Jihad Esmail, GLF2022 Team
As web3 projects and protocols move towards user-ownership, thousands of communities have been launched that are rediscovering the world of self-governance.
Folks from across the ecosystem have come together to coordinate in new and interesting ways, but some old, human problems became increasingly apparent. DAO contributors and operators were forced to come face-to-face with organizational design and governance challenges that technology simply isn’t able to solve. People are still people.
As a result, we have seen a lot of reinventing the wheel. Almost all DAO contributors have found themselves falling into the same traps as organizations that came before them. Slowly, but surely, the ecosystem has moved in the direction of learning from our long, rich, global history of coordination and governance.
Orca and Other Internet have teamed up to explore key trends and beliefs surrounding web3 governance. The results, which are outlined in this essay, informed the design of the Governance Learning Forum 2022 (GLF). Over the course of two days, GLF22 will bring together web3 governance practitioners and experts on governance and coordination beyond the crypto ecosystem.
This summit is not just another series of panels. GLF will feature unique online participation formats, emergent coordination methods, and live knowledge capture designed to help attendees meaningfully integrate learnings. Knowledge generated during the event will be published afterwards, with all participants as co-authors. There is no “audience” at GLF22, only participants.
In preparation for this event, we surveyed the crypto ecosystem to understand how governance challenges are currently emerging.
The goal of this piece is to outline the results and key findings from the survey, including responses from some of our event organizers.
109 people completed the Governance Learning Forum survey.
More than half of those surveyed considered themselves DAO operators or contributors, and a third considered themselves DAO founders or core team. We defined “DAO operator” as someone who is leading a working group, pod, team, or guild. “Contributors” were defined as anyone who was a part of any of those groups, while “core team” were anyone working for the DAO full-time.
We can assume, then, that while most people surveyed consider themselves to be contributors, a significant number of participants were leaders and decision-makers in their communities. Not surprisingly, over half of these folks considered their “areas of expertise” in their DAOs to be governance, org design, strategy, and/or community facilitation.
An almost identical number (~30%) of those surveyed said they have been in crypto since 2021 or 2017, with another 20% saying they have been in the space since 2015 or before. This showed a diverse range of “entrances” into the space.
Also diverse were the types of DAOs people were involved in, although a plurality seemed to be involved in DeFi protocol DAOs.
It makes sense that those of us responsible for driving outcomes – operators and contributors – are also most concerned with decision-making ideologies and organizational design. It’s my belief that governance will emerge as a moat for the most robust decentralized organizations as organizational impact is tied to the community’s ability to effectively coordinate.
An interesting data point is the length of time survey respondents have been in crypto and the lack of correlation to governance expertise. The short of it is: regardless of how long someone has been in crypto – presumably engaging in varying degrees of coordination – they still feel challenged to find solutions to coordination bottlenecks.
Previous Governance Experience
Instigating question: What is your experience facilitating decisions and/or helping communities, teams, or organizations facilitate decisions? What practices have you used? And do you have any preferences?
The survey results revealed that many people have experience with traditional corporate hierarchy, majority voting, and Roberts rules. Some survey respondents with experience in these methods said they preferred other decision-making processes – but noted that alternative decision-making processes are often slow and cumbersome.
Survey Quote: “Preference for non-hierarchical practices with a focus on action and accountability to reinforce trust and foster autonomy.”
Survey Quote: “We mainly used standard corporate models (complete with 1:1s, standard peer review processes etc). I don't think these models are always bad, and they were effective in their specific contexts, but they weren't (understandably) really good at building camaraderie.”
Beyond traditional hierarchy, survey respondents identified experience with the following processes: consensus, consent, modified consensus, Holocracy, cooperative governance, Sociocracy, delegation, autocracy, integrative decision-making, Agile, ranked-choice voting, Do-ocracy, and proposals. Most notably, many survey respondents describe engaging in patchwork solutions or combinations of governance models.
Some people are aware that they’ve participated in intentional decision-making processes but did not identify them as a particular methodology. Additionally, people describe intuitive decision-making processes that come from experience.
Survey Quote: “Preference depends upon the context, number of people involved, and their relationship.”
The survey responses demonstrate that governance is contextual.
There are nearly limitless governing and decision-making ideologies, and most of us have experimented with multiple methodologies at varying degrees of influence. Still, operators and contributors are in search of a preferential decision-making process for our current coordination challenges.
As dissatisfying as this is, it would serve us to recognize that the preferred governance methodology is highly dependent on organizational design, interpersonal relationships, organizational purpose, and scale. Lastly: good governance takes time.
One goal of this survey was to explore the governance and decision-making experience of participants in non-crypto organizations. While not a perfect parallel, understanding what a traditional decision-making process looks like and how it functions shines light on the perspectives of current DAO contributors and leaders.
Just under 40% of participants said that they had founded a non-crypto community or organization in the past. These organizations ranged from startups and consulting agencies to local tea house communities and art collectives.
While the vast majority (83%) had used some sort of formal decision making process in non-crypto contexts, only about half of participants had designed or implemented such a process in those contexts.
Most participants had experience with three different decision-making processes:
- Majority Voting
- Traditional Hierarchy
A significant number of those surveyed also signaled that they’ve used a combination of processes (which could arguably be interpreted as having no process at all).
Sociocracy and Robert’s Rules were other popular decision-making processes–however, several respondents expressed negative sentiment around Robert’s Rules.
It is important to note that there may have been a lack of clarity around what many of these decision-making processes were. For example, consensus decision-making refers to a specific process that is distinct from majority voting. However, some participants in the survey conflated the two in describing their experiences.
This indicates not only a potentially significant error in the results (e.g. the true results may more heavily skew towards majority voting and hierarchy), but also a lack of exposure to and understanding of the differences between decision-making processes, the existence of less common processes, and the tradeoffs of each.
Putting consensus aside for a moment, majority voting and traditional hierarchy take the cake as the most commonly experienced decision-making processes. These are commonly found in the majority of web2 organizations.
It is no surprise, then, that a common challenge amongst survey participants was managing the transition from web2 to web3, both for their communities and themselves. These challenges were primarily focused on education.
Working with Contributors
When asked what coordination or governance problems they were actively facing, participants responded with challenges ranging the entire span of the contributor lifecycle.
Survey Quote: “I think we have an issue with people wanting to contribute, but not wanting to take the time to learn the tools that we would like to use or the principles of self-management.”
An interesting cluster arose highlighting education and onboarding challenges. These largely fell into two sub-categories: information overload and governance education. Current DAO operators and contributors struggled to get newly onboarded members the information necessary to make effective decisions and participate in a meaningful way. Additionally, some folks noted that many contributors weren’t interested in governance in the first place.
“Self-management” is a characteristic that can be expected of organizational leader and high performers. But even for these character types, organizations provides clear constraints which allow creative talent to chart their own course. In my experience, DAOs both in their organization and community form frequently lack clarity of mission. To some degree, “DAOifying” seems to imply that community members have equal say about the direction, purpose, and activities of an organization. I’ve seen this in the form of lengthy organizational debates, and in proposals for the DAO funding activities that effectively amount to contributor hobbies.
Governance and Leadership
The point around “boring work” is notable here. Many participants come into DAOs with very specific and idealized expectations of what their experience will be. Whether it is governance or copywriting, an aversion to doing “boring work” may be an underlying cause of many of these issues.
While governance education is certainly a problem, it is an optimistic lens through which to view broader challenges that many DAOs face. In fact, many DAO members know how to participate in governance – they just don’t.
Voting activity and lack of discussion on governance forums were arguably the two most highlighted challenges in the survey. One respondent attributed this problem to the “Tyranny of the Proactive”:
Survey Quote: “...where active people accumulate more context and trust and effectively become an oligarchy accidentally.”
Whether accidental or not, the concentration of governance power creates de facto hierarchy throughout these organizations. Leadership strategy and long-term planning are thus put into the hands of a small group of people who are willing and able to participate in these decisions.
This is not necessarily a bad thing. High-context members of an organization making decisions is probably for the best. However, things fall apart when the decision-making process and org design were not structured with this in mind.
In our work with Uniswap, we’ve seen that direction-setting is necessary, and clear leadership has no substitute. This is most true in cases where DAOs are not headless brands but straightforwardly on-chain organizations with a business function.
In cases like these, governance tokens can set expectations of “shareholder democracy.” I want to emphasize that concentration of governance power is not problematic, but requires clear expectation setting, role definition, and delegation policies for differences in power and authority to be legitimate. This may work differently for organizations which rely on lots of community participation than for clearly professionalized orgs and guilds.
Governance in crypto and DAOs is a critical component of organizational sustainability, stability, and impact.
Thank you to everyone who took the time to complete and share the survey!
If you are a DAO operator or contributor interested working on solutions to these problems, fill out the event participation interest form by July 29th.