Smart Contract Summit 2021: Governance Theory Panel

SCRF has been invited to host an independent research track as part of the 2021 Smart Contract Summit. We’ve chosen to present five panel discussions that touch on some of the most timely issues facing the blockchain space: “Identity and Reputation”, “Governance Theory”, “Governance Implementation”, “Privacy and SNARKS”, and “CBDCs and Blockchain”.

In this series of threads, we will be providing some deeper insight into the panel topics, the participants, and where interested viewers can find their most relevant works.

What is SCRF

The Smart Contract Research Forum (SCRF) is where academics, researchers, and industry leaders from all over the world come together to discuss research, solicit thoughtful peer review, and find new projects on which to collaborate. You can find additional information about our programs, grants, and initiatives in our repo; or feel free to join us in our chat.

About the Governance Theory Panel

What are the challenges in decentralizing a hierarchical organization? This panel brings together a group of academics who explore collective decision-making related questions from different perspectives to discuss some of the theoretical aspects of governance.

Full Video

Panelist Bios and Relevant Works

Ellie Rennie

Ellie is a Professor and ARC Future Fellow at RMIT University working across RMIT’s Blockchain Innovation Hub, the Digital Ethnography Research Centre, and the ARC Centre of Excellence for Automated Decision-Making and Society. Her current research is looking at capabilities arising from the use of blockchain technologies. Prior to commencing her Future Fellowship, Ellie’s research was focused on digital inclusion and how cultural norms influence privacy and safety online. She has also worked extensively with NGOs, community and Indigenous organisations on outcomes-based funding models and social innovation evaluation (including the Trust Alliance, a network of humanitarian organisations using blockchain-enabled verifiable credentials). She has published five books.

Some of Ellie’s work:

Relevant links for Ellie:

Joshua Tan

Josh is a mathematician and computer scientist @ Oxford, Stanford, and the Metagovernance Project.

Some of Josh’s work:

Relevant links for Josh:

Michael Zargham

Zargham is the founder of engineering research and design firm BlockScience, which specializes in estimation, decision, control and governance of social and economic infrastructures. He is affiliated with the Vienna University of Economics and Business in the Interdisciplinary Institute for Cryptoeconomics. He earned his PhD in Electrical and Systems Engineering at the University of Pennsylvania in 2014 where he developed novel methods for decentralized dynamic resource allocation in networked systems.

Some of Zargham’s work:

Relevant links for Zargham:

Quinn DuPont

Quinn is an Assistant Professor in the School of Business at University College Dublin. He has a PhD in Information Science from University of Toronto and was a Postdoctoral Research Associate at University of Washington.

He is the author of Cryptocurrencies and Blockchains (Polity), Associate Editor Frontiers in Blockchains, Education Chair IEEE Blockchain Initiative, Research Fellow at University College London’s Center for Blockchain Technologies, Founder and Editor in Chief Blockchain Research Network, Affiliate of The Future of Money Research Collaborative, Member of UCD’s Center for Innovation, Technology and Organisation (CITO), and Member of UCD’s Center for Digital Policy. Previously, he held visiting research positions at Leuphana University and the University of Victoria and was a Senior Information Specialist at IBM.

Some of Quinn’s work:

Relevant links for Quinn

Key Questions for our Panelists

Some of the questions we’ll explore during the panel include:

  • What does governance entail?
  • There are definitions of DAO’s ranging from anything that uses smart contracts to coops that use blockchain to organizations that run without people. In your opinion, what is a DAO?
  • How to avoid the mistakes of the past?
  • Do you think DAOs that focus on non-financial incentives will fare better or worse than those focusing on financial incentives?
  • Is standardization of governance models possible? Is it something we should be shooting for?
  • Are plutocracies OK?
  • What things need to be factored into decentralized governance in order to maximize the chance of building a successful community run system?
  • What is “Designing for Resilience”?
  • What challenges does anonymity pose for governance?
  • Can we coordinate at scale?
  • What is a reasonable amount of agency people are willing to take on?

Watching the Panel

The Summit is taking place virtually from August 5-7. You can find the most up-to-date schedule and get your free tickets here.

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This was a fascinating panel, thank you Ellie, Quinn, Michael, Joshua, and Rich for coming together and doing this. Is there much overlap between the study of DAOs (particularly the ethical considerations) and efforts to develop data science as a standalone academic discipline? Seems like there are similar ethical issues involving data collection, pattern discovery and decision making, particularly for the more autonomous flavors of DAO. I liked the idea of employing professional ethical guidelines the way that engineers are taught, but I wonder whether without the weight of hundreds of years of bridge-building or the risk of losing a professional license those standards would have much power.

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This is an interesting point. I wrote this piece (on general blockchain) ethics which emphasizes the importance of clarifying responsibility, accountability, and recourse (see: A Provocation on Privacy & Ethics in Blockchain-Based Systems: An Invitation by Kelsie Nabben :: SSRN). The recent “DAO Model Law” guidelines by COALA delineate the need for internal arbitration (between DAO members), and external arbitration (between DAO and external entities), which is one way of breaking down who is responsible for what, at lease so people know what they are signing up for, regardless of how automated the DAO (I list the model law principles here: Experiments in algorithmic governance continue - by Kelsie Nabben - Kelsie - on the cataclysmia of digital infrastructure)

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Thanks for the link to your work, Kelsie. In my exploration of blockchain ethics I don’t discuss privacy issues very much, so it’s nice to see a complementary approach.

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One of the questions that run at the core of the conversation: When is a DAO considered a DAO?

The mere use of smart contracts is not an assurance even at a very high automation level. It is also possible to decide on collective actions without smart contracts.

Thus it should be wise to measure DAO effectiveness on a spectrum with room for debate. Otherwise, we set ourselves at risk of identifying the wrong as the ideal.

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Great question! This complementary discussion tackles this question directly: Smart Contract Summit 2021: Governance Implementation Panel

(Not much agreement there either; token platform with decentralized governance?)

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It’s a really interesting and meaningful conversation. I love the notion of creating reciprocal relationships. It can provide extrinsic motivation, which gives people incentives to participate in and develop it, and intrinsic motivation, which facilitates its self-growth within the community. I like the thought of thinking it from the perspective of rigidity and elasticity, which makes its development more resilient. The reason for people to turn contracts toward building a firm, that is internalization of external cost, is very enlightening as well when we thinking about governance on blockchain and how does it interact with other entities or internet services. These make me feel DAOs are more like organisms.

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For practical purposes, maybe it could be worthwhile to discuss DAOs or governance on chains from a legal analysis perspective as well. I’d like to share that NTU law school professor Wen-Yeu Wang has a book “Exploring Economic Foundations of Contracts and Organizations” (ISBN:9789575110956) is talking about how the resilience of contracts and organizations performs in different commercial scenarios. It mentioned DAOs as well. It preliminarily concludes that business trust may be a better legal framework for a DAO rather than a partnership or LLC. Meanwhile, it remains space for more discussion.

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It’s an excellent panel discussion! This is an interesting point to learn about the development of the government process. And Ellie pointed out that automation is only good with a high degree of capacity. It’s why the DAO encourages more people to get involved with the community.

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I was just listening with a podcast featuring Dr. Michael Zargham and figured I’d post it here as it’s relevant to the overall topic. Palladium Podcast 62: Michael Zargham on Society As a Complex System. In this episode, Zargham spoke about the diversity of time scales that are important to think through with complex systems. This also made me think of something that came up in conversation with one of the panelists, Joshua Tan. Specifically, we got on the topic of looking at governance across different scales in a system (say the protocol, network, and data layers).

Bringing these two ideas together, the time scales at the different levels can vary greatly. At the protocol layer, the time scale should arguably be a longer one than at the data layer. When I think of something like resilience, I start thinking long time scales. When I think of ethics (or harm minimization as it was referred to in this panel), I think of an endless series of decision on very short time scales that keep building up over time.

Understanding which factors at which layer need to have the ability to be fast moving (removing bureaucracy) vs where there should be more space for longer-tail conversations and even adding measures to slow down decision making (potentially adding bureaucracy) is also an important facet to consider when trying to think through and design governance. Especially considering there’s the added complexity that there will be points when a decision needs to be made at, say, the protocol layer that needs to happen quickly but might have long lasting implications.

Trying to think the temporality of different decisions and their implications is an interesting exercise. If anyone knows of any literature on this topic, please share!

Citations:

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While saying governance should be non-hierarchical or flat might get you applause, Dr. Michael Zargham points out that it’s actually terrible advice when it comes to coordinating communities and getting things done.

I’m reminded of The Tyranny of Structurelessness by Jo Freeman, a 1970s paper that explores structural problems facing groups (insights grounded in the women’s liberation movement but widely applicable). Freeman argues that “structurelessness” is organizationally impossible. It doesn’t prevent the formation of informal structures, only formal ones. In fact, structurelessness becomes a way of masking power, because as long as the structure of a group is informal, rules of how decisions are made are gate-kept by a select “in” group.

Given that “non-hierarchical” might not be best, what are other options? In Humanocracy, Gary Hamel says "on any issue some colleagues will have a bigger say than others will, depending on their expertise and willingness to help. These are hierarchies of influence, not position, and they’re built from the bottom up.” Instead of a single hierarchy, Hamel describes the need for many evolving, overlapping ones, based on passions, strengths, and expertise.

How might we create fluid hierarchies of influence in DAOs? Knowing someone’s track record for good decision-making, their “on-chain resume” in the community might help. And things like vote delegation certainly enables communities to identify which members might have more expertise in a certain topic, and put more weight behind their perspective.

I think a helpful first step will be to help people unlink non-hierarchical/flat/horizontal and applause. The default answer that governance is “non-hierarchical” actually doesn’t tell us anything new and simply serves as an excuse to avoid uncomfortable conversations about power.

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Though we can’t avoid informal hierarchical power structure in the DAO, I think DAO may provide more transparency for its members to monitor the power they have delegated and a more accessible and easy way for its members to take back their power. These are what they may be pretty hard to achieve in a traditional organization.

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