Blockchain

A Decentralised Social Organisation

Photo by Javier Allegue Barros on Unsplash

It is easy to accept that things are the way they are in business, and that the current landscape reflects some Darwinian mechanism, within the legal and political constraints so that only the best models thrive.

The orthodoxy is that for a successful company to form, there are some clever co-founders, who are backed by investors at various stages. The investors are selective, and realistic that only one or two investments will achieve the rewards they are looking for, and the losses on the others are built into their overall business model. With the emergence of the new technology companies, there is the added incentive that they can become monopolies, with the unit cost of each extra subscription being very low, or the revenues generated from selling data far exceeds the costs of acquisition of individual user (who willing builds a profile for free). The rewards are skewed to the founders and early investors.

In questioning the alternative business models, it becomes clear that the distribution of power and rewards to the wider community creates a much fairer structure.

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The emergence of blockchain with the decentralised model created an environment where it was possible to make an organisation, global, decentralised, and autonomous. The governance and ownership were extracted into smart contracts which sat on a decentralised network. The first attempt at this and the inspiration for Decentralised Social Organization (DSO) is the Decentralised Autonomous Organisation (DAO) which as described is a self-governing organisation.

The infamous DAO project and subsequent hack in 2016 saw the demise of the project, and it failed due to a programming logic error and to a lesser extend the regulator’s view that the tokens raised were securities. The DAO did however prompt many projects into building DAOs while resolving the legal, regulatory and programming issues.

While the DAO was the inspiration, the point in substituting the Autonomous for Social is to recognise that in order to create an equitable organisation, we cannot rely on “code is law” and tokenomics, rather there is a need to incorporate a social element as there is no nuance to code and it is next to impossible to foresee every scenario. Thus the Autonomous felt brittle, and researching Society it became apparent for a self-governing society to work the human element is essential. The term Social was also inspired by Social Enterprise.

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The initial set of statutes of the DSO define the purpose and governance rules, and within these parameters the community, by consensus, may adjust these within the bounds of checks and balances built into the DSO.

At the heart of the DSO is the community building that considers everyone’s interest, by contrast where there are asymmetries of interests in Society then communities begin to malfunction.

There are several steps in approaching a DSO, and beginning with community building, anyone can be an observer of the DSO as it is open, and transparent.

Let’s consider how to engage with the community, in a DAO this would require some form of know-your-client (KYC) or whitelisting, in a DSO rather than relying or trusting a KYC, ID or identity verification service the DSO relies on the community.

The bane of the blockchain is the Sybil attack, or the ability for people to create multiple on-chain addresses seemingly from different people. In the case of a DSO this becomes important, the answer is to have existing members propose new ones. You can see the flaw in that? Nothing to lose. There is the scenario where someone may approve any old person and say I have checked them? How about a system where a proposer must have a stake of tokens held in escrow? That way if a proposer turns out to be bad, the community can propose a slashing event, and vote on it, thus the proposer would take a financial hit. Furthermore there are a set of proposers so the person wanting to have their Identity verified has a choice, and alleviates the issue of “pay me €100 and I will propose you” as the person could then ask others.

Why do we need to know who is who? For voting this becomes important, not linking it to ownership of tokens but to identity.

There is a concern that a community may not grow very well at the beginning if every new participant needs to be personally known or connected to an existing member? The proposer does not necessarily need to know everyone, but for example can spot someone who is contributing a lot to the forums in helping people or the person who wrote some nice, open source, utility code, or helped review a tricky code change with some complex changes. The proposer can then contact the person and ask for some id or address verification should it be needed. Why would someone go to the trouble to contact one of these people and ask them to join? If there were a proposer reward, paid on the successful election of the new member? The proposer would need to invest some time in spotting, contacting, and making a case why Alice123 on Github is a positive community member and would do this motivated by a strong sense of community and/or in anticipation of a reward. In either case, the result is the same.

The added social element that has rewards and consequences for the community participation make a DSO strong and further supports the idea that the most successful projects are community based, where success is defined by equality and fairness.

The community effort in running a blockchain requires engagement from all members. This includes the validators that secure the network, the developers that build the software, the governance efforts, the community members growing the community, and contributors. The effort by the community as a whole relates to engagement rewards which is an integral part of the Proof of Engagement (PoE) consensus model. The PoE consensus model is based on Proof of Stake (PoS) which requires the validators to lock some value, ensuring they secure the network without “nothing at stake”. The validators in a PoE model are selected on the basis of their stake with a multiplier using their reward points, which they accrue for being engaged with the community, so that validators who help the community and have a smaller stake get the equivalent to one that just throws in money and does not engage. The fees earned from the transaction charges on the blockchain are distributed to the community on the basis of reward points.

The combination of the structure of the DSO and the PoE form a powerful structure for community driven projects that bring value and rewards to all active participants.

TgradeFinance

Author TgradeFinance

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