Towards Cooperative Ledger Governance Models

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Nathan Schneider:

"Cooperatives are businesses that practice democratic ownership and governance among active participants, rather than serving profit-seeking outside investors (Schneider, 2018). They blend person-centric governance (one member, one vote) with market-based incentives (patronage dividends in proportion to participation). Cooperatives have historically served as a social and legal framework for activities that DAOs and other distributed-ledger projects seek to enable, such as accepting small, early-stage investment from participants and distributing financial rewards. The cooperative principles of autonomy and member control resemble the certain cryptoeconomic aspirations (Davila, 2021; Walden, 2019), while “concern for community”encourages internalizing social externalities (International Co-operative Al-liance, n.d.). Cooperativism provides a framework for democratic governance that can help counteract the plutocratic tendencies. For these reasons, a growing number of blockchain projects are incorporating legal entities as cooperatives. For instance, Kleros operates through a cooperative legal structure in France. The US entrepreneur John Paller has taken advantage of flexible cooperative statutes in the state of Colorado to form the legal basis of two tokenized projects: Opolis, an employment platform, and ETHDenver,a conference that attracts international Ethereum developers and investors(Ahonen, 2021).Cooperative structures could reside primarily at the legal layer, or they could guide the design of distributed ledgers themselves, such as through decision-making based on egalitarian membership rather than token hold-ings. The largely abandoned cryptocurrency FairCoin implemented a novel consensus mechanism called “proof-of-cooperation” that sought to ground its cryptoeconomics in cooperative membership among participant organizations that served as network nodes (König et al., 2018). More recently, a series of manifestos have called for “distributed cooperative organizations,” or DisCOs,integrating distributed ledgers and cooperative values, as well as feminist commitments to reward the care work and public goods that markets often fail to recognize (Troncoso & Utratel, 2020). Distributed ledgers could also enable cooperatives that self-govern by methods not found among offline cooperatives, from Kleros-like random juries (Fan & Zhang, 2020) to “liquid”delegation of representatives in real time (Blum & Zuber, 2016). In a call for “moving beyond coin governance,” Buterin (2021d) points to “proof of personhood” and “proof of participation” systems that could tie governance to the logics of human persons and contribution—using cryptoeconomics to reinvent democratic strategies that offline cooperatives have employed for generations. A cooperative ledger could govern a particular application, as in the case of Opolis or Kleros, or span a larger ecosystem, akin to the role of the Ethereum blockchain in setting ground-rules for the diverse contracts built on top of it. Whereas democracy through state regulation would likely come from outside the network, cooperative democracy depends on network participants to invest in egalitarian spaces—as those in some cryptoeconomic projects already have."