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!