I’m Kate, a contributor to the Centrifuge DAO and Centrifuge Network Foundation. For the last 12 years I have worked in decentralized organizations including Enspiral, GoldenPandas, Greaterthan, Consensys, DAOstack and Genesis DAO, and various other proto-DAOs, and now Centrifuge. I have a Masters in Political Science specializing in Governance Theory and I have conducted general and academic research on different online communities and DAOs, two examples are available here and here.
This is a discussion post to share what I believe are some basic foundations for distributed governance via prosperous community ownership. These basic foundations could be utilized by contributors to the Centrifuge DAO, in particular the Governance & Coordination Group who are mandated to pass processes and structures for the DAO.
These are my own personal recommendations and I invite rigorous discussion and responses to this post!
The Centrifuge DAO is a collectively-owned distributed organization working towards unlocking economic opportunity by connecting people to borrow and lend money transparently and cost-effectively.
The Centrifuge DAO has a huge opportunity to turn around the image of DAOs failing to make progress.
Part of the existential problem of DAOs is that most use the catchphrase of ‘decentralization’ to signal a blurry general philosophy rather than a clearly defined objective. The technical definition of decentralization (i.e. workload is spread among several nodes without having a single central node to manage network activity) has been extrapolated to be the aspirational state for all modes of organizing that are ‘not centralized’.
Decentralization”...one of the words that is used in the cryptoeconomics space the most frequently, and is often even viewed as a blockchain’s entire raison d’être, but it is also one of the words that is perhaps defined the most poorly’ (Buterin 2017)
Having a fuzzy and broad philosophical concept of key terms like decentralization implicitly puts a lot of unhelpful expectations on how we (and others) ‘should act’ in a DAO, for example common interpretations of what decentralization means are; ‘everyone must have a say on all proposed changes’, or ‘decentralization means that no leadership can be taken’.
This can be weaponized by groups and individuals to achieve their own objectives rather than that of the Shared Mission and growth of the protocol.
I would offer that non technical decentralization means that governance is distributed among peers in a fluid way: this means that decisions are not taken solely by one person or controlling entity but by those with the most relevant experience or insight, and those who are most effected by the decision.
We should try and be clear and explicit about what we mean, what we want to achieve, why we want to achieve it, and how we organize to do these things.
|Owners extend access to more people to borrow and lend money transparently by expanding, governing and stewarding the Centrifuge protocol||I strongly believe that a stance of ownership as stewardship is the one the Centrifuge DAO should aim for. This takes the concept of being an owner further than extraction or possession by a small group, it is a stance of responsibility to give access to many more people. It also goes against the grain of the dominant ‘game theory’ thinking in crypto that humans only respond to correctly designed monetary incentives. Stewardship ownership means owners benefit economically but are not acting in a solely transactional way.|
|To avoid the protocol getting controlled by an entity not aligned with the Centrifuge Shared Mission||Ownership of tokens does not just indicate possession of the technology and the ability to benefit from it, stewardship ownership means guardianship and safekeeping of a collective good, in this case the Centrifuge protocol and the ground breaking potential it holds. This potential is inextricable from the mission of giving open access and preventing monopolization and take-over.|
|To have robust participation in governance from owners: this means those involved in making a decision have higher skin in the game in carrying out the decision.||Ownership i.e. holding of the native token of the protocol is made real by the ability to participate in governance in a meaningful way: this means not all owners are expected to participate in every governance process, but rather a more generative way where people with different levels of engagement participate where they have expertise or are affected.|
|To align the Centrifuge protocol with regulatory guidance||Decentralization via distributed community governance is helpful for any SEC regulatory assessment of the CFG token.|
Working as a DAO is the way that core contributors and owners can best achieve the state described above. Who comprises the DAO and their (differing) levels of engagement are described in Part Four (forthcoming).
Although it’s still early days, the Centrifuge DAO has a high level of owner stewardship and relatively robust governance engagement. Centrifuge DAO members are active in the various parts of governance, including, proposal creation, ideation, discussion, voting and execution. One major area of governance is proposing value accrual mechanisms for the CFG token, and improvements for protocol, such as:
Integrations and partnerships
Staking and burn mechanisms
Token holders have mandated a governance group to facilitate governance processes and moderate discussion and they in turn have proposed a Governance Process and Framework for robust governance which was passed by governance.
I think the next pillar is to put in place are ‘Founding Documents’ which include the following:
The agreed upon Shared Mission
The DAO Principles
The Code of Conduct
An agreement for Levels of Engagement
There is a place for groups without a strong and explicit Shared Mission or Principles or Code of Conducts, think social movements, community groups, social clubs, but they are not businesses.
In order to have a well functioning and well coordinated DAO there should be a clear, short, and inspiring Shared Mission. It should be easily remembered by everyone in the DAO.
The Shared Mission is ‘what we’re trying to achieve together’ and is written down in one sentence.
The Shared Mission is a ‘North Star’. The North Star or ‘Polaris’ is famous for holding nearly still in the sky while the entire (northern) sky moves around it. Similarly, the Shared Mission is a fixed destination that everyone can navigate towards even while there is significant change around us.
People can use the Shared Mission to guide action:
- When participating in governance
- When considering if and how their own initiative serves the DAO
The simple question should always be ‘does this help us achieve our Shared Mission’?
The mission should be proposed as early as possible. I have been in too many situations where retrospectively trying to make a mission has caused conflict, endless discussion, and ultimately inaction. Thus I advocate that one of the first steps of the Governance Group should be to pass the best possible version of the Shared Mission via governance (a draft already exists).
This process could involve discovery interviews and refinement of the existing draft with core contributors including early team members to draw out the best possible version of the Shared Mission, this should then be passed by Governance and listed in the Founding Documents.
There are numerous rush jobs where DAOs have tried to achieve so-called decentralization at breakneck speed and the lack of process and guidelines has resulted in a tyranny of structurelessness. I believe Centrifuge DAO can maximise lessons from these experiments and decentralize (i.e. allow for distributed decision making) in an iterative, purposeful and progressive way using tools like Principles to guide action.
Principles should have a sense of direction, accumulating to a clear ethos and be generative rather than constraining. Principles suggest patterns of thought and action, ways of being, even priorities.
There are two levels of principles:
Guiding Principles can directly reflect and draw out the essential pieces of our Shared Mission. They guide action.
Some Proposed Guiding Principles
Open access: We work to give open access to the new financial system
Transparency: We avoid the pitfalls of traditional, centralized financial systems by designing for and committing to transparency
Ownership: We prioritize ownership as a form of stewardship
Operating Principles describe how core contributors and owners put guiding principles and the shared mission into practice and get things done.
Some Proposed Operating principles
We choose simple over complicated: We reduce unnecessary steps and make it easier to get things done
Goodwill guides our communication: In all our community channels including forum, social, calls, meetings and discussions we uphold integrity and goodwill. We avoid polarized posting. We moderate bad faith behavior based on our Code of Conduct.
We are bureaucracy light. As we progressively ‘decentralize’ or distribute decision making we avoid ‘direct democracy’ or governance overload i.e. asking all community members to vote on all things.
We make things explicit: We avoid the pitfalls of implicit interpretation by clarifying and agreeing on what we mean when we work together.
Following discussion of the ideas above I will publish recommendations of what could constitute Parts Three and Four of the Founding Documents, including:
- A Code of Conduct: a clear ‘code’ of behavior outlining what is encouraged and what is not accepted nor encouraged and, crucially, what will happen if someone breaks the code
- An agreement on Levels of Engagement which acknowledges and presents the different levels of knowledge, capacity, mandate and involvement in any DAO
Thanks for reading, curious to hear what you think !