What a Difference a DAO Makes
Sitting here with a beer in my hand, I reflect and think about the past year and what I have accomplished. This year my working mind was occupied by three simple letters: D.A.O.
By far, the most interesting or engaging things I did this year was to co-write the TIKI DAO whitepaper and trying to figure out the concept of crowdsourced governance. It sounds like technobabble, but it’s been quite a journey.
Where we started
To explain the journey, I would need to give it some context. At the beginning of September (2022), I started writing the first draft of the TIKI whitepaper. We (CEO Mike Audi and I) focused on the user selling their anonymized data to companies who bought a data feed or consumed that data through an insight or report. We planned that they would use a crypto-based token to make the payments to the user on behalf of the company. We considered incentivizing people to participate by rewarding them for “selling” their data and engaging with the TIKI decentralized exchange.
The exchange would manage the transaction, and the buyer would pay the gas fees for the transaction. This would all be subject to the TIKI Protocol.
This set of rules managed all the processes around the voting and proposals.
The fee income would be transferred to the Decentralized Autonomous Organization (DAO). The members of the DAO would be holders of the TIKI token.
The value of the TIKI token would be the income or a portion of the fees on the data transactions.
We agreed that this was the way to go, as it met with the TIKI principles of openness and transparency.
Refining it
I spent the next month working with Mike to refine the concepts along with the concept of community participation through a TIKI protocol and developing the concept of Crowdsourced Governance. By the end of September, we had the first draft of the whitepaper. I consulted with my network of peers (generally people who are smarter than me) to test the concepts. We thought about the feedback and made some structural amendments.
By this time, we had narrowed the core concepts down to three elements of Crowdsourced Governance:
Token Issuance (incentivizing and measuring participation)
Proposals and Voting (the processes for maintaining the governance protocol)
Governance Protocol (the process for the implementation of the initial proposals)
Disruption
As we were working on this, the world around us was changing. At this time, the impact was really being felt from Terra Luna's collapse[1]. We had originally intended to use a stablecoin to manage the payment to the user. This would be for transferring their payment from the companies for buying or using their data insights. But, given the uncertainty in the market and the rumors of the other stablecoins being valued at sub-par, this line of thinking now became an obvious risk. We may have ended up in a situation where the company paid us X, and we were paying the user X-10% because of the stablecoin valuation. Not an acceptable risk.
I had also started to look for an exchange to list our tokens and at the possibility of lending a block of our tokens to a market maker so they could create liquidity. They would do this by making a two-way price for our tokens when there may be few buyers or sellers. At the end of an agreed period, the tokens would revert to us at the issue price. The market maker would book a profit if the tokens increased in value. We were ready to go with an agreed date and a contract in place with a market maker. However, when I spoke to some people about their experience of using this type of service, the majority of opinions I received were negative.
We needed something to remove the risk and potential exposure from these more “traditional” token-issuing methods.
Q4
This brought us up to November. The market was still very uncertain, and I was nervous about the growing presence of the SEC in the crypto market and the noise they were making about enforcing regulation on token issues. If you objectively looked at our token, it would fail the Howey Test[2]. At this time, Mike had a conversation with one of our investors, who spotted that we were vulnerable to a 51% attack(here is a link to something I wrote about this) [3]. This was a bit embarrassing, to say the least. I had been so engrossed in the detail that I lost sight of the bigger picture. Let’s say it was not a good conversation. But it was necessary. It forced me to think about the issue in a new way. The development stage is often full of screw-ups.
It was back to the drawing board; this time, we fundamentally changed the concept of incentive for participation. We removed all financial rewards from the token and replaced them with the concept of reputation. Reputation is earned through participation. The more you participate, the more say you have in voting on proposals for change in the DAO. We also removed the executive committee for the DAO and made it fully autonomous and controlled by the members alone. This, in effect, ensured that the governance was in the hands of the parties to the DAO.
On reflection
The whitepaper is almost ready and will be published this month (January 2023). On reflection, I have learned a few things in writing the whitepaper that differed others I have written or contributed to:
1. Don’t underestimate the help you need with the equations. Despite testing Mike's patience, I knew what I wanted to do but could not write the equations.
2. Review, review, review. Don’t underestimate the knowledge in your peer group and how they will see your concepts.
3. Don’t try to fit a new and novel concept into an existing structure or format. If it is new, write something new.
This has been a challenging journey. We had a full-blown crypto whitepaper ready to go and scrapped it to write something completely new and fresh. We had to go through the process to get to the concept we are about to publish.
At its core, this concept involves leveraging the power of decentralized systems and blockchain technology to create a data market that is more secure, transparent, and efficient than ever before. By bringing together the best of both worlds, we can create a platform that allows users to easily buy and sell data with confidence, knowing that their transactions are safe and transparent.
Beyond this concept's technical aspects, what excites me is its potential to transform how we think about and use data. By making it easier for individuals and businesses to access and monetize their data, we can create new opportunities for innovation and growth and pave the way for a more data-driven future.
As I raise my empty glass to the future of data markets, I can't wait to see what the next year will bring. Here's to a bright and exciting future for all of us!
[1] https://markets.businessinsider.com/news/currencies/luna-terra-stablecoin-price-crypto-crash-dollar-2022-5?utm_medium=ingest&utm_source=markets
[2] https://www.findlaw.com/consumer/securities-law/what-is-the-howey-test.html
[3] https://www.investopedia.com/terms/1/51-attack.asp