Reputation-based governance is the future of onchain coordination

What exactly do I mean by this and what kind of coordination is it good for? Let’s explore! 1/

Coordinator, Product Manager, Event Producer, DAOist, Privacy Advocate

The first onchain organizations established a “value first” principle for holders. The project distributes tokens through a sale or airdrop which are then available on the open market and fluctuate in price. Some examples include Uniswap, ENS, Frax Finance, and Gitcoin. 2/

Buy tokens > project do well > number go up 🤝 incentives aligned 4/

A few issues with this:

1) stakeholders with the greatest economic power can have greater say than actual contributors and users (esp true over time).

2) Investor interests don’t always align with the projects goals/values/interests

3) voting participation is often VERY LOW (esp for non-major decisions) 5/

This game theory model was inherited from the first blockchains like Bitcoin and Ethereum. And while it may work well for globally distributed settlement layers, communities that wish to pursue more complex, focused goals need a different form of distributing voting power amongst themselves. 6/

What we’re seeing now is a move from “value first” to “reputation first” models— intentional and highly participatory systems for distributing voting power within an onchain organization. 7/

Reputation based tokens do not hold a market value and they cannot be accumulated through economic exchange. Instead, the tokens directly reflect the holders contributions and reputation within the organization. 8/

This offers a completely different way to assign value and facilitate fair say among members of a DAO.

Governance tokens are out, reputation based systems are in! 9/

A Moloch contract is an example of a deployment that allows DAO’s to distribute, redistribute and rescind non-transferable tokens to its members. Those tokens can represent a % of the value of the treasury, or simply just voting power. 10/

Tokens in a Moloch DAO cannot be bought and sold on an open market, and thus have no inherent value and no incentive for passive investors to seek them out to purchase. The org is capture resistant from silent economic players wishing to own large amounts of voting tokens. 11/

So a tool like Moloch allows for tokens to be distributed (and taken away) by the governance body themselves. 

But how does the DAO assign tokens in a way that fairly represents members’ contributions? 12/

In the next installment of this cast storm I’m going to dive deeper into two projects that are attempting to address fair governance rights distribution, and talk about their differences and similarities: 

Hats Protocol’s ProtoDAO https://www.hatsprotocol.xyz/ 

Optimism Fractal

In the next installment of this cast storm I’m going to dive deeper into two projects that are attempting to address fair governance rights distribution, and talk about their differences and similarities: 

Hats Protocol’s ProtoDAO https://www.hatsprotocol.xyz/ 

Optimism Fractal https://optimismfractal.com/

https://flink.fyi/f/daos/0xc7fed413293f6f138567590daa0e8bbed86d96c4

You can earn or buy a projects token, which then, depending on the project, grant a % of voting say ((tokens owned)/(total supply)) in that onchain organization.
The idea being that the more value you have invested in the project, the more incentivised you are to vote in the best interests of that project. 3/