On the nature of DAOs and their projection on Electoral & Corporate structures

DAOs are unique in their structure, not particularly because of the manner in which they are structured but how their structure is in fact a ‘hybrid sum’ of two well-known organisational structures – Electoral and Corporate, both of which try to organise two very unique and exclusive systems.

  • In a simplified electoral structure (ignoring the legislative layer), the voting system is sybil-resistant, i.e. 1 entity = 1 vote. The imposition of 1-entity-1-vote constraint is necessary to ensure equal representation of all voters (human capital) which is desirable in a social framework. When looked at from human capital perspective, 1-entity-1-vote constraint encodes the principle that human capital is equally distributed among all participants; in other words, everyone is equally important. The resulting 1-entity-1-vote system then folds onto public governance through the elected legislative assembly.

  • In a (simplified) corporate structure however, 1-entity-1-vote constraint is relaxed and voting system is sybil-agnostic since the end resource to distribute and maximise is not human capital but instead financial capital; this leads to replacement of ‘equality’ with ‘equity’ as a measure of contribution to the system. The further discretisation of total financial capital in ‘shares’ is then performed to distribute the financial capital among shareholders in a sufficiently fractionalised and equitable fashion. The resulting 1-share-1-vote system then folds onto the inner corporate structure through board of directors; in a loose sense board of directors are equivalent to legislators in an electoral system.

    It appears that from a strict analytical/mathematical perspective, both systems are effectively the same except for a transformation that maps human capital to financial capital.

  • DAOs, it seems, are a hybrid sum of the two since they intend to map the ‘end node’ in an electoral system (a voter) to an end node in a corporate system (share).

    This comes with certain consequences; as pointed out above, the two systems – electoral and corporate – are similar but not precisely the same; therefore there is no direct 1-to-1 map between the end nodes of the two. They can in fact only be mapped accurately by a transformation that captures all the elements of human and financial capitals and their correspondences. The ‘forced’ hybridisation of the two to yield a DAO structure results in a bunch of paradoxes and loopholes that DAOs have only begun to unearth.


Example: ENS DAO

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This is well thought out. I like it. Thanks for sharing.

On this part, I’ll bite. :sweat_smile:
Please, expound at will.

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One from top of my head. In an electoral system, a citizen can cast vote for themselves in an election. In a corporate system, a board member cannot vote for themselves in an appointment by vote, say for CEO position. What about DAOs? 1-person-1-vote ensures that conflict of interest in an election is almost 0, i.e. one vote isn’t going to make a difference to the outcome. If a corporate company has millions of board members (= DAO), I guess the same could work for such a corporate entity. In theory, yes, if every person are their own delegate. In practise, no; delegation leads to only a handful of equivalent board members (e.g. top 10 delegates in ENS can enact all the changes with absolute majority)

They DAO-Delegate structure has analogs in the contemporary corporate structures, in that shareholders can grant general proxy voting power to a trusted actor. This in and of itself isn’t good or evil, and in fact can be a good tool for consensus building and signaling preferred intentions or values.

When comparing this to DAOs, it seems the dysfunction could enter if the vote delegation is simply too passive. DAO voting delegation is incredibly broad and permanent. In the analogous electoral scenarios, we’re all required to go vote on each Election Day if we want our opinions to be heard. A single vote for a congressman or mayor or elector doesn’t carry on in perpetuity until changed as it does in DAO vote delegation. Even the corporate proxy structure is generally time bound.

Would a DAO be healthier or more representative if the vote delegation process was temporary and the vote delegation itself expired if not “refreshed” after a certain period of time?

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Bang on. I was literally ruminating over it since a very relevant question was asked just now in the forum which goes at the heart of what you said. There is too much permanence in the ENS delegation structure; several DAOs have expiring delegation windows which I wholeheartedly support. You’ll be hearing a lot about it on ENS Discourse, from me at least. It has been brought up again and again

How is the Quorum value handled in this situation? It can’t stay static if the vote delegation expires. I’d envision the healthiest scenario would have quorum as a derivative value, which opens the door to how that algorithm could be structured to encourage distribution. Perhaps a higher risk score would/could contribute to a higher required quorum, whereas a more distributed vote landscape could allow for a lower quorum. Pure spitball.

Get out of my head :no_mouth: I have a basic algorithm for a dynamic quorum but it is not convincing yet. I’ll work on it more before proposing it.
So far, the DAOs using expiring delegation make a percentage cut-off of “active” votes. I’ll go one step further and make it even more flexible.

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