Current rules for decentralized organizations struggle to allow large numbers of members to effectively work together to manage the organization. This article presents committee Daos as an alternative with substantial supporting research. In committee Daos, subgroups selected from the Dao’s members work on specific proposals which are then voted on by the entire community.
Wisdom of the Crowds: The Case For Daos
“Wisdom of Crowds” is the idea that large groups of people can make better decisions than any individual in particular, even expertly trained individuals. The seminal book on the topic is The Wisdom of Crowds: Why the Many Are Smarter Than the Few and How Collective Wisdom Shapes Business, Economies, Societies and Nations (2005) by James Surowiecki. From the book, discussing the TV show ‘Who wants to be a millionare’:
“Everything we think we know about intelligence suggests that the smart individual would offer the most help. And, in fact, the "experts" did okay, offering the right answer—under pressure—almost 65 percent of the time. But they paled in comparison to the audiences. Those random crowds of people with nothing better to do on a weekday afternoon than sit in a TV studio picked the right answer 91 percent of the time.”
Crowds of relatively uninformed viewers guessed answers correctly 91% of the time as opposed to individual experts who scored just 65%. At the time, few people thought that such an outcome was possible.
Surowiecki inspired new forms of governance and informed early designers of Daos. Such inspiration was not at all accidental. As Surowiecki describes his objectives in his book:
“In one sense, this book tries to describe the world as it is, looking at things that at first glance may not seem similar but that are ultimately very much alike. But this book is also about the world as it might be. One of the striking things about the wisdom of crowds is that even though its effects are all around us, it's easy to miss, and, even when it's seen, it can be hard to accept. […] We should stop hunting and ask the crowd (which, of course, includes the geniuses as well as everyone else) instead. Chances are, it knows.”
It's important to understand the source of Dao designs because as the underlying research advances, the designs based on said research should be updated. In the case of wisdom of the crowds, recent research has shown that certain methods of organizing crowds are more optimal than others. Specifically, while crowds might outperform individuals, small groups outperform large ones and small groups of experts outperform both.
Smaller, Smarter Crowds Are More Effective
An excellent article on improving the wisdom of crowds comes from The Wisdom of Smaller, Smarter Crowds” in a collaboration between researchers at Google and Microsoft. In this study, the researchers specifically used data from fantasy soccer games. Well informed subcrowds outperformed the overall population. From the article:
“The main conclusion of this work is that one can find smarter, smaller crowds within a larger crowd by aggregating only those with higher predicted skill levels.”
Small groups of experts outperform. Furthermore:
“When expertise is not evenly spread throughout the crowd, it is better to focus on the concentration of the expertise as opposed to diluting it with experts of a lower quality. As a result, the wisdom of the experts in the crowd can beat the wisdom of the whole crowd.”
In the context of improving Dao governance, even the simple current model of voting on funding specific proposals frequently requires knowledge that is not evenly distributed across the Dao’s members. As newer Daos deal with more complex plans with legal, financial, market, and product complexities the problem will worsen. Expecting a crowd to make informed decisions on areas that require years of specialized training is foolish. Instead, Dao members need to identify which of their members has expertise in a specific area and assign them to work together in sub crowd committees.
Social Integration For Daos
Implementing committee Daos requires rethinking what technologies are required for Daos. Current Daos are focus almost entirely on blockchain technologies, perhaps with centrally controlled social media channels as a side thought. Committee Daos require a new level of social integration. These Daos need to be able to manage complex roles and communication channels on social media platforms directly without control by a central authority. Since social interaction is so integral to these Daos, to be truly decentralized, social media must be directly managed by the Dao instead of an Active Participant.
That’s not to say a decentralized social media platform should be used. It’s enough to have an social media manager bot that is sent commands directly by the Dao. Members can then vote on proposals that send specific commands to the bot, ordering it to assign or remove members from committees.
An important step to accomplishing this task is the BBLLC. Blockchain-Based LLCs allow Daos to incorporate, which provides many benefits. One of the key benefits is BBLLCs provide a legal identity to the Dao which can then be used to create accounts for the Dao. The operating agreement of the BBLLC specifies specifically how the Dao interacts with the real world. It can even allow for actions off chain. Since all members of a BBLLC must sign the operating agreement, they can be required by contract to perform certain actions on behalf of the Dao but not at the behest of any centralized authority. Of course, as technology advances and more platforms develop APIs that Daos can directly communicate with, these terms will become an anachronism of the past. In the current period of transition from centralized to decentralized forms of governance, properly designed operating agreements for BBLLCs can empower Daos to implement social media features early.
SwiftDaos Are Committee Daos
Of course this blog post is written to support the SwiftDao standard, so here comes the shameless plug - sign up for SwiftDaos here. SwiftDaos are designed from the beginning to have social media integration. Currently, this integration is under development with Discord, a chat channel commonly used by gamers. This might seem like a strange choice compared to more professionally oriented tools like Slack or tools most popular with the cryptocurrency community like Telegram. However, Discord has some of the easiest to use webhooks for managing bots and the largest library of tools for managing bot interactions. It has all the advanced features required to build committee Daos built into the platform, and existing bots are already able to manage said platforms. Tools like Dagger can directly communicate with these bots, allowing the bots to immediately respond to transactions on the Ethereum blockchain.
Of all the features under development for SwiftDao, the second most important is social integration for committees (the first is automated exit). These features will be very basic at first, but will provide the full functionality for the first SwiftDaos to be fully operational and truly decentralized. Important to note is the impact such true decentralization has on the SEC; in both The Dao report and in the Framework for ‘Investment Contract’ Analysis of Digital Assets the SEC has clearly stated that projects must be truly decentralized without Active Participants and that members must have the tools available to effectively organize and manage their Dao, including the case of smart contract code failure. SwiftDaos with automated exit and social integration give their members such tools. As SwiftDaos become larger, more sophisticated standards will need to be developed. Large numbers of members simply struggle to organize effectively and are more likely to be defrauded by a small number of members controlling high percentage stakes. For now, SwiftDaos are restricted to 35 members but as the standards are tested, discussions are opened with the SEC, legal opinions are written, and the standards are upgraded, that number will gradually increase over time. It is critical to the SwiftDao community to avoid any decisions that may result in SwiftDao investors from being defrauded. Unfortunately in finance, the standard technologist’s advice of “move fast and break things” can result in individuals losing their entire savings which is simply not acceptable.