I’ve been circling around this idea for about 3 years now while working on self sovereign identity. After recently coming back to this idea after digging more into DAOs I finally decided it was worth putting it on paper and getting feedback for. I decided to write this down as a blog post which you can find here: Financing Open Source Software Development with DAO Governance Tokens – Kyle Den Hartog
Given the Radicle community already has a fair amount of tooling in place which seems aligned with the concept based on the discussions I’ve seen here I wanted to check in with this community here to get some better understanding of what I’m missing with this idea or if it makes sense to do something like this. Let me know what you think even if you think it’s a fatally flawed concept bound to fail.
“As a project grows and is utilized by more and more developers it will create an economic incentive for people and companies who wish to steer a project to buy up the currently available tokens or contribute to the project in order to collect these tokens.”
From the perspective of developers, the existence of something like Radicle means there can be tremendous upside in contributing to FOSS (free and open source software), assuming the FOSS they contribute to garners widespread adoption.
For users of a given open source project (read: the corps and individuals you mentioned), something of a zero-sum game comes into play. They can buy into the given governance token, thereby gaining influence, or they can refuse to buy into it and lose out on prioritising their feedback and requests for features. There isn’t much middle ground; you either buy in and benefit or you don’t.
For web3 native orgs — where cooperation is more the norm — buying into such a system will likely come easily.
For web2 corps, this may have 2 interesting implications. Firstly, it acts as a forcing function to bring web2 companies into web3 protocols. In order to steer the work in FOSS Orgs that adopt tokens, they will need to buy tokens. Secondly, it will put them in competition for influence. I imagine web2 corps will either spend indiscriminately to gain influence, thus driving up governance token prices, or (fingers crossed) they will change some of their business practices to become less centralized/siloed and more decentralized/cooperative.
The tooling Radicle will provide will allow FOSS orgs to structure the economics of their projects in many ways. It should be very interesting to see how each Org finds that balance of equilibrium between their labour/wages and their users. The examples above mostly assume FOSS Orgs using a limited supply of tokens, but there’s no reason they could create tokens with no upper limit on token supply.
I’m assuming you’ve read the post below, but if not, you may like it:
(You might also like to checkout the #drips channel on the Radicle Discord)
Especially in cases where the token supply for a project is limited, I can very easily envision there being a race to have ownership to steer some FOSS. The main worry I have here, though, is this creates speculation. This often means inactive token holders (read: people who don’t actually participate in governance). It also opens up the opportunity for corps to come in and buy up a lot of tokens, which is a hotly debated topic these days…
I don’t actually agree that this is the case (yet), but I do think it’s worth raising as a downside of speculative behavior, whether it’s speculation on the price of a token or speculation on the power a token may wield in the future. I would be a bit worried if we just have a bunch of web2 corps owning 10% of most protocols out there, because that 10% can slowly turn into 15%, then 30%, and so on (don’t forget their proclivity to grow their assets over time).
In any case, my outlook is fairly bullish. The ideas in your blog post resonated with me. The ideas I’ve shared above are also some of what came to mind when I first started supporting Radicle. I just don’t see any long-term incentives for FOSS developers to continue doing things the old way.
I especially liked your point about existing FOSS projects – and not just web3 projects – adopting this model of funding. I think this topic is worth expanding upon because there is an incredible amount of value in existing FOSS that just isn’t funded properly yet and could likely benefit from adopting crypto-based funding.
I created an account just to reply to this after coming up with a lesser version of it and googling (I know) “sovereign software dao” I believe this has the potential to realize great value for the world but especially for the niche FOSS corners like the privacy community.
I believe the right thing to do now is to spin up a discord server, spread the word and see how it grows organically. I am also willing to fund this effort to the degree I can.
This has been on my mind a lot lately. Not only with web2 corps, but any single individual or entity obtaining a large portion or even eventually a majority of governance tokens - ergo be the primary influence in governance decisions - seems like a pretty serious problem that there don’t seem to be a lot of solutions for. Even if not a major threat now, I actually see this as being one of the largest potential pitfalls of DAOs.
That brings me to these question: Should we be already be trying to prevent this from happening down the road? If yes, how? These are not easy questions to answer if we are to maintain the free and fair right to token ownership and anonymous/semi-anonymous luxuries of decentralized governance.
If anyone has any good literature on this topic I would be grateful if you shared!
My favourite mental model is one that focuses on ecosystem members earning and holding tokens. users earn/buy tokens for access, growth contributors earn tokens, ecosystem builders earn tokens, those running nodes earn tokens, etc. If you distribute ownership between those to build, grow, and use a protocol it’s probably most likely to serve that ecosystem best. For this to work there may need to be more models that allow for growing supply over current model of fixed supply that largely rewards investors and those that are early.
Uncapped supply and dilution of existing holders in favor of new ecosystem contributors is just one way to achieve the goal of decentralized and anonymous ownership.
Fix (or slowly increasing) supply could be combined with a “buyback and make” model is another option. Obviously, it requires a working economic model to enable the DAO/project to execute buybacks.
Another option is to implement a multi-class token voting model so that work contributors keep a significant governance power, regardless of their current holdings. The limit here is that such a setup would twist the market price of the token if its value is essentially about governance.
There’s also the option of quadratic voting coupled with privacy-preserving identity schemes (establishing uniqueness with BrightID, PoH, Idena, or even web2 means, and then using it with zk-based services such as Sismo).
I believe this has the potential to realize great value for the world but especially for the niche FOSS corners like the privacy community.