're doing it," he explained.

In the future, Dietz envisions such models being embraced by local municipalities, wherein citizens would receive tokens they could use to partake in transparent voting on communal decisions.

Trust management within the platform, according to Dietz, is still a work in progress, adding that he anticipates a "second-tier" application resting on top of Swarm. He acknowledged that users could be vulnerable to keylogging attacks, potentially opening the door for hackers to gain access to DCO credentials.

Dietz further indicated that Swarm will be looking to distance itself from the idea that its projects may generate a financial return for those involved.

In contrast, Dietz suggested that he encourages a broader definition of value, one that goes beyond monetization. Tokens for voting, he said, could have trading restrictions placed on them as determined by participants in the DCO.

"Allowing people to join and fund an organization is very valuable, as is the crowdsale mechanism," he continued. "In our case, I don't see the latter as necessarily wrong, but it's part of startup investing in general where people expect unrealistic returns."

Dietz said the platform is more suitable for grassroots organizations than profit-driven corporations. He cited the College Cryptocurrency Network as an example of the type of group that would be better acclimated to the concept.

Swarm categorizes its new manifesto as one that promotes "abundance for all", encouraging users to sign a pledge that they will "take into account more than profit" when joining a DCO.

Trust may prove to be an issue in in attracting new users given Swarm's involvement in the Bitcoin Foundation's failed attempt to conduct voting for its most recent board of directors on the blockchain.

Issues with the voting process, which was conducted through the use of bitcoin transactions to tally votes, ultimately led the foundation to revert back to its older system.

Dietz dismissed criticism of the event, suggesting that Swarm's system simply struggled to adapt to the foundation's needs, including a requirement that voters have the ability to vote for multiple prospective board members.

"Our product wasn't designed for that specific use case," Dietz said.

He added that certain aspects of the system, such as the fact that token users had to wait for their transactions to be confirmed on the bitcoin blockchain, were perhaps not clearly communicated.

Government image via Shutterstock

Further Reading: Download our Cryptocurrency 2.0 research report.