New section on the governance of virtual communities, peer production communities but especially blockchain-type collaborations.

Quotes

"Within blockchain-based governance mechanisms, standard token voting practices rely on the neoliberal notion of “voting with your dollar.” Like the capitalist market, this means wealthy investors can simply purchase large amounts of tokens on the market in order to hoard voting power. This system allows these capitalist robber barons, or “whales” to greatly influence the outcome of proposals submitted on “decentralized” applications. In other words, financial power becomes directly correlated with political power."

- Breadchain [1]

"Prevalent among communities forming around blockchain technology more specifically is an emphasis on relegating governance to automated enforcement by a protocol, coordinating the otherwise free actions of actors in the network. More than a technology, blockchain has come to represent a powerful narrative and governance ideology (Reijers and Coeckelbergh, 2016), promising the possibility of automating governance, understood as the coordination of individual actions at aggregate scales. This idea has manifested in different approaches to governance in blockchain communities, which we discuss in part one of this article as materialist, designer, and emergent ideas, and approaches to governance relating these to three evolutions of governance theory (Mayntz 2003). Blockchain is a particularly fruitful context for discussing dissensus as it is navigated by online communities because, as an ideology, it so explicitly seeks to achieve consensus through technological arrangements."

- Kate Beecroft et al. [2]

"When we look at current “grafting” proposals like the Fei Protocol and Rari Capital merger, or the xDai and Gnosis merger, what we’re seeing is two organisms coming together as one, rather than corporate shells consuming each other as with traditional mergers. These are communities that are integrating, not employees changing offices and titles. We are much more than employees in a DAO: we are owners, voters, curators, ambassadors, and pathfinders. Our language should accommodate these characteristics, and the comparisons to ecology and horticulture are far too apt to ignore. .. This shows us that building and improving the tools and platforms for DAO communities to work together will have immense impact, and will produce powerful interactions that transcend industries and unite competitors. When these communities can easily and trustlessly collaborate, coordinate, and negotiate, they will no longer view project-specific problems as ones to be solved in isolation, but ones to be tackled together. This shift in perspective is essential for a thriving DAO ecosystem."

- Numa Oliveira et al. [3]

"Voting happens all the time in crypto. Participants in decentralized autonomous organizations (DAOs) vote on software updates, treasury allocations, and pizza toppings according to rules encoded on a blockchain. They tend not to vote for politicians to represent them; they vote on proposals, or they delegate their votes to other users in a “liquid” system, enabling them to withdraw the delegation at any time. Power over group decisions doesn’t come from party platforms and political contributions; it may come from metrics of participation in the group’s project, or from the duration of one’s conviction, or the intensity of it. Before anyone votes, a prediction market might highlight which proposals are worth considering. The possibilities of voting are becoming so exhausted in crypto, voting is already going out of vogue."

- Nathan Schneider [4]

"We are entering an era where governance is no longer solely the domain of nation-states. It can be exported, outsourced, embedded in code, and even monetized. This raises profound questions for the future of democracy, sovereignty, and public accountability.

As governments struggle to catch up, the challenge is not just about regulating new technologies—but about redefining governance in a world where power flows through protocols, not parliaments.

Whether DAOs will live up to their promise of creating fairer, more participatory systems—or simply become new instruments of exclusion—depends on how we build legal bridges between digital innovation and democratic principles.

Now is the time to ask: Can we build global governance that is open, interoperable, and accountable—or will we watch as power consolidates in digital enclaves beyond the reach of public oversight?"

- Felipe Oria [5]

DAO's as Commons

"Some of the DLT’s (distributed ledger technologies) like blockchains, which act as the underlying substrate of web3 native communities like DAOs, can be understood as commons. The practices of purpose driven governance and stewardship are the defining element, not the resources themselves. The arrangements of people, minerals, and technologies which coordinate through DLTs need not be defined by the technology, rather the technologies are scaffolded by our shared purpose and ethics. Perhaps one of the greatest contributions that the blockchain and DAO technology can make to the wellbeing of the planet is to enable the effective scaling and distribution of the commons as an alternate option to market-based or government-based solutions at a scale heretofore never achievable."

- Austin Wade Smith [6]

From state avoidance to state mimicry ?

1.

"Where we (the libertarian crypto community - MB ?) once talked about separating money from state, now we hear of crypto states and constitutions. Political rhetoric in crypto has turned from state avoidance to state mimicry, with democratic voting models and public goods as primary concerns. Underpinning this slippage is a new ideological refrain: that crypto is the next “leviathan,” comparable to the state in its ability to instantiate immutable rights. According to some, blockchains will replace the state’s monopoly on violence with a credibly neutral decentralized cryptographic infrastructure, allowing for the creation of independent property rights and “network states.”

2.

"Censorship-resistant immutability to the law is crypto’s greatest achievement as well as its greatest weakness. By resisting the all-encompassing reach of the law, it creates the conditions in crypto for a new kind of realpolitik, a space where power operates by different rules. However, in removing the law, crypto protocols are left with a three-body problem. Social norms, markets, and code each have their own regulatory logic, often finding themselves in conflict. In this novel game board, protocol designers’ intentions can be undermined, leading to undesirable institutional behaviors, moral dilemmas, and contradictory governance policies."

- Toby Shorin, Sam Hart, Laura Lotti [7]

Web3 as Prefigurative Self-Infrastructuring

"Web3 is a collective exploration in ‘self-infrastructuring’. The verb ‘to infrastructure’ denotes the activities, processes of integrated materials, tools, methods and practices that make up and change an infrastructure (Star and Bowker, 2010). Thus, infrastructuring is an ongoing process of doing, and these processes are incremental, iterative, and long-term (Karasti et al., 2010). Web3 originates from anti-establishment ideals, and aims to provide the prefigurative means to build new structures for decentralized, self-governance from within the prevailing power structures of society."

- Kelsie Nabben [8]

Blockchain as Neo-Leviathan

"By allowing people to self-organize into capture resistant small pods of effective coordination, blockchains rewrite the basic assumptions about the necessary scale of governance.

I’m not suggesting that blockchains are prepared to fully replace the monopoly on violence of nation states. But in the same way that iPhones put a supercomputer in everyone’s pocket, blockchains put the basic building blocks of sovereignty in everyone’s private keys.

Without the need for any additional sovereign entity, anyone can now create an organization that provides immutable rights of governance to members and, if they want, create an independently controlled currency for the organization."

- John Hollis [9]

How the Resistance to Crypto Created More Innovation

"As crypto has developed, there have also been waves of resistance. In the 1990s, with the advent of PGP, the US government freaked out and reclassified cryptography as munitions. They literally said that encryption was armaments, and it became illegal to export from America without a licence under what was called the ITAR [International Traffic in Arms Regulations] regulations. ITAR drove a huge number of cryptographers out of America and a lot of those folks wound up in a place called Anguilla and formed an early crypto island community there. That’s also where you began to see the hybridisation of offshore finance in cryptography, and some people would suggest that that was where you got the birth of some of the stuff that became crypto economics that we started in the late 1990s.

One of these waves of resistance led to the fall of E-gold in 2005. E-gold was a perfectly reasonable gold-backed digital currency system: fully centralised, no real use of crypto, it was a very successful platform. You could transfer $100,000 from one cell phone to another cell phone in the late 1990s for 50 cents, instantaneously, and that was all gold-backed, it was essentially gold-backed stablecoins. That system was effectively shut down in 2005, when the FBI raided its offices over E-gold’s use in criminal activities and confiscated its equipment and files. I would say that almost everybody thinks that the fall of E-gold was the thing that triggered Bitcoin. It was a case of if there was going to be another E-gold and it was not going to get shut down by the government, then it was going to have to be decentralised. The response from the crypto community to E-gold, was Bitcoin and the blockchain, and that led to what we now know as the whole cryptocurrency space."

- Vinay Gupta [10]

DAO's as Seeds of Distributed Social Governance in a Viscous Society

1.

"Seeing the global society in terms of strict dichotomy of “disorder versus structure/control” is counter-productive for understanding and governing it. Both ends of this dichotomy are undesirable: disorder is simply not a viable solution for society, while stable structures are not sustainable and even harmful due to the increasing social complexity. We therefore propose to approach society in terms of a fine balance of ever adapting temporary structures in otherwise fluid whole — a 'viscous' system." ... "What we propose with the image of A World of Views and the Living Cognitive Society is the shift of emphasis from the structures and institutions to the very process of creation, adaptation and dissolution of social subsystems at all scales of the global society. Furthermore, the naturally distributed nature of the process – meaning the absence of central body or ‘trusted party’ governing it – should be embraced, rather than fought with establishing global institutions or ‘world governments’ as, we maintain, no stable structure would be able to outweigh the factors of social complexity driving the society towards increasing fluidity."

- Viktoras Veitas and David Weinbaum [11]

2.

"Although many DAOs would not embrace the label of digital cooperative, one could say DAOs embrace cooperativism as a protocol, meaning an evolving set of relational practices that are distinct from traditional corporate structures or decentralized autonomous corporations, because they prioritize member ownership. The label cooperative can be qualified by digital because today DAOs act primarily to coordinate around digital assets. However, as the concept of DAOs evolves in practice, its digital primacy will fade. DAOs, as we will see, also introduce new dimensions that exceed what the operating principles of a digital cooperative notionally encompass."

- Kei [12]

On the Necessity of Crypto Law

"Disputes arise in blockchain governance. We follow protocols for managing them. Ergo, crypto law exists. The purpose of this writing is to 1) document some of today’s crypto law, to 2) agitate for a change in crypto law; to convince the cryptocurrency community to abandon a crypto law (a law that I’m calling “Szabo’s law”), and 3) to agitate for the inception of a new crypto legal system."

- Vlad Zamfir [13]

We now have the opportunity to create novel protocol-based social coordination systems

"With the advent of the internet, and with the latest advances in AI, complexity science, and blockchain technologies, we now have the opportunity to create novel protocol-based social coordination systems. Widespread transition to a new paradigm now involves people opting in to a digital social-economic network when they are ready, instead of necessitating the difficult and slow process of conventional political transformation. The need for elected human representatives and centralised institutions is replaced with consent-based protocols which define how we conduct our relationships with one another and our environment. These new ‘economic’ protocols can be designed with different rules and explicitly defined objectives embedded into their architecture."

- The Holonic Earth Operating System [14]

The Trilemma of DAO Governance: Investment/Plutocracy vs Democracy vs Allocation Efficiency

"If we have democracy, capital attraction, and treasury utilization efficiency, we have the trilemma of DAO governance.

1) Once we maintain democracy and treasury efficiency (considering the community as a parameter for what would be effective), we lose capital;

2) If we maintain the efficiency of treasury utilization and want large values inside the DAO, we lose in democracy;

3) And if we want democracy and capital attraction, we lose treasury utilization efficiency, since democratic decisions can lead to slower processes and mutual concessions, which can impact resource allocation efficiency."

- Danimim [15]

Using Decentralized Protocols To Create Ecological Institutions

Austin Wade-Smith:

"Decentralized protocols are systems of rules and standards that enable computers, devices, or individuals to communicate and share information without relying on a central authority or server. They enable distributed ownership of goods, and cooperative decision making around the use of those common resources. Organizations which hold resources, and record the governance related to those resources on the blockchain, are referred to as DAOs (decentralized autonomous organizations). Unlike cloud computing and conventional data storage which are authoritative and centralized, decentralized protocols uphold consensus between many different actors in a manner which is similar to ecological networks.

This makes them well suited for applications of ownership and governance of common resources which are:

easily accessed

easily depleted

This includes many planetary systems like the atmosphere, water cycle, and the ozone. In short, commons. As such we feel it is important to consider how decentralized protocols might substantiate and amplify existing efforts for non-human agency.

We identify 4 domains in which decentralized protocols may further enable non-human agency and the creation of ecological institutions.

Identity

Ownership

Sensing / Verification

Governance "

(https://mirror.xyz/austinwadesmith.eth/tv9z1XXrtqQxDIxE8FygZ_W39NpkQJkVfrtjCtdbzA8)

Regression to the code doesn’t always produce legitimate outcomes

"Whatever role norms play in a protocol ecosystem, the ultimate determinant of institutional and user behavior is the encoded architecture and market incentives. With Curve, we saw “greedy” behavior was a valid social norm enabled by vote-buying mechanisms. With NFT royalties, we saw artist-supporting residuals collapse in a price war. And with ENS, the in-built coin voting system overruled the community’s normative stance on Brantly Millegan’s removal and abstention. When normative behavior is unenforceable, it tends to regress to behaviors afforded by the other regulatory forces. New social norms that correspond to the extant architecture then prevail.

Some view this regression phenomenon as the foundational policy of the crypto space: “whatever is permitted by the protocol’s code and market structure is legitimate.” This viewpoint, while rarely expressed in such direct terms, is remarkably common among crypto users.

...

Regression to the code doesn’t always produce legitimate outcomes, so it can’t be true all the time. In the cases explored earlier, the legitimacy of protocol adjudication is precisely what is in question. It is not clear, for example, that the inability to protect artist royalties is a good outcome. Many viewed it instead as an architectural shortcoming, taken advantage of by unscrupulous traders who skirted designers’ good intentions.

Regression to the code erodes social norms, and this consequence accounts in large part for what repulses people from crypto. Even as protocols fulfill important social functions like affordable remittances and escape from inflationary regimes, “the space” appears to outsiders as greedy and riddled with scams. It is for this reason that crypto seems to stand apart from all prior human institutions. More than just “lawless,” it comes off as a “normless” zone where morality is suspended, even if the prevailing intention is to support the resiliency of all manner of social organizations."

- Toby Shorin, Sam Hart, Laura Lotti [16]

Austin Wade Smith on the need to Undual the Natural and Digital Webs

"Community is at its essence, web-based. Although the term is most readily applied to internet native groups, I’d argue that communities which practice social life in an expanded sense through networks of mutualism, symbiosis and reciprocity are the original web-based communities. MMO guilds, open source developer communities, and these new thorny things called DAOs, are more recent actors in a lineage of web-based communities whose identity is actively formed relationally through networks. To undual is to reconcile the fact that the social sphere has always been web-based, and thus not exclusively a human affair."

- Austin Wade Smith [17]

On Re-Scaling State Functions

"Contrary to libertarian beliefs that decentralization would dismantle state structures, these developments suggest a transformation in how sovereignty and governance are exercised. The concept of rescaling — wherein global and local forces interact to reshape state functions — has profound implications for the future of governance. This rescaling is evident in the rise in city-regional governance and the increasing prominence of digital platforms as arbiters of power, challenging the traditional Westphalian model [13,14,15]. As new forms of nation-statehood emerge, the intersection of platforms and governance will play a critical role in shaping sovereignty, transparency, and techno-political futures."

- Igor Calzada [18]

Status

WE ARE NOT THERE YET, shows Rebbeca Grace Rachmany:

"The promise of DAOs has been to create more advanced decision-making systems. Yet, to date, the DAO technology has provided little more than voting and funds allocation mechanisms. To govern at a global level has become an imperative in the pandemic, which affects all human beings on earth. Managing this crisis and those to come requires the development of technologies that cover all aspects of discussion, collaboration, proposal-making and accountability."

(https://www.coindesk.com/tech/2020/09/21/daos-will-never-govern-the-world-at-this-pace/)

Typology

of governance mechanisms:

History

- "One account of the prehistory of DAOs could begin with the Rule of Saint Benedict: “a book of precepts written for monks living communally under the authority of an abbot.” Written in 516 AD, the Rule of Saint Benedict acted as a social protocol that spawned a decentralized network of autonomous monasteries."

This and more in the article:

A Prehistory of DAOs: Cooperatives, gaming guilds, and the networks to come. By Kei Kreutle. Gnosis Guild,2021

URL = https://gnosisguild.mirror.xyz/t4F5rItMw4-mlpLZf5JQhElbDfQ2JRVKAzEpanyxW1Q

Key Resources

Key Articles

DAOs as Commons. Austin Wade Smith.

Limitations of Cryptoeconomic Governance Mechanisms. By Nathan Schneider.

The Other Internet journal has a series of very illuminating analyses of what makes Web3 tick, i.e. what is so transformational about its emergence:

Ecological Governance

See also: our entry on the Sovereign Nature Initiative.

Ecological Institutions → Protocols to Grow Autonomous and Convivial Ecological Actors. Austin Wade Smith. Regen Foundation, 2024. [19]; Topic: "autonomous and convivial ecologies". More at Protocollary_Ecological_Institutions.

Austin Wade Smith. Commons Sense - An Introduction to DAOs as Ecological ↔ Digital Linkages. [20]: (the human, the natural, the technological, three in one coordination mechanisms). More at: Making the Non-Human World Legible Through Technology.

Category:Crypto Governance