The number of DAOs has increased rapidly and with it the number of protocols for on-chain voting. We could be forgiven for hoping that this would take us away from the autocratic structures of the past, and nearer to a vision for commons managed through decentralised governance. However, most DAOs suffer from very low participation, with just a handful of large token holders calling the shots. In turn, low participation leads to short-term vulnerabilities and low-quality decisions, risking the long-term viability of DAOs.
How can we address this problem?
In this article I will explore one of the biggest hidden costs that’s limiting participation, and a four-step approach to addressing it and advancing decentralised governance in your own DAO.
Accounting for the cost of making decisions
At its most basic, participation happens when
potential upside of participating > costs of participating
So both sides are important, yet most tokenomics conversations and documentation pay significant attention to creating incentives and upsides, while giving very little to reducing the cost of participation.
The conversation around the latter is frequently limited to two basic categories of costs:
- The cost of obtaining rights to participate – Money and time invested in acquiring a governance token.
- The cost of voting – Time invested in learning how to use the specific voting mechanisms of the DAO and the payment of gas fees or similar. (Currently, this is a big issue for Ethereum-based projects but this will hopefully be solved in the near future.)
The third category, however, remains the elephant in the room: the cost of sense-making. The time and energy we need to invest to be able to make an informed decision on how to vote.
Since sense-making happens largely off-chain, in the messy space of human interactions, the technocentric nature of blockchain projects has an unintended tendency to ignore sense-making costs.
How sense-making happens
We live in a world where every day there is more information produced than anyone could consume in a lifetime. So if we’re to stand a chance of navigating what’s happening around us, we need to collaborate.
Without collaboration, every agent would need to digest all the information available, making it very expensive (time and energy wise) to engage in governance. And that’s why, in practice, we sense-make collectively, borrowing insights and building on top of each other’s knowledge.
A key requirement for good decentralised governance is then enabling collaborative sense-making, making it viable for as many actors as possible.
Collective sense-making is broken in most DAOs
When we look at most DAO community channels (often Discord), we see common patterns that anyone familiar with the tyranny of structurelessness will recognise:
- Onboarding systems are poor or outright non-existent. When you join, you’re faced with many channels and loads of people talking but no idea where to get started. This feels both overwhelming and disengaging.
- Conversations are fragmented. Since chat happens through a combination of private and public channels, across platforms, and often mixed in with other topics, it’s hard to follow a thread.
- Conversations are ad-hoc and noisy. Chats rarely follows a clear process, and it’s hard to filter relevant information from yet another request for basic tech support or rocket meme.
- There is no way to navigate the network. The lack of organisational charts, members databases, and public job titles makes it hard to know who to address for a specific idea/question/request.
- There are a few key influencers who ultimately call the shots, and they’re hard to get hold of. Insiders/connectors are likely busy with a million things, which often means that if you didn’t meet them in the early days, you’re unlikely to get their time or attention.
- The more radical or innovative an idea, the harder it is to convince others. One can have a genius idea, but if it’s quite out there, it will require a lot of time to explain it and help others see its potential.
All of these patterns, combined effectively, make getting involved in the social interactions and decision-making of a DAO a binary choice. Either you invest loads of time or none at all. Anything in between is likely an expensive way to achieve nothing.
Enabling collaborative sense-making
Many DAOs already have community managers that actively participate in the conversation, answering questions and the like. However, moving beyond our current challenges means we need to think more systemically, a bit like when making bread.
Any decent baker knows that good bread starts with getting good ingredients and putting them together, but that the magic happens when you create the right environment to let the yeast and microorganisms do their thing. It goes like this:
4 steps to bake high-quality decisions into a DAO
1. Choosing quality Ingredients: Place a small hurdle for those seeking to join the community channels to ensure a minimum level of commitment and understanding.
This might take the form of a short quiz following some well-crafted documentation or videos, to ensure they have basic knowledge. (The training videos in Coinbase that reward users with a couple of tokens are a great example.) Or for the decentralisation purists, something similar to Enspiral’s referral system where two people need to vouch for you to join the network.
You can still keep a fully open channel for tech support, but to participate in the community, people need to at least know what the community is about.
2. Mixing the Ingredients: Create a good onboarding process, where the user journey doesn’t require a PhD to understand how to start participating in your DAO.
This process must involve human connection. Joiners can read a lot of wonderful things about your DAO, but the key is establishing some level of rapport with an individual who acknowledges and welcomes the newcomer. Without this human, personal welcome, people won’t feel connected.
Think of onboarding as a progressive funnel. What’s the minimum understanding someone needs to start participating? And what’s the plan to help them expand from there? A bit of gamification here will go a long way.
3. Creating the right environment for proofing: No bread will rise if it’s carelessly left out in the cold, and the same happens with community members who are left alone to scroll through every Discord channel.
Proofing – whether bread or ideas – is the magic that happens when we allow high-quality ingredients, carefully mixed together, to sit in the right environment. For collaborative sense-making, that means facilitating high-quality conversations between participants.
And a great way to do so is creating a structure for the key topics, channels, and platforms where conversations will take place. These common standards and framing improve the signal to noise ratio, provide some structure to navigate the network, and give more continuity to important conversations, thus reducing the time costs of participating.
You can let the structure of the conversations evolve organically, but to give you a head start, you can find in this article Six Key Interactions that are required for an organisation (decentralised or not) to thrive.
4. Baking: Finally, it’s time to solidify conversations into high-quality decisions, with an open and structured decision-making process that enables collective sense-making over polarization.
The government of Taiwan has taken a great approach to this. Their policies are debated in a sort of live reality TV show, with expert guests who answer questions from the audience and – only after extensive debate – a bill is drafted and voted upon. This requires a facilitative kind of leadership that aims to create space for a conversation to happen, without trying to dictate the conclusion from the outset.
Another interesting example is the Advisory Process used in self-managed systems. Multiple rounds of clarification questions, reactions, and objections are raised, and the proposer is invited to clarify, reframe or adapt the proposal to address objections until it can be deemed “safe enough to try”.
Whichever decision-making process you end up choosing (whether quadratic voting, conviction, or reputation systems, etc), remember that the final decision is only as good as the sense-making process to get there.
A new era for DAOs and decentralised governance
These four steps can help us to mitigate one of the most significant barriers to entry for active participation in DAOs: the individual cost of sense-making. By making collective sense-making possible, we distribute the time and energy required to get involved, increase the quality of decisions, and make participation more enjoyable. And while this has the wonderful benefit of making the organisation more valuable, it’s about more than that. Increasing participation is exactly what we need to move towards truly decentralised governance.