Incentivizing accountability and decentralized funding

One major part of moving to a DAO is to decentralize funding. One approach is to use the Status multisig and “democratize” control over its funds. But this is only partly a solution and not enough to be sustainable. To be sustainable, the community itself must self-fund development.

To do this we need community crowd funding. This is inherently a bottom up process. And who is the community? It is us. As core contributors we are ostensibly at the core of this, so it makes sense that we are the first to do this. Especially since we bear by far the biggest cost to the current funding structure.

While doing this in a trust-minimized, rigorous way is a bigger problem, there’s a lot we can do right now. Instead of talking about this idea abstractly I thought I’d just show it in practice. To keep the discussion focused, one on the general idea and another on a specific instance, the specific initial experiment can be found here:

The tldr of it is that if you take responsibility of getting 80% of core contributors to use Status daily before Devcon, I will personally give you some money, and if you fail you’ll give me 10% of that amount.

Context: where does the money come from in Status?

It is helpful to sometime ask where the money comes from. Initially, before the ICO craze and the crazy year of valuations in 2017, Status was almost exclusively self-funded through Carl and Jarrad’s previous endeavors. After that, Status received its funding from almost 20k unique (addresses/)contributors (A Look at the ICO Token Distribution | by Corey Petty | The Bitcoin Podcast Network | Medium) who believe in what we are building. An ICO is just the initial primitive form of funding, and there are many better tools out there.

Quoting Jarrad’s recent latter to Status:

The more capital we burn doing Step’s 1-3 has a direct measurable impact on the amount of people we can onboard onto crypto.

While there are many ways to talk about acquisition, we can talk in terms of a traditional paid user acquisition strategy, for each core contributor we have on, we are prevented in reaching about 25,000 people, every year. Status has about 100 people in the organisation now, that means every year we reduce our capacity to reach ~2,500,000 people, I’m talking monthly active users here, not unique installs.
It’s helpful to view your own actions through this lens, and I hope you care about reaching as many people as possible as I do. We’ll work to fix the incentives so it’s a win-win for everyone involved, but in the meantime, it’s definitely a useful thought experiment when working on the project.

Context: Bottom-up and private knowledge

Note that this type of funding doesn’t require any permission, consensus or top down decision making to work. It is simply individual entities who decide to put up a reward and others can commit to it, voluntarily.

Another point worth mentioning here is the idea by Hayek regarding distributed knowledge or private knowledge. The idea is that knowledge lives at the edges, and by having individual actors bet both their funding as well as the the people, they are using knowledge about impactful things and skills in the most effective way possible. This can be complementary to a more coordination-heavy approach that aims to distribute a single source of money fairly and effectively.

As to how much to stake and bet, this is up to you. There’s a whole set of literature on this problem called the Kelly Criterion. This is outside the scope of the article, but a recommendation would be to start small.

Assumptions, trust-minimization, etc

Right now this is operating in a trusted ad-hoc matter, which is OK. We can work on making this trust-minimized concurrently. A big part of this initiative is to (1) do what we can now (2) change cultural norms (3) be effective in terms of resource allocation and compensation.

The reason a trusted setup is OK is because initially this will primarily be used within a group of 100 core contributors with fairly close social ties, so social shaming is a factor in cases of contracts not being fulfilled. See Social scalability by Nick Szabo for more (Unenumerated: Money, blockchains, and social scalability).

A lot of this can be formalized in smart contract, but this is not a blocker for us doing this socially right now. See dominant assurance contracts, DAICOs, and a super rough sketch I started here

Experiment #1 can be found here:

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