DAO Redundancy vs Efficiency

A compelling argument for me about DAO’s is their emphasis on redundancy over efficiency. Put simply, traditional organizations tend to optimize for efficiency as a performance premium whereas the decentralized nature of DAOs encourage resilience through redundancy.

This makes organizing people challenging since we don’t have a lot of good models for crowd management other than open source software and few examples (that I can think of) beyond software development. Many DAOs are happy to explore their own emergent properties which allows for a lot of chaos and experimentation.

One of the most exciting developments within Web3 is its composability and how different projects fork and borrow code from each other, build services on top of one another, come to each other’s defense after a code exploit… this is true co-opetition. This is probably why I think of DAOs as inheritors of the co-operative movement.

I don’t think it’s a one-size-fits-all solution but I want to keep track of the success stories and learn from them. One to watch is MakerDAO which formed a real-world Foundation for awhile and then tore it down again to truly embrace decentralized governance again. They run single-discipline teams but are hoping to create internal competition by spawning multiple teams to work on the same things. This is highly inefficient but insulates them better from interference and disaster.

I’m interested in the approach taken by Liquity which presents itself as a finished project that does one thing and one thing well - interest-free loans against ETH furnished as a USD stable coin. The project has been designed to be governance-free (insulated from interference). Does this mean code is locked for eternity? It also offers an SDK for third-parties to create front-ends for it by offering some kickback capability on fees as incentive. The result is a very self-contained and resilient project, limited in scope but not in scale. It’s like an ETH locker LEGO piece that can be embedded in other projects. This isn’t original in itself - there are other projects that share similarities - but it’s the degree of commitment of the project to decentralization that is intriguing, to the point that there’s no way (apparently) to modify or extend it.

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Thinking on this a bit more, I shouldn’t overemphasize redundancy over efficiency because there is a radical efficiency built into the crypto-Web3 movement and that is the innovation of making currency and contracts one in the same. This may seem like an oversimplification of things but I think it helps to make my point.

Society makes rules which human beings collectively want to see obeyed but human nature is such that individuals will always look for ways around the rules. Enforcement of the rules consumes a lot of resources, largely in the form of legal fees, courts, etc. As complexity (of society) increases, so do the costs of enforcement. Eventually, this becomes highly bureaucratic and unproductive.

Web3 aims to eliminate much of the unproductive cost through ‘code as law’. In other words, it is seeking to make code and law one in the same. Taken to an extreme, all lawyers will eventually become coders. Web3 maximalists will seek to make all agreements smart contracts and there will be no room for renegotiation (this is my ‘Gorp’ analogy, except that maybe the governance structure allows for code to be changed when there is enough consensus to do so).

Cryptocurrency ensures the sanctity of ‘code is law’ but it also gives everyone a share of the contract which functions as a share of the service / platform / network. For every project that we use, we could very easily own a share of the project through the contract rather than simply reducing every transaction to a single vehicle currency (such as, USD stable coins).

Putting these two things together increases efficiency (and entitlement). Smart contracts are deployed, hacked, modified, re-deployed, and so and so forth until they are best-of-breed and battle-hardened. Because they are transparent, anybody can copy and use them. This increases the reliance upon standardization and proven utility which leads to greater efficiencies.

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“Society makes rules which human beings collectively want to see obeyed but human nature is such that individuals will always look for ways around the rules” - I feel this way almost every day, also naturally question why is there a rule for this or that but I always just think to myself Earth is rotating around the Sun, what are rules anyways? :slight_smile: - When you said currency and contracts would be one in the same, that made it easier to understand Web3 and digital currency, to me the internet/digital currency just always seemed like a made up fantasy floating in the matrix pinball machine.

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I appreciate your feedback, Sean. Especially, since you’ve admitted to not being a crypto enthusiast. I’ve been trying to figure out the best words to explain why I am keen on it for the benefit of people who are skeptical, so thank you for responding.

I think that as a species we do rely upon collective fantasies at times to organize ourselves. We are highly symbolic creatures. Think about the leaps and bounds we’ve made regarding money, itself, in terms of the various forms of currency we’ve come to accept. We started off with physical things such as metals then moved to paper then moved to plastic (credit cards) and now to digital wallets. None of these things have any actual ‘value’ in and of themselves, except gold perhaps. Nevertheless, we’ve come to accept that they represent stored future value.

This ability to have one thing represent something else - even if it’s a very abstract idea - has unleashed a great deal of coordinated productivity over the years, so it is clearly very important. I look upon crypto as an even bigger abstraction that can coordinate more productivity than we’ve heretofore seen, so that’s part of the reason why I’m bullish. Now, I just need to find the right words to express that!


I think you just did a fine job of finding the right way to express your views on this David! :sunglasses: Makes good sense to me!

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Thanks, I believe I understand the idea better. Always worth it to try something new