Breakout room 3: Governance Challenges and Collaborative Solutions

Activity 1: Daniel Ospina: Case study on Company X on Organisational Design & Progressive Decentralisation

The group played a game of several “rounds”, contending with a sequence of challenges experienced by the community and core teams of an imaginary Company X, which is trying to decentralise. Participants had to navigate a series of failures.

Initial scenario The company’s “DAO builder” product was not fully functional and had experienced a delay of 2 years. There was very little community presence, they had slow and inefficient processes, and a lot of “firefighting”. The capacity and deployment of funds was insufficient.

Part of the core team decided that the DAO was not fit for purpose. They started a project to redesign, but managed the DAO development governance behind closed doors. The stakeholder groups were tokenholders about whom not much was known, and a core team who were very idealistic about DAOs.

Round 1: What do you do on your first day of work? The organisation created a protoDAO using its own DAO-builder product.

Core team started building engagement and decided that the DAO should be launched on the side. The community starts to grow. There is a multi-sig funding solution for small grassroots programs. Work is happening. The CEO is very excited about the mission.

Round 2: The product is still delayed and something has to be presented. The core team becomes frustrated. Executives get involved, and tensions emerge and build as ideologies conflict. One team member starts to impose classic corporate strategies - more structure / milestones / OKRs. The core team cuts funding for initiatives that are less strategic - including for community teams. What do you do?

Part of the core team decided that the DAO was not fully fit for purpose. A big project was launched to redesign the DAO infrastructure, including governance and constitution. But all behind closed doors.

Round 3: A group of activist token holders, not liking how things were proceeding, take the initiative to launch a “coup” - they collectively launch a governance proposal / attack to return funds to the community.

The DAO core team/Foundation felt attacked and the situation resulted in bad PR.

Reflections on the activity

• Trying to create a DAO on the side of foundation is probably the wrong design

• Flawed intent

• Without community - in a tough spot

• Initiatives will create tension and should be resolved proactively

• There needs to be a business case for the DAO in order to have a chance of success. Its contribution to the organisation needs to be clear.

• Platform for exponential scalability

• Process was too difficult, complex, and with too high a task load for one person to manage

• Process was difficult with multiple stakeholders

• Process was difficult for people to lose influence and power

• “It’s not just about tooling” - a voting tool is not enough

• Voting tool doesn’t change anything

• Power of the community goes beyond a voting mechanism

• Difficult in scenario to say “What do we do next”

• Recurring theme is to “Ask the community?” through decentralisation methods

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Activity 2: Rafael Presa: Discussion of sNET's DeepFunding

Rafael reflects that there is a tradeoff between the efficiency of centralised decisions and the engagement of community-led ones.

Need for opposition in perspectives, bringing diverse backgrounds into decision making

There is a sweet spot - a balance between decentralised decision making and efficiency.

Question from Rafael to the meeting participants: “What have you seen so far in DAO environments that enables frictionless decision-making processes? What can we achieve? How should we do it? Who’s going to do it?”

It is difficult to account for responsibility and accountability.

DeepFunding has identified we need a lot more learning.

What are the priorities in the ecosystem?

• Decision-making process

• Open area where people can discuss

• Field problems or concerns from the community, then get solution proposals. Then the Community can vote, and engage. Build and wrap-around culture naturally

• First provide value to community, and guide interaction with community.

Things to be aware of:

• Danger of pre-supposing problems before asking. Instead, ask the community “what are your concerns?”

• There is a natural segregation between early adopters and external community.

• When values are identified, people find value, and these values attract certain people (so identify main culture, and allow subcultures to emerge).

Key Takeaways

• Decentralising an existing centralised organisation is extremely difficult, even with the right tools and technology in place. There are many human factors at play including resistance to giving up power and influence.

• Trying to create a DAO alongside an existing foundation is likely the wrong approach. The intent and incentives need to be clearly aligned.

• Community buy-in is critical throughout the process. Lack of community makes decentralisation very difficult.

• There needs to be a strong business case and platform for exponential scalability to justify decentralisation.

• The decision-making process should be open and transparent, allowing community members to discuss issues, propose solutions, and vote. However, voting tools alone are insufficient.

• When decentralising, beware of pre-supposing problems vs asking the community directly what their concerns are. Allow the culture to emerge organically.

• Having a vague mission allows more diverse participation, but can dissipate intentions. More focused values and missions attract smaller but more aligned groups. Finding the right balance is key.

• Overall, more learning is needed on how to enable frictionless and accountable decision-making in a decentralised environment. The human and cultural factors are as critical as the technology.