[Draft 1] An Optimistic Governance Structure - Discussion (GC Governance)

Squad: @jakeandstake @siddhearta

Summary

This post is a potential project funding structure to do the following:

  • Create an evaluation framework to help the DAO make strategic decisions with treasury and grant funding
  • Create a new evaluation process that optimizes for both community consensus and responsible decision making
  • Refine and formalize the funding mechanism in alignment with the evaluation framework and processes

At a high level, this Optimistic Governance structure would allow project evaluation and funding to be done by subject matter experts. Each review period, a group of “Representatives” will evaluate projects based on their strategic value and send them to the Grants Committee for budgeting approval. This separates the evaluation of each project and its strategic alignment from project funding and deliverables.

The process of determining which projects to fund starts with project evaluation by the strategy group (representatives) and goes to compensation evaluation by the budgeting/deliverables group (Grants Committee).

The representatives serve as an incubator for projects. Improving collaboration across guilds and the sharing of ideas. The Grants Committee holds the keys to the treasury and is responsible for accountability. The emergence would come from the projects put forward.

Both entities would be responsible for affecting the strategy, compensation, and deliverables. To enact high transparency, decisions made by the Representative group and the Grants Committee will be subject to snapshot approval. This ensures a high level of transparency where token holders can also have a direct influence on project funding.

Background

In Season 2, the Grants Committee ran out of funding with a month left in the Season, despite increasing the budget by an additional 40% from Season 1. The DAO needs a better strategy to evaluate projects that go to the Grants Committee for funding. This is done through the standardization of project roles and their compensation.

At the same time, we don’t want these decisions to be made in a vacuum. This framework is a new evaluation process that optimizes for both community consensus and responsible decision making. Through the election of subject matter experts to serve on the Representative group, projects are evaluated by people with intimate knowledge of the requirements for a project’s success and the compensation necessary to fulfill the work. This structure also serves to decentralize the Grants Committee.

Yet, a truly decentralized structure (token voting) is still insufficient. Community voting does not reflect critical evaluation because the DAO will often vote yes without deeply evaluating the full scope of a proposal and engaging in proposal discussion.

The structure outlined in this post is a potential solution to improve the strategic prioritization of DAO project funding and continue to decentralize decision making.

More background here:

Funding Philosophy

What is our “North Star” for funding projects?

A principled approach to project funding and evaluation requires that our mission, vision and values are clearly stated and that our community is aligned behind this mission. From our Mission, Vision, and Values page:

“We will help the world go Bankless by creating user-friendly onramps for people to discover decentralized financial technologies through education, media, and culture.”

In my opinion, our funding philosophy should prioritize revenue generation and a strong BANK token. This will lead to a flywheel of projects and set us up to create long-term sustainable impact on the world. I’ve outlined my thoughts on the subject here:

TL;DR - We need a strong BANK token to continue to impact the world and the best way to create a strong BANK token is through revenue generation and a strong treasury.

Given these goals: sustainability, strong BANK, and impact. How should we get there? Fundamentally, all things will flow from revenue generation. This is what we should be optimizing for, but how we get there is another question. Clearly, we’re funding projects, but how do we prioritize them?

At present, I think about this as a scale between two philosophies: long-term revenue generation and short-term revenue generation.

In the long-term case, the DAO will have a high risk tolerance — a tolerance for lack of cash flows and for delayed cash flows. The long-term projects will likely take time to fruit (ex: software products/services) but are set to have strong business models once they do (SaaS, tokens, etc).

In the short-term case, we’ll have a lower risk tolerance and we’ll cut projects that do not generate revenue — or lack a concrete plan to do so — and prioritize projects that generate income today. Again, I see these two poles not as an “either/or” but a dichotomy for us to manage through revenue modeling and rigorous project evaluation. In all cases, projects will be held accountable for the milestones they promise.

My thoughts on our goals are ordered here:

  1. Be cash flow positive - This means on-chain revenue, clearly stated KPIs and set deliverables that are highly aligned with this goal, and being careful with the money we spend. bDAO is like a nation that must create goods and achieve income; a strong nation should have a strong treasury.

  2. Begin incubator phase - Once we have reached “escape velocity” we can begin to fund more ambitious projects. But funded projects have to execute on their promises.

Without a clear view of where we are going and what we are trying to accomplish, the path forward towards evaluating and funding projects becomes tenuous at best. Many of the problems we are currently facing are due to a lack of the ability to strategically align behind a clearly stated purpose.

In order to create a framework for the strategic prioritization of project evaluation and funding, this post proposes the following Project Evaluation Framework and Optimistic Governance Structure.

Funding Mechanism

Project Evaluation Framework

  • Projects Evaluation Variables
    • Minimum Viable Product
    • Revenue (or projected revenue)
    • Mission Alignment
    • Member Benefit (Culture)
    • Budget needed
      • Important to compare between projects that are similar in nature
      • What is the capital for?
    • Key Performance Indicators
      • Revenue, engagement, and progress
    • Project lead/team track record
  • Projects must be re-reviewed on a Seasonal Basis (3 months)
    • Review progress → Cut projects if there’s not progress (Grants Committee)
    • Ensure targets are being hit (KPIs)
    • Every project has a cash inflow and outflow statement (akin to a P/L sheet)
    • Projects can reapply for funding → Project track record is reviewed
    • Bonus multipliers for achieving project KPIs
  • Opinion: The focus should be on increasing on-chain revenue and align with our goals
    • Reason: We should be able to sustain ourselves without needing to mint more tokens and dilute holders
    • A strong treasury will support the BANK token and serve as “backing”. It’s always better to have a strong treasury than not.
    • This will also increase the value of the BANK we issue, giving it a higher premium. We can raise equal (or more) funds with less dilution
  • Marketplace for service bounties/ideas
  • Funding Public Goods
    • The evaluation framework will be similar for public goods funding. These projects will likely continue to receive funding from the Grants Committee. The need for revenue will be deemphasized in favor of KPIs. It’s much more important for the project to hit their KPIs as a measure for success. The project’s benefit should be apparent and the team should continue to explore revenue generating mechanisms.

Optimistic Governance Structure

  • Elections for “Representative” seats
    • The role of the Representatives is to evaluate the strategic value of projects
      • Allows flexibility to fund projects and lets DAO members influence the results indirectly.
      • Guild and project members have a sense of how to evaluate projects through their expertise. This will help cross-guild knowledge sharing regarding the creation, funding, organization, and implementation of projects.
      • The Representatives will determine the project’s value alignment with the DAO and have power to say no. Where community consensus is almost always “yes”, this body would have the flexibility and focus to critically evaluate projects and still give bDAO community members a voice.
      • Project sanity check (input from other Guilds)
      • This body will serve to improve project proposals and help teams make adjustments to compensation and strategy
      • Guilds can influence how their members are paid.
      • Side note: Proposals/discussion points go on-chain for transparency.
    • Guilds vote on representatives to participate in the project approval process
      • Each guild sends a subject matter expert
      • Guilds serve as talent pools for projects and are aligned through token ownership
      • Grants Committee members may not serve as Representatives concurrently.
    • Term limits 4-8 seasons?
    • Let guilds decide their own election process
      • Prefer guilds qualify who votes in their elections → Who qualifies as an x-guild member?
  • Grants Committee
    • The role of the Grants Committee is as a compensation and deliverables group.
      • The primary responsibility is asset/treasury management; they ensure we don’t run out of funds. The PLM working group could help advise the Grants Committee through this process.
      • They ensure our budget is on track. They do this by evaluating deliverables created by the representative group
      • This will function like a Treasury Leadership group
      • Keep an eye on cash flows out of the treasury
      • They are also responsible for standardization of project/contributor compensation
      • Standardize revenue flow mechanisms (DAO/Guild/Project) and costs/budget
    • If the project passes the Representatives, the proposal goes to the Grants committee
      • The serves as the “executive” branch and can Veto proposals
      • Focus should be on managing the Treasury
      • The Grants Committee will vote to Veto the proposal or not
    • Opinion: The Grant’s Committee should have at least
      • 1 Dev Guild Member → Evaluate software projects
      • Maybe: Analytics Guild & Ops Guild & Treasury Guild

In all votes deliberated upon by each body, the size of quorum is correlated with the size of grants. In other words, a small grant needs a small quorum and a large grant needs a large quorum. The treasury structure would remain the same:

  • Grants Committee Treasury → Funds projects
  • DAO Treasury → Funds Guild operations

Project Evaluation Process

  • Project leads must present their project to the Representatives
    • Typical Grants committee process
    • No “ongoing” project proposal evaluations.
      • New project proposals are reviewed halfway between seasons
        • Review occurs over a set period of time (ex: 2-3 weeks)
      • No new proposals until the next season → gives us leeway for funding
      • This will reduce the ongoing drain of the grants treasury
        • Our budget is predefined
        • The opportunities present themselves at once so we can pick the most important/valuable projects to fund
  • Representatives Evaluate Project proposals
    • Evaluate proposals based on the Project Evaluation Framework
    • Work with project leads to set milestones and metrics for next review
    • If the project achieves a quorum, the proposal goes to the Grants Committee
  • Grants Committee
    • Can Veto the project or not
    • Decided on a quorum
    • If the project is Vetoed it goes back to the Representatives to be reworked
    • If the project is still Vetoed, it will not be funded
      • Projects may reapply during the next funding round
    • If a project passes it will be added to a snapshot vote, where BANK holders can vote to veto particular projects.

FAQ

  • Why focus on revenue?
    • Without the generation of revenue we are forced to fund projects through the minting of BANK. This inflation will reduce the value of BANK, diluting token holders until the value is effectively 0. Revenue allows us to fund initiatives in a self-sustainable manner.
  • What problem does this solve?
    • This structure will allow us to fund projects more strategically, decentralize governance over the Grants Committee Treasury, and improve our project evaluation process.
  • Why are we adding more bureaucracy to this process?
    • In general, the addition of the Representative group will slow down the approval process and give us more granular evaluation of projects. When we’re approving things too loosely, added friction will slow down the velocity of BANK. This also serves to decentralize the Grants Committee’s responsibilities.
  • Shouldn’t we be decentralized and flexible?
    • The addition of the Representative working group will both improve project evaluation and decentralize the funding process. Previously, the Grants committee held sole responsibility for project evaluation. In the new framework, members have a more direct influence on what gets funded through representatives.
  • How do projects work with guilds to set prices?
    • The Grants Committee and Representatives will monitor market prices for roles and expertise. Price discovery should occur through executed bounties.
  • Why only fund twice a season?
    • The benefit here is twofold:
  1. This will allow project leads to create MVPs and build a strong case for their project.
  2. The Grants Committee will have better control over the purse. Given a limited set of projects to fund, the Grants Committee and Representatives can pick the most important projects for the DAO.

Closing Thoughts

These are my thoughts as of now and this structure is not a final solution. It should be iterated and improved on. Still, this gives us something to work with and I think a structure like this will solve many of the challenges we have as a DAO.

bDAO strong!

Thank you to @siddhearta for working through this problem with me. Your feedback was invaluable.

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Please tell me you have applied for GSE role?

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Exactly ser. Whether or not we agree with the specific recommendations within this framework, it clearly shows that Jake and Stake has a keen mind to focus on these contributor retention and strategic prioritization issues that the GSE role seeks to address. Good on you Jake for putting your efforts towards helping the DAO become more focused and sustainable.

I deleted the prior post b/c I intended to address it to SwoleChasse, but Discourse is upset with me for trying to delete it and repost as a reply. Fingers crossed this works.

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I’ve saved mine for the application but I love this! Jake, you’re a natural and articulate writer! Maybe we will work together in the future

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I love how well you laid this all out! Well done ser! I agree that it is rather important that the DAO be able to start having durable cashflows from operations. This is one of the most important factors in being able to persist into the future, especially if/wen bear season comes along.

Also, there should be some really firm rules on how funding is disbursed. I personally like the though of having “draws” where, like a construction loan, if certain criteria are met, then the next portion of funds is disbursed, rather than 100% upfront. Or at least using something like Superfluid where it streams continuously (ON CHAIN FOR FREE). Then if someone vanishes, bankless could just close the channel and not pay out more. This also gives a timeline: “make money by this date” which can be discussed in advance and rediscussed if it’s not met, depending upon what has been produced.

Then also expectations on what bankless gets from successful projects being paid back into bankless. A portion of revenue? How long? What’s to prevent people from not doing this, have bankless reps on a multisig wallet? This is important stuff you brought up! Stoked to see it being talked about more.

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First of all, great post! It’s hard to put into words how mission-critical this conversation is for the DAO. All of my comments are expansions of it and thoughts about how your proposal would look in practice.

I agree that subject matter experts could help the community say no to projects. I think part of the reason we’re scared to deny funding is because of the social implications. To reduce the social backlash of saying no to things, I wonder if these subject mater experts should be anonymous. Maybe only the grants committee would know who they were, and rather than doing a GC-style voice call, they’d give their opinions as simply “Developer SME,” “Writer SME,” “Designer SME,” etc. Could be tough to execute and the closed nature of it could make the community squeamish (does this go against the nature of DAOS? big questions). But I think anonymity would make it easier to make hard decisions.

I reached this conclusion by imagining myself in the shoes of the representative/subject matter expert. If I was a Writer rep and was tasked with evaluating a project that involved lots of my WG friends (which it probably would, honestly, if the Writer rep was being called in to evaluate a writing project), I would feel super weird about vetoing and honestly would probably bring in too much of my personal view of the individuals involved. I don’t know if everyone is this way. But I think it’s hard to say no to things when that decision creates an immediate ramification for people you work with every day in the DAO, especially because these subject matter experts would likely be evaluating projects put forth by people they spend the most time with in the DAO (a dev rep is probably in the dev guild and would evaluate projects coming OUT of the dev guild or involving people in the guild).

For the quote above, does that mean the community and the representative both cast votes? Or is it just the representative now? Which one goes first? I can see one influencing the other. Do they happen concurrently? Just things to consider. I think having the representative make their own decision first, writing it up so everyone can see why, then letting the community take that into account when they vote makes sense. Some people will vote with the rep, some won’t. Ultimately the community, not the rep, decides. The community just has the necessary info from the rep to make a more well-informed decision. Just my two bank.

I think you’re spot on with this idea. I believe we should tighten it up even more. A more extensive evaluation process before even GOING to forums makes sense, I think. Projects shouldn’t just be asking for funding left and right. Maybe…

  1. Project puts up a poll in the guild it nests under/is most closely associated with/has the most members from. This would get feedback/buy-in from various subject matter experts within that guild. If it’s nested under 2+ (like how the Website Project could be considered dev guild, writers guild, or design guild) go to 2+ guilds for feedback!
  2. Project presents to Treasury or Ops Guild or GSEs or some governance-minded group to get feedback.
  3. THEN they can go up to forums.

I feel like we get on forums too quick and more gating makes sense. Again, fundamental questions of what makes a DAO a DAO. Thank you for this post Jake!

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Another excellent example of a member giving serious thought to the health, success and longevity of the DAO. Our experiment has progressed and matured to allow deeper communal consensus thought. The term runway comes to mind as does talent attraction and retention. Jake has done a great job of clearly stating his view and he and this living document as a starting point has earned my full support. Always seeking a longer runway to progress and thrive. It will be interesting to see what members far smarter than I find objectionable. Thank you, ser.

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Thank you very much Jake.

This is a wonderful post. I think that it will be of great use for our GSE team. What I like the most is:

  • the criteria for the assessment of the project;
  • the fact that you introduce the board of Guild representatives. To me it has been always a priority that Guilds, which are the source of talent, should be somehow accountable for the creation of projects. In this way you create a strong link between Guild or Guilds (in case of cross-Guild initiatives) and project.

I only note that often the “optimistic” component is connected to the community, whereas here - if I have well understood - it is related to the veto power of the Grants Committee. The idea is therefore that the power to set the budget is essentially on the Guilds and that the Grants Committee should only intervene in cases of need. This in my opinion would be totally fine!

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Thank you for your thoughtful reply!

I think the problem with having these people be anonymous decision makers is the lack of accountability. We should know how reps are voting so individuals can make informed decisions during elections. In my humble opinion, we should be increasing transparency, especially in processes involving DAO-wide decision making.

In this model, representatives make decisions on the community’s behalf (in the fist stage).

The ultimate safeguard is the Snapshot vote. This is where the community has a direct voice. But yes, each member of the Representatives and the GC should be expected to explain their individual thought processes behind their vote (probably via forum).

Thanks for drafting this @jakeandstake, I appreciate your thoughts.

I don’t agree that revenue generation is our top priority, I believe it to be long-term contributor engagement. I mention this because I have seen organizations prioritize revenue over engagement and in the event they « succeed », the org is unrecognizable. I wouldn’t want this to happen here.

I do agree that a strong BANK token is preferable and revenue-generation is a great way to do it, so we emerge in the same place: how do we encourage these pursuits in our contributor base? You’ve identified our grants process as one way (there are others!), and it’s probably the best place to start.

For your framework, I really like the idea of a representative body, but I have to ask: why are they representing guilds instead of the DAO-at-large? What is it about guilds that makes them more able to select who would be able to critically evaluate a project? I understand the point about having subject matter experts, but critically evaluating a project comes down to more than just validating if the constituent parts are sound, it’s about how all of the building blocks are park together in concert. It’s about how credibly the team behind the project could
fill the gap in the market they have identified.

I’m afraid the representative body based on guilds will miss a lot. There’s no strategy guild, so no guarantees that strategy will be taken into account. No product guild, so no critics look that the product matches the market. Meanwhile, every project will have someone from a AV Guild weighing in even if there are no audiovisual assets.

I’m intrigued by your mandate of the grants committee. It seems you’d like to beef up their responsibilities, which I support, but your scope of work for them is pretty large! Managing a
treasury is a LOT of work, especially if you’re meant to do it in a strategic fashion. The committee would need more funding for sure to accomplish this. Question: I feel some of the responsibilities are currently part of the treasury guild, how will we disentangle that?

Here are my suggestions for further thought:

  • how can we aim for revenue while keeping everyone engaged? Do we really need to fund ONLY rev projects or can we fund other projects that pursue mission?
    • are projects not pursuing mission but rev-generating ok?
  • what if the representative body was delegated instead of voted by guilds? I.e. I think @jakeandstake rocks, so I’m going to delegate my votes to him to make funding decisions
  • what if the grants committee was the representative body instead of having a separate body?
  • what is the role of grants committee vs the treasury guild?
  • i think you might gain a better understanding of what PLM group could do - they are definitely not finance experts.

Thanks again, I enjoyed reading!

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Great feedback links, you ask a lot of hard questions that need to be explored.

Re: representatives for guilds. One of the things Jake and I discussed as he was creating this was that each guild needs to have some kind of representation in order to be able to properly evaluate and compare projects. Guilds as talent pools are able to have better insight into what a particular project might require in terms of talent and revenue. If we went with a DAO-at-large model, you can imagine how certain guilds might hold more prominence and smaller guilds (talent pools) would be left without a voice.

For example. For writers guild, I would feel comfortable with someone like Samantha, nonsense, Frank or any number of other people to evaluate projects and voice concerns with regards to EPA, newsletters, or client services. They would also be able to compare similar work and make a determination on expectations, for example creating website copy. How much does that cost? What are realistic timelines?

Guild representatives become subject matter experts for their respective talent pools.

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LINKS STOP BLOWING MY MIND

No, please do continue doing it. I’m blaming my covid brain fog :wink: :joy:

I’ve always wondered the founding intention behind the separation of these two entities and cannot find information on it, so I’m highlighting this and hoping some genesis member or treasury guild members comes in and explains it to me :laughing:

GC members themselves should look at funding from a strategy and product lens, bringing in SMEs when needed. But, our GC elections are more about alignment with bDAO values/expertise in bDAO inner workings, not about strategy/product knowledge. I wonder if one of the SME representatives could come from the PLM working group to solve this gap :thinking:

I was thinking we wanted to eventually move power away from the centralization of the GC, but honestly I don’t know how we would do that without straight funding anarchy. So…yeah.

I think you might be on to something here! I’m curious to hear more/think more about how this would work. I might be back in a couple hours for another comment :joy:

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Thanks for the feedback @links !

This is a great point. I omitted the importance of community! I suppose this is like matrix multiplication with many outputs to optimize and this is just one variable (project funding).

I’m not sure this is the question we want to ask here… It’s one thing to encourage people to participate and another to fund the right projects.

Yeah, I hear you. @siddhearta and I went back and forth on whether to include some kind of “project management/business development/peer review” body. Ultimately, I simply left “Guilds” in, as I believe they should have a direct voice and, admittedly, I was less sure about how to implement the other constituency.

My concern about a strategy/project guild would be lack of transparency (the responsibilities of a “strategy guild” feels ambiguous to me), but it’s something I think is important.

+1 to this, I like using delegated voting to elect the body responsible for the treasury because it aligns incentives correctly. With respect to the large scope of responsibilities for this body, I don’t imagine this group being the same size as the GC is today.

My current thinking is that having separate entities (with guilds having direct input) is an important part of balancing the interactions between labor, treasury management, and project evaluation.

Overall, this is great feedback and, quite honestly, what I was looking for. Thank you!

This is fantastic lots of great insights and a lot to unpack and discuss - I would suggest dividing this into two proposals to keeping the focus on two goals - 1) creating an effective strategic evaluation framework 2) Proposal/Grant application process. I say this as I want to comment on the evaluation but then the comment can get lost in the governance structure for voting and selection approved proposals. I also think a DEI plan should also be in a discussion through these processes to allow greater diversification and equity.

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