Free Company - Multi-Disciplinary / Multi-Protocol Contribution

About two months, ago Jill Carlson published Free Company. The Decentralized Future of Work | by Jill Carlson | Medium

The Big Question
The how to achieve effective coordination and economies of scale in open, decentralized development ecosystems


State of the Ecosystem:

For the Projects

  • There is little learning happening between siloed project teams despite opportunities for synergies and collaboration
  • Protocol projects are the most financially well endowed open source projects in history
  • Protocol projects are struggling to recruit due to the overall low supply of talent, and what little supply there is being locked up in individual projects or as service providers

For Contributors:

  • Primary option for talented contributors who wish to work broadly across the space is contracting, but this is difficult to scale
  • It is challenging for key contributors to fully participate in the upside of what they are delivering (without putting their own capital at risk)
  • Projects need to ship and to do this they need to source contributors
  • Contributors want to work in an open, decentralized, and collaborative manner

The creation of a “system” or free company that can bridge top talent with top projects in a multi-protocol and multidisciplinary way, with a focus on shipping in the form of code, products, partnerships, educational initiatives, contracts, or content. The ex-consultant in me sees this as a multi-protocol, decentralized (I cringe when I use that so broadly), consulting firm/service provider working across protocol development, product, UX, community, marketing, ecosystem development, developer relations, and developer experience.

The Free Company could collect revenues from:

  • Contracts with protocol projects
  • Winning bounty programs put forth by projects
  • An investment fund that takes a stake in projects

Contributors could be given a stake in what they are shipping and can share in the upside of a protocol’s success.

Using a DAO
It could be interesting to explore this free company as a DAO, and understand what aspects of the system could be “decentralized”.

I would love to start a discussion on:

  • Measuring/Quantifying Contribution: How do you measure labour and output from contributors? In a multidisciplinary environment, shipping will take many forms and could become quite subjective…
  • Contributor or Service Provider Reputation / Trust
  • Governance Processes: Can anyone join the free company, do contributors need to apply,
  • Resource Allocation/Shared Infrastructure: Would there be any resources shared by contributors, and how would those resources be allocated? How are contract terms drafted, negotiated, closed? How are contributors paid?

Measuring/Quantifying Contributions of independent contractors/contributors/service-providers in a service based DAO:

I wanted to bring up a point from the paper 1972 paper “Production, Information Costs, and Economic Organization” by Armen Alchian and Harold Demsetz.

Alchian & Demsetz argue for the firm as a central contractor, acting as a coordinator and monitor system that reduces transaction costs (theory of the firm). The output produced by this team is tricky to measure/quantify objectively, and rewards are hard to allocate accordingly.

From my understanding, most open source contributions so far have been judged and valued in a pretty centralized manner, by a small group of people? Or at the very least, processes that allocate resources (could be extrapolated to contribution rewards) are still pretty nascent and untested…

Allocating Rewards Appropriately

Excerpt from The Economist’s “Coase’s theory of the firm” article:

Mr. Holmstrom and Paul Milgrom [1] established that where important tasks are hard to monitor, and where a balance of activities is needed, then a contract should shun strong incentives tied to any one task. The best approach is to pay a fixed salary and to leave the balance of tasks unspecified. A related idea developed by Mr. Hart and John Moore [2] is of a job contract as a “ reference point” rather than as a detailed map.

It might be very complex to architect “reference point” job contracts for hundreds, thousands of independent contributors in a DAO, on-chain environment, given that many of the “balanced tasks” that real-world employees perform are never even included in these or are incredibly subjective. Is there any way this these important tasks could be coded as business logic? There is probably a need for some level of centralization when assessing contributor responsibility, output, and reward allocation.

Would love to hear more thoughts! Has anyone written about measuring contributions/output for a DAO (or in any similar environment)?

[1] "Multitask Principal-Agent Analysis: Incentive Contracts, Asset Ownership and Job Design” by Bengt Holmstrom and Paul Milgrom, Journal of Law, Economics and Organisation, 1991
[2] “Contracts as Reference Points” by Oliver Hart and John Moore, Quarterly Journal of Economics, 2008

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Hi @kevink94! Thanks for sharing this its definitely a really interesting point of discussion.

Measuring/Quantifying Contribution: How do you measure labour and output from contributors? In a multidisciplinary environment, shipping will take many forms and could become quite subjective…

I think measuring/quantifying contribution is fundamentally a subjective issue, I’ve seen some approaches which attempt to reward people for objective metrics such as number of commits or lines of code included in a pull request just don’t feel like they would ever work particularly well. I think it will require some sort of self-valuation prior to work occurring and being accepted, this is one of the goals of one of the Aragon Nest projects (Planning Suite). I hope that we see more and more experimentation in this regard.

  • Contributor or Service Provider Reputation / Trust

I think reputation definitely can help, but the question becomes how do you design a reputation system that accurately captures the history of valuable contributions… I think the approach that Colony is taking with a task/skill-based reputation mechanism makes a lot of sense for a use case like this. At basic level an organization can use non-transferrable governance tokens as a means to both track internal reputation within an org.

  • Governance Processes: Can anyone join the free company, do contributors need to apply,

I think ideally organizations take on a more fluid nature where its easier to join or leave than it is with a traditional binary hiring/firing process, but there are some challenges and limitations with that that aren’t immediately obvious. If participation is a gradient, at what point to do people get certain privileges? How do you grant or revoke access to sensitive resources such as social media accounts that are used to communicate on behalf of the organization. The Aragon Community is starting to experiment in this regard with the Aragon DAC initiative.

  • Resource Allocation/Shared Infrastructure: Would there be any resources shared by contributors, and how would those resources be allocated? How are contract terms drafted, negotiated, closed? How are contributors paid?

Some shared resources can be governed using the DAO’s internal governance process, but currently there is no way for a DAO to enter a traditional contract. This is one of the reason we think a digital jurisdiction will help DAOs become more practical. :slight_smile:


I’m currently working on the second part of LegalBlock paper. This second part is about incentives whereas the first part was the conceptual paper. We have been experimenting for months with the community, testing our hypothesis on social behavior, doing Participant Observation and iterating. As a result, we cover the four items mentioned by
Kevin in the LegalBlock second paper as follows:

  • Measuring/Quantifying Contribution: First of all, we based our structure on Cooperative Games due to the nature of the community and our vision. We have a table of the Activities, and we assign points; based on the contribution of each member on the activities we develop together. Those points will be redeemed by tokens when we are ready to do so. We have been experimenting with this for a while. As Luke says, it is not easy. We came up with a clear methodology where the Catalysts propose the activity and the community decides if that activity is of the interest of the group. Therefore, you are sure you will have participation, and you will be able to assign the points;

  • Contributor Reputation / Trust: This is one of the foundational ideas. We have started the process of Accreditation of Lawyers (community members) via TPL as a matter of test. The idea is assigning the tokens to the verified Lawyers using the Token Management app as an incentive for participation in this test. That is the first step to build a reputation system. We do contemplate later the use of TCR design as a way for the community to participate in the reputation process as well, on a foundational level. What we need is a periodic review of contribution per participant where the members gain or lose in terms of reputation. One of the ideas is that this could be achieved via a one-time bond deposited once you apply. Each X period (let’s say every 365 days) the voting is open and the points; are counted. That could give us an actual and historical contribution measure that is reset every X period (365 days). We have also looked into Colony model. However, Colony is something most of our members don’t see as valuable as I could see it. So far it has been disregarded for us. We need to work more on this topic on the reputation system.

  • Governance Processes: We propose Elinor Ostrom work on the Commons. We are looking into the eight principles as a way of Governance for the DAO (in our case DLO Decentralized Legal Organization). Although the community is an open forum, only those Accredited participants (Lawyers and Catalysts in our case) are considered for Governance purposes. All of this is measured by contribution to the commons as stated above.

  • Resource Allocation/Shared Infrastructure: We are proposing Sharpley Value as the mechanism of fair distribution of rewards based on the measure of item one above. Having said that, the Sharpley Value could solve the fairness distribution problem, but we still need to address more friction on the incentives side. Therefore, we are also considering the Core allocation method. We are doing more research on Convex games. As per participant observation, we see a trend of forming Coalitions within our Community. The reason is the diversity of interests which we find amazing. That’s measured by participation in the activities as explained above. Some participants are only interested in talking about regulation, some others are interested in the protocols per se and the code behind, some others want to participate in tests, or interact with self-regulation protocols, legal agreements platforms, and so on.

We have already identified at least 3 sources of revenue (external). The Token would work on the Governance, Reputational level.

Luke had some participation on the first draft as per my invitation to comment. However, the intent was always iteration based on Participant Observation. And that takes time. I would be interested in getting your feedback on this next phase. If you are interested, I’d love to share with you the draft when it comes available. How can all these ideas and assumptions be translated into code and smart contracts? What should be left entirely off-chain and what is a good opportunity and a feasible one to be tested on-chain? More than following Kevin discussion through answering questions, I leave this open for feedback.


A system that allows projects to post and search ongoing issues may help promote collaboration and pooling of contributors efforts. This may benefit from an anonymity option.

Projects and contributors should be allowed to decide on the levels of counterparty engagement they require. Different terms and conditions will appeal to different people. Because of this I would suggest different ways of sourcing and rewarding.

Bounties will continue to have use as they appeal to many who prefer more tangible objectives and rewards as well as a different approaches to task completion; which generally involve “big pushes” towards goals. I believe they also tend to promote a more “hands off” style of working that again will appeal to many. I would keep these. These are one end of the spectrum.

At the other end participants may favour a more engaged way of working that also integrates their own wishes for personal development and needs, which theoretically can benefit all parties.

Because of this I believe the ability to reward contributors and employers across different domains would be useful. Domains for example could be:

Team working

These are just general ideas and not an exhaustive list!. Contributors and projects could decide at the beginning whether they wish for the scoring of any of these domains to have an effect on the rewarding outcome. These would obviously be open to gaming and abuse and the use of TCR would be one option to negate these. Contributors/Projects could also be scored on these (and reflected on their profile) which may (or may not!) be good for them. TCRs could help in the validation of these.

Initial self appraisal of work completed and fees due could be submitted by the “worker” prior to payment. These can be correlated against a similar “employers” appraisal. Use of closed and open questions will provide quantifiable and deep information. I would expect over time analysis of this data will provide insights and quantifiable data with normal distributions, that could be used to power smart contract driven automation. There will of course be disputes which will need human arbitration which again will be based on TCR reward/punishment mechanism.

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