Web3 Governance - A Sabotaged Word Marring A Bright Future
Web3 governance is terrible.
We shouldn’t be building governance.
In fact, of all the words we could have chosen we somehow managed to land on the one closest to “politics”. Governance is a hop, skip, and a jump away from government. And what is government? It is an institution we (supposedly) willingly subject ourselves to in the name of receiving a set of benefits. A symbiosis between the individual & the institution.
I believe we should be building futuristic tools that solve the problems that currently exist within sets of individuals coordinating on productivity. If we do this correctly, we can not only solve for better run “governance” institutions but also better run businesses.
I’m going to assume within this mental exercise that governments to date are worse versions of businesses. I believe this is primarily because the free market of voters have lacked the tools to dynamically disintermediate governance into a productive network graph that can actually be productively controlled.
What are some of the problems of productive coordination that exist within traditional businesses + governments?
Bad accounting (where is the money now, where did it go in the past, and where is it going in the future?)
Bad controls (why was said individual allowed to spend X amount of funds on Y thing?)
Bad incentive alignment (meaning individuals are not aligned as they could be with the broader organization, and in some situations are maligned)
Inability to spot bad actors
Inability to rotate out bad actors
Inability to rotate money away from bad actors
While there are many more than just this, I think the above represents a large chunk of human coordination problems.
Blockchain “governance” protocols have truly done a terrible job of resolving any of the above. The closest we’ve come to solving one of the above is on the problem of bad accounting. Blockchain with its (generally) immutable history of public transactions empowers anyone internal or external to an organization the ability to investigate where funds have come from and where they are going.
However, assume the funds are not going to where they should. Assume a blockchain community has funded a private organization. The only thing the community has at its controls is social slashing which is essentially when people go to the town square (X / reddit / telegram / discord) and shout about the problem loud enough so that the counter party that generated the infraction ultimately loses “goodwill” & “reputation” that would potentially impact future funding. Crypto has a problem though - what happens if the upfront payment was so large that the receiving party doesn’t care?
This is a problem of bad incentive alignment.
The interesting thing about bad incentive alignment is that it is usually good for a sub-institution (i.e. a foundation) but bad for a broader ecosystem (blockchain). In a company, one would say good for the individual but bad for the company.
How do we define a bad actor within a system? Simply put, a bad actor extracts more value for themselves than they create for the broader institution.
Cryptos’ archaic funding tooling & socially accepted funding cycles are horrifically similar to where we’ve come from with Real World Institutions (RWIs) and because of this are empowering bad actors at an alarmingly fast rate. In fact, the liquid nature of crypto (the ability to rapidly spin up some form of an open economy and a social graph around an economy of some value) is a remarkable breeding ground for the list mentioned at the beginning of this blog. Tie that with the liquid nature of social graphs, and you can have your bad digital citizens seamless migrate away from the negative impact they have created. In the real world, when you rob a bank or murder someone there are typically ramifications & actions taken against you, and it isn’t easy to magically migrate away from the problems you’ve made. Obviously an extreme example. But in crypto, these types of soft social extractions appear to be remarkably easy to pull off with almost no controls in place to prevent a similar reoccurrence.
The individual should (largely) be permissionless.
The institution should be heavily permissioned to the groups of individuals that it exists to serve.
The problem is that cryptos publicly funded organizations are using out dated software. They’re existing in the old world.
It’s time for the new.
Give community the ability to clawback funds.
Give community the ability to veto spends.
Give community radical transparency on how funds are spent.
Give community the ability to evolve budgets.
Give community the ability to define KPIs.
Give community the ability to hire/fire leaders based on KPIs.
Give community the ability to evolve the org structure.
Bring an end to blank checks.
Bring an end to publicly funded private organizations.
Death to multisigs.
LONG LIVE DAOs.
Give community the limitless tools, such that if the institution fails it is because of the quality of the community. Similar to a well run nation state, a digital nation state will only be as successful as the quality of its citizens, and their ability to productively coordinate themselves.
This is part 1 of a series where I will work to outline what I believe to be an ideal end state for a productive crypto social coordination layer.