Non-Profit Localized DAO's - The Mechanics Needed to Sustain Community Engagement

Hello Aragon Community,

I wanted to discuss the topic of Localized DAO’s, and engage this community about ideas and thoughts around some fundamental requirements for Localized DAO’s to perform in the real world.

I believe that Localized DAO’s, whose membership and activities are dedicated to a specific geographical location have significant potential to create a new form of highly coordinated civil society. It is the basis for the development of my organization, CityDAO, and one that desperately needs more minds if it’s going to succeed (which is why I am writing this).

Decentralized organizations, especially ones that span multiple languages, cultures, and geographical locations have historically had a difficult time establishing a unified purpose and sustaining the participation of their members. The cause of these difficulties stem from a myriad of reasons ranging from a lack of desired mechanics to the charismatic influence of a few unknown members.

The benefit of creating a localized DAO such as the one I will be initiating in Oakland, California is that is has a central geographic location for which the purpose of the DAO is defined. While the members of this DAO may still have cultural and language barriers, the ability to guide them around an inherent commonality (the place they live) offers a great advantage to the long-term sustainability of the DAO.

This however, is not a given. There are certain requirements that will be necessary for localized DAO’s to succeed, and that is what this post is about. The following topics are presented as an articulated problem and key questions regarding how to solve them. I am hoping, if you have the time, that you will engage both the problems and questions, propose any alternatives, or just highlight any misconceptions I may have about the topic.

I’m currently setting up a method of action research that will evaluate the best methodologies for Localized DAO’s to succeed. These problems are ones that will need to be resolved for the first phase of the Oakland, CA DAO to be initiated. While this is all a grand experiment, I plan on using this DAO as a method of engagement, not only with my fellow citizens but also with local organizations and the City of Oakland.

Once again, thank you for your time and attention.

Problem 1 – Legal Jurisprudence – A Liability Problem

The lack of clarity surrounding the legal characterization of DAO’s is extremely problematic for any community based organization that desires to execute collective actions.

DAO’s are a new form of digital organization, and the legal characterization of such an organization, depending on where you live, is probably not well defined. In the United States, I have yet to see any progress regarding a cohesive framework for DAO’s to operate within.

While many DAO’s operate without the fear of liability (due to the nature of their work), this cannot be said for Localized DAO’s. Liability is a significant concern when coordinating the actions of people in the real world. I believe it is in the best interest of any Localized DAO, at the moment, to incorporate within the legal framework currently mandated in their jurisdiction(s).

From what I currently understand, all participants in a DAO which possess an instance of liability will be treated as members of a General Partnership. Essentially, one bad apple turns the batch. This is not an attractive proposition for potential members wanting to join the DAO and put their money into an organization without proper liability controls. It also has the possibility of establishing the wrong type of legal precedence regarding the future regulation of DAO’s.

I’m sure there is much more to be said on this issue by those who have a far better understanding of this legal niche, but nonetheless, incorporation seems to be the only option.

Questions to Ask:
What limits does legal incorporation place on DAO structure, and the mechanics of incentives alignment?

Once Incorporated, how does a DAO (in my case a Non-Profit), handle the issue of liability? Is it placed on the individual responsible for incorporation? Is Liability Insurance the best method for protecting DAO founders?

How should Incorporated Entities that are both digital and paper based, bridge the issue of Reporting Requirements?

Problem 2: A Transitional Bridge from Present to Future:

At the moment, the most productive DAO’s are those whose activities are digitally native, and do not require interaction with traditional methods of ‘real world’ exchange. Localized DAO’s will need the ability to use collective funds to buy equipment, pay for services, and provide general supplies for the execution of their specific initiatives. While I see this problem as a temporary (relative) issue, I cannot currently spend my DAI at the local hardware store (yet).

While converting between stablecoins and fiat currency is not ideal (for both accounting and legal considerations), it is in fact possible. Our problem exists not in how the money is spent, but rather who has the power to spend it. Articulating a process for this problem is crucial for building public trust not only in a new technology, but with fellow citizens making up the membership of any Localized DAO.

By establishing a legal identity for a Localized DAO, we can grant our organization the ability to open an organizational bank account for which the conversion between digital currency and fiat currency can occur without the need of any individual member being responsible for such a conversion.

Questions to Ask:
Can we ensure that any member, including trusted parties, do not run away with our funds, or act in a manner that places undue liabilities on those members who are responsible for its incorporation?

Would it be easier for the member who has authority over the Organizational Bank Account to be in charge of all Spending in the DAO?

Is it possible to distribute this power among multiple members of the DAO?

Could the development of an App that interacts with a Banking API re-enforce transparent information about this bridge?

Problem 3: Volunteers – Another Liability Issue

Participation has been a pain-point for many DAO’s within the space. Without the ability to provide immediate utility or defined role to any given member – has resulted in DAO’s with more ghost EOA’s than active participants. Citizen Engagement is fundamental for Localized DAO’s to become sustainable, and it is also one that is easier to achieve compared to their digitally native counterparts. While the DAO may grant us the ability to organize a weekly cleanup around the city, allocate funds for the equipment necessary to do so, it still creates a huge liability in terms of organizing Volunteers. Having the ability to create online waiver forms is really the only way to make this work. If you have any thoughts on this, I’m very interested in obtaining more perspectives.

Questions to Ask:
Is there a method for waivers to be developed on Aragon?

Can Waivers be integrated into tokens?

I believe that if I can set up the mechanics for a DAO that addresses these problems, I can begin to start initiating the Oakand, CA DAO. I’ve also been working on a Utility-Based Bonding Curve design for non-profit DAO’s if anyone is interested in discussing.

As I said, my goal here is to start building the informational infrastructure for Localized DAO’s to exist in every city, and if you have any interest in helping me in this endeavor, I’d really appreciate your time!

Thanks again!

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Interesting stuff! In Australia I have moved from Sydney to a small country town and I have occasionally thought of something like this for a local project but unfortunately I think the numbers of potential participants just aren’t there . .

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Hey! Thats awesome!

Well, the concept is to establish working DAO’s within cities, and connect cities containing similar infrastructures and allow them to learn from one another through the ‘CityDAO Network’, which will be operated by the CityDAO Organization.

The Network will attempt to develop Digital Public Utility Networks (dPUN’s) which are designed to be small-scaled distributed networks that serve a specific function within the field of public administration.

The broader vision being that we have utility networks owned and operated by local citizens that can be trusted when local agencies and their linkages (public-sector organizations) are either overburdened or have missions that are misaligned with the observed needs of the community. You can think of them as parallel networks that can be trusted as vehicles for collective action when the public sector becomes restricted for any reason.

Once developed, and piloted, DAO’s can share the IP rights of these networks through a Bonding Curve, generating revenue for the Non-Profit DAO’s, enabling them to expand their infrastructure further. The CityDAO Organization will be dedicated to help implementing these Networks in whatever city that wishes to adopt it.

Not every city is alike, but the one great aspect of introducing technology into the public sector is that it unites political ideologies. If you want small government, these networks can provide a path; and if you want more efficient public services that are removed from the bias of administrative discretion, these networks also provide a path for that…and the great thing is that they can co-exist with legacy forms of governance.

I think we just need to put it into practice! Just think about what your small country town needs (I grew up in a small country town), and I promise you’ll find individuals with common needs and goals. It’s easy to speak about decentralization, but much more difficult to practice it.

Yes, I agree with all of that!

The main DAO idea for the particular situation I have was to set up a growing electricity utility storage grid - owned by the users. There are some related projects already in existence - notably:

Power Ledger | https://www.powerledger.io/

which I put some cash into during the ICO and a few other, smaller groups I am aware of in Australia but I am thinking more along the DAO lines anyway . . I know there will be constraints and difficulties to deal with re a small group setting up their own utility in competition with existing commercial utilities - which exert influence over elected bodies state and local but I am interested in pursuing the option in between other, mostly non-profit projects. The idea came to me originally because I wanted this project:

http://lev.com.au (excuse the CSS bug that needs fixing . . )

to become as self-sufficient as possible in as many ways as possible and I thought it might be worth involving the neighbours in the electricity deal . .

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Thats (http://lev.com.au) really awesome! And I am very aware of the Power Ledger project (Good Investment!). I think they are attempting some really unique approaches to competing in existing energy markets.

Practically, the dPUN’s I was speaking of before are intended to serve use cases that aren’t commercially viable at the moment.

Decentralized Networks aren’t a cure all, and in fact there are some situations (think energy, bridge and highway construction, public transportation, etc.) where centralized management from trusted legacy institutions (including commercial entities) is a far better option for the public, mainly because it requires significant attention from the most talented administrators to ensure the safety and sustainability of the common good.

The Networks I’d like to see built are small in nature (don’t require significant scaling), and assist in some of the smaller functions that our local governments and agencies provide but can at times overlook or de-prioritize as cities experience the natural contraction and expansion of their expected obligations mandated by public policy.

The hypothesis is that if we create these networks, and instill a behavioral and cultural mindset of participating in collective action (through the use of DAO’s), we can possibly relieve some of the burdens that we all place on our local governments. By doing this, we could potentially shift public trust away from centralized government institutions and place it into equilibrium with its citizens.

I see it as a method to incrementally decentralize the means of public administration.

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Amazing initiative! I am researching impact economy inside of the Global Impact Hub community that is represented by a network of co-working hubs all over the world, so basically we are working in the same field) I am looking for an economic system that would allow to connect such local communities into one global network with decentralized economy and governance
Regarding to 1 problem you described, I see the solution in form of co-working center or community hub that can regulate activities and represent DAO participants in a court as a legal entity.
Regarding to 2 problem, basically you are speaking about fiat gateway system, it’s still a vulnerable part of the DAO’s mechanisms, but if you consider this project https://celo.org you will see that there are similar solutions tested in the field. I assume that in terms of co-working solution functionality of the gateway can be represented by the co-working it-self - company has bank account with some liquidity and provides DAO with fiat-crypto exchange for a reasonable fee (buy tokens=buy membership, sell tokens = service payment, incentive = tax+fee). This eliminated risk of the entity to run away with money because entity has just its own liquidity.
I am just making an assumptions, because I’m in data gathering stage now and can’t give reliable information at the moment.

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Thanks!

You as well! I’ve enjoyed reading the research you have prepared in your paper, Impact-Oriented Economy Research! I think it is incredibly important to create new models for impact funding. I believe that Commons Stack and their crypto-economic approach is an absolutely fascinating proposition, that in the long-term, will provide a more efficient and transparent method for the management of collective capital that can scale globally and provide better outcomes toward the governance of the commons.

Also, thanks for the feedback on the problems/questions! I think I have come to those realizations as well! I’ll check out the implementations of Celo concerning their use of a fiat gateway system.

Currently, I’m working on applying a decentralized assessment framework toward the development of digital public utility networks. If you’re open to it, I would love to collaborate with you in your research!

Thanks again MikeAnanyin!

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Thank you for your feedback! Sure, I would love to collaborate, please let me know how I can support you! From my side, I just initiated voting on my proposal for Impact Hub community on-boarding and after I finish to construct chatbot survey, I would like to ask you to go through and give me a feedback about it, we can combine our goals and develop similar surveys to gather data and also generate leads

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