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How to Start a DAO, the Right Way

Published by
Andrew Warner
August 19, 2022

This is the story of how and why Origami was founded, as told in an interview with Ben Huh, Origami's founder. Listen to the podcast or read the transcript below.

Andrew: Welcome back everyone. I've got with me, Ben Huh. He is the founder of Origami. They are the leading organization for creating DAOs. DAO stands for decentralized autonomous organization. Ben, how would you describe them.

Ben: DAOs are a community of people who come together and share power through the use of a token. Usually on a blockchain.

Andrew: My name is Andrew Warner. in the session. We're going to contrast a DAO with the corporation and then also understand what are the ingredients of, well organized, well run DAOs.

Web2 didn’t compensate community members

Why don't we start with one of the problems that DAOs are here to solve. And, you know, Chris Messina. What happened to Chris Messina?

Twitter didn’t compensate Chris

Ben: Chris is a great example of somebody who did something absolutely brilliant, at an inflection point in social media. He came up with the idea of the hashtag.

He was an early Twitter user and he suggested, why don't we use the pound sign or the hash sign to denote subjects so that people can actually follow subjects instead of just tweets or people.

This idea became adopted not only at Twitter, but basically across the entirety of the internet, but Chris never made a dime off of that. Twitter never compensated him for it. It wasn't really intellectual property the way you and I think about it. Chris has done well for himself, but how did that happen?

Right. That's just par for the course, when you are working with a corporation.

Andrew: Community member helps, the corporation benefits. The community member gets something to brag about, but not much more than that. Meanwhile...

Cheezburger didn’t compensate cat photographers

Ben: Actually, to be honest, I'm guilty of the same thing. So I ran this company called The Cheezburger Network. We are a user generated content company and people would submit their cat photos and, make captions and use our tools to actually publish them. It would make millions, tens of millions of people happy, but I was unable to compensate them because the amount of revenue that I was generating minus the overhead that I had to use to run the company meant that there was nothing available for the users.

Andrew: Uh

Ben: This is actually a massive problem in software and technology and media today.

Andrew: So it's not just like evil corporations trying to take advantage of people. It's also the structure doesn't allow community members to benefit the way that it allows, founders and owners to benefit.

Okay. So let's go over Orange DAO. That is a DAO that you put together for Y Combinator entrepreneurs to help fund crypto companies.

What happened there in contrast?

Orange DAO rewarded its members

Ben: We took a radically different approach. I'm one of the partners of a venture fund. We are investing in early stage web3 companies. We realized that when you are an early stage firm, it's difficult to create a network.

It's difficult to create an inbound set of deals so you can filter for the best ones. But we had an idea. The very valuable part of a venture firm is the profit that you earn, from your investors' funds. It's called “carry”. And so usually a venture firm takes 20% of carry. In other words, 20% of the return on the upside.

Instead of the three of us, the partners, keeping it, we said, we're going to give that to a DAO. And we're going to give them this money in exchange for their help. And we're going to create a set of very clear rules that give people tokens. And these rules can evolve as the community changes. They would allow them to do whatever they want with those tokens, as long as they support the same mission — which is to help more entrepreneurs move into web3.

Andrew: Give me an example of how a community member who helped got a benefit for doing it.

Ben: Orange DAO has a team that helps the fund to screen the deals. So we run as this meta venture firm. But now we've got these additional funds that we can use to support more entrepreneurs in different ways. We have a DAO member. His name is James Sinka and he is a science guy and a YC alumni.

He and a couple other people said, we'd like to create a fellowship. And the idea of a fellowship is when people transition industries, they need some time and some money to actually go from one phase to another and we'll give them $25,000 to spend 10 weeks working with us at the DAO to go explore a new idea. All they have to do is present at the end of the 10 weeks, what they want to do.

It's virtually no strings. If you start a web three company within 12 months of the fellowship ending, you'll give us, what's called a MFN position in the company. So basically it converts into potentially future investment, but if you don't do anything, no harm, no foul. You can go do whatever else you'd like to do and you got the education and the training from us.

That's a very different model than venture. You're actually supporting the person, not the company, but the DAO actually came up with that. As a grassroots effort, not only did the DAO devote $150,000 to the program, but another VC came up and they said, "actually, we'd like to match that. We'd actually like to create four more seats. Can we piggyback with you?" They said "we will give the DAO 50% of the upside from our own money."

Andrew: Okay.

Ben: Not only did he create an amazing program for entrepreneurs but bring in potentially additional revenue for the DAO.

Andrew: So that would be a great idea. In the past that would've gotten him a pat on the back, built his reputation. Here because you're functioning within a DAO where community members are supposed to benefit from the upside, what happened?

Ben: Because James is running this program, he is receiving tokens for actually doing this work and these tokens represent a share of voice in our community. So now he has more authority in our ecosystem to direct future funds and the activities of the DAO.

Andrew: So he gets all of that and then.

Ben: Also gets a pat in the back and better credibility.

DAO members rewards

Andrew: Okay, fair enough. So now let's talk about how to do this properly.

You've said in the past that corporations are there to help benefit the shareholders, right?

Ben: Yeah.

Andrew: How is that different from a DAO? Isn't a DAO then saying, look, you're all essentially shareholders, it's too difficult to create shares and then create a market where you can trade those shares with other people. We're just going to call them tokens. But essentially you're a shareholder. Is that what it means?

Ben: From a legal perspective they're not equities, they're not securities. It is not about the distribution of wealth directly to the people who own those tokens. There are some models that you can do that, but it's really about being a part of this community and actually having more control or more voice in that community.

What you do is you formalize the rules in which people can earn these tokens. So what the DAO says — which is members, as well, as leadership of the DAO — we exist for the betterment of our community. And therefore all of our resources are dedicated to our community members.

So we can keep growing the assets that we manage or the value of the things that we do and continue to help out and go after the mission. For example, Orange DAO's mission is to help existing entrepreneurs transition to Web3. We want to create more entrepreneurs in Web3. And that's the mission that we're going to go after.

Andrew: Let's talk about how to do this, right. What are some mistakes that people make when they're trying to get this right.

DAO organization mistakes

Ben: Human nature fears, the lack of control or the loss of control. When the core members want to start a DAO, they'll say, great. I have a community. I have a revenue model. And I have tokens.

Well, the tokens are the hard part. Like how do you distribute these tokens? Who are you going to give it to? How much are you leaving at the table?

And they'll say, well, since, we're the ones contributing the money, is it possible for us to like remain in control in one way, shape or form? And there's this point where they're looking for a backdoor way of owning 51% of the tokens.

They try to hide it. They, talk around it. But they're not really making a commitment to decentralizing. They're trying to like have their cake and eat it too. That doesn't work.

You have to understand communities are pretty smart and eventually they'll figure this out and they will violate that trust with the community because they've been backdooring this control.

The moment your community starts to lose trust. The moment you realize that people are not leaving things on the table for the DAO gain value, there's what I call "a run on trust." It's like a run on the bank. People have decided not to trust one other than the community and they want to be extractive versus value add.

Andrew: If there's a run on the bank, it means some people take their money out. Other people watch that the money's going out and they want their money out too, because they see that the bank might be close to not having any cash at all.

Here people see others don't trust it. They say they're probably not going to be any trust left. I better not support it. And trust that I'll get any of my benefits back out of this. And the more this goes on the cycle just goes down.

The Solend example

Ben: It's happened over and over again, actually. There's an example of a lending protocol on the Solana ecosystem called Solend. S O L E N D. In June they had this catastrophic event in which Solana prices kept on falling. And so they were about to lose their money.

Because they had lending positions, and if the value of the collateral that they promised falls below a certain number, the other protocol that they were using was going to repossess all of those tokens. So they were freaking out.

And the very first proposal that this community put together was to take over control of some other member's money. Granted they couldn't reach this person. They were trying to figure out how do we save all of our capital and potentially save the capital of the entire ecosystem?

Because this could be like a chain reaction. They did what no one should do in crypto, which is to violate the sanctity of somebody else's tokens.

Andrew: By just taking it over, taking the money out of their wallet.

Ben: Literally taking control of someone else's tokens, because you have the keys to the contract.

Andrew: Did the community vote in that case?

Ben: The paradox here is that with enough tokens, you can do whatever you want. The paradox is that the community should never actually do the things that it can do, if it's looking out for the community's best interest. Right. It's the abusive power problem. And also the DAO can actually have set up safeguards.

The DAO can actually do its work and homework, well before any of these problems happen so that these things don't occur. They could have had really good controls. They could had better communications. They could have had backup communications channels.

Notice that when Solend has their crisis, it's literally the very first proposal that says we're going to take over somebody else's money. It goes to show you that they were not prepared to be a part of a community. They were just putting in money and hoping for returns.

Ingredients of a good DAO

Andrew: So if we want to do it right, what are the ingredients? What goes into a good DAO?

And you've created how many DAOs?

Ben: I've created two DAOs that I'm a member of and Origami has more than a dozen customers.

#1 Community

So we talk about having a real community. This is not just people who have met for the first time on the internet and don't, they don't know each other. I mean we do support communities like that but they have to rally around a mission. There has to be a north star.

There has to be something that we all agree is bigger than us. Right. So that is the potential of a DAO. Now that community is literally all of the active energy that you can actually use for the betterment of the community itself.

Previous relationship & shared mission

Andrew: They need to know each other and have a shared mission first?

Ben: Yeah, absolutely.

Andrew: One example of that is Y Combinator alumni. They've all gotten funding and support from the same investors and they're in an online message board called Bookface and have for years. Fine.

I see how you work with that. Give me another example of a community that's been around and then created a DAO.

Kauffman Fellows example

Ben: The Kauffman Fellows, which is a group of venture capitalists. It is very prestigious program. They basically go through training with each other to become even better investors. They were Origami's first customer. They decided to work with us so that we can help them build their DAO and their ecosystem and their toolset so that they can share deals and co-invest together.

And in fact, Origami became one of the first investments that they actually made.

Andrew: They got together and they said we want to do what?

Ben: They said, Hey, we would like to actually build a venture capital platform of the future. As VCs go from Web1, to Web2, to Web3, they're adopting the technologies that they're investing in. The experience of investing through a DAO is something that they really wanted and so they wanted to pool capital together, make decisions together, and actually have fair governance on what they're investing in.

Instead of one partner with a lot of political power, pushing things through and other people not having a say, they said, we're actually going to vote on the deals that we see. And if the threshold passes X, we will make that deal.

Andrew: They've had years of experience together. They've had years of trust and a shared mission of supporting entrepreneurs that they've expressed over all those years. And now all they're doing is they're saying let's have a fairer way to reward the people who are benefiting us and a better way to get their ideas back into our investment, into our community.

That's what you're looking for. As opposed to, if 20 people said, "Hey, you know what? We want to make some investments, let's get together and create a DAO." They don't trust each other. They don't know each other. They don't have a reason really to set up an infrastructure that allows them to give up power to the other members.

That's ingredient number one. What's ingredient number two?

#2 Decentralization

Ben: Decentralization, the commitment to continue to distribute value to your members.

So this says power tends to accumulate. In any given system, you have people who are better incented or better positioned or have ideas about gaining control. Everybody wants more control.

A DAO is really more successful when you are constantly trying to figure out how do we bring up members who are new into our culture so they can actually earn tokens and add value. At, Orange DAO, we talked about this. This is not a formal thing, but we said, "How long does it take for a new member to join and then for them to join the team at earn tokens for something that they contributed? So you want to go from zero to 60. And 60 is "I did something good. The DAO value that I earned tokens for it." We want that cycle to be as short as possible. How do we do that?

Orange DAO member creates something new

Andrew: Let's talk about the decentralization part for Orange. What's something that they could do because they have tokens. What makes it uniquely decentralized.

Ben: If you look at larger DAOs like Orange DAO, like Shark DAO, like all these other large membership groups. It is not a hub and spoke model. It is much more what I call "fractal organizations."

The DAO itself at the very base layer is very thin. There are very few people who are needed to actually run the DAO.

The idea there is that the administrative overhead should be very light and the DAO is there to accept and vote on the ideas of its members to empower a small, independent team of people to go execute on something and return value to the DAO.

So we have a partnership team at Orange DAO. The partnership team is there to create a revenue generating program. Let's say with, uh, NEAR, which is a Layer 1 blockchain. And we did a partnership where we can present NEAR and the technology and their tokens to founders who want to build on their blockchain. In exchange, we are going to be receiving $15 million over the next four years from NEAR to do this program.

That is grassroots, has nothing to do with venture capital, which it was the original promise of the DAO, but there was a grassroots effort that's being driven by DAO members.

Ethereum Name Server votes out a leader

Andrew: One of the things that you sent me before we got started was an example of a DAO that basically pushed out one of its leaders from the DAO.

Ben: In this case, we have an example of the Ethereum Name Service. So it is, um, incredible project, where you can actually buy a .eth name. For example, my ETH name is huh.eth. I really wanted that three letter domain. That protocol administers that system and it runs on the blockchain on Ethereum.

It is one of the shining examples of a great project, great governance, and things like that. And one of their community leads, was very well respected, said something on Twitter, that was very politically incorrect and the community decided to hold effectively a referendum on his role in their community. And ultimately he left that role.

He had no more power than the rest of the community. Whereas if it's an executive, there'll be protected by a board or protected by contracts on the laws. But here the community spoke very loudly. That what he said wasn't okay. And that they did not believe that he should be a part of the community, at least at that high visible level.

That is also true governance. So there's decentralization, which is a distribution of power. How does power look across the community? That's decentralization. Governance is a process in which that voting group uses their decentralized powers to affect change.

#3 Resources

Andrew: What's the third ingredient?

Ben: This is the part where it is not about just having a community. It is not just about having votes. That's like a nation state. this is where a DAO is really more like a company or a corporation. The DAO needs resources. The DAO needs some way of creating value and capturing it in their control called the "treasury." So that the token actually has meaningful value. Because if there's nothing to actually use to actually affect change, then the token, the voice that you have, the control that you have, isn't controlling anything worthwhile.

This is where you need at least a starting business model that people will see and say, "wow, if I have a token in that community, I'm controlling something of value. So that's the revenue model.

Andrew: It It just be the right to vote. It has to be the right to vote with some kind of financial power...

Ben: You are directing a resource.

Why a Bored Ape is valuable

Andrew: You're calling it a resource. I'm calling it money. Is there an example where that resource is worth something other than money?

Ben: In crypto, this is where it like gets super gray. It's like, well, I have a Bored Ape. Is my Bored Ape money? Kinda. It's liquid. I can go sell it at any point and turn in the money, or I could actually put it on the lending platform and actually take stable coins out and go buy more ETH. It’s crazy. It's like everything, because it's run entirely on chain and it's on software, has this nature of liquidity.

And so if somebody believes that you're token has value, it is going to start having value. And so that's the part where you go straight from, we have voice and we have control to what's that token worth because of that voice and control.

Andrew: But what you're saying is it has to have a financial model attached to it, or else it's not helpful. You also have to be able to cash out. Am I right?

Constellation DAO’s token must have value

Ben: Sort of, okay, so let's say I have a DAO, um, Constellation DAO, uh, it's one of our customers, they are a group of, uh, TechStars alumni, couple hundred members strong, and they are also launching a venture fund to invest into their ecosystem. Just like Orange DAO.

The carry from that venture fund is going to be given to the treasury of the DAO for it to do whatever it wants to do. So there is inherent value in this community here. They can share deals, they can help each other out, but that's really soft value, right? Things that are not, quote unquote, liquid. The moment you realize that there will be money in that treasury because of the venture fund, your token starts to have meaningful value, even though there's nothing in the treasury, right?

As a good grand ape, we can say, wait, there's a venture fund. There's going to be a return. That return is promised to the treasury, oh, wait. This token directs that treasury. Well, I guess I'll be willing to pay a little bit of money to have a bigger say if I can direct that money towards a program that I like.

Why not function without revenue?

Andrew: It doesn't work unless that revenue component is a part of the mix?

Ben: Otherwise you're just a Web2 community. You might as well just be a Facebook group.

Andrew: And you say the distribution of value comes before creation of value. Why? Before.

Ben: In every model that we've had, um, up to this point, we said, "if you come do work for me, I will give you value. I'll give you money. You have given your value first as a employee. And then I'll distribute something that you can use to live your life." In a DAO, because the community is the potential of this network, the community is the lifeblood. You say, we're going to give you tokens first.

We're going to give you something of value about control and voice in this community. And then we're going to actually use that power, and that ties us together towards a common goal to generate value.

You have to give that voice and power away first. You have to trust the community to say I'm going to participate and I'm going to actually be a good member. And that's where a lot of DAOs have real difficulty trying to understand what their community really is and how to incentivize them.

Give resources first

Andrew: You're giving before you're getting.

Ben: Yeah. You have to realize that a DAO is bigger than you. It is as I call it the "hive mind," this community of people that can do amazing things. If the incentives, the communication and the culture are right, it can do incredible, amazing things like the fellowship program at Orange DAO, for example, the partnerships program, the media arm that they're building. VC3's investment thesis.

All this stuff came grassroots, bottoms up. No one person, no CEO showed up and said, we're going to go after this strategy. This is where we are learning to live with each other online, in a true sense. Because there's real value involved and people are learning how to actually exchange value so that we don't have to be under this corporate way of doing things, which has been the only thing we've known so far.

Creating culture

Andrew: Culture is hard to create. How do you create culture in this community?

Ben: We have lots of tools — since the Internet's been around for a long time — to create online communities and to actually direct them. And so you do things like, "Hey, we have a code of conduct and, when you join a community, you are agreeing to abide by that code of conduct."

We now, with Web3, have a tool that is more direct than moral and yelling at someone or downvoting them. We literally have tokens and incentives. So you can design systems that say, "If you do X, and if your peers believe that you have contributed, then you will earn these tokens." By giving quantity to a quality of work, you are actually shaping that culture itself.

Andrew: It feels like money and culture are inconsistent with each other, especially if you're trying to measure everyone's contribution. It feels, I don't know, like it's a job, like everything's a job instead of a community that cares about each other.

Tokenizing handshakes is lame

Ben: That's a great point because the distinction there is a DAO is more than a community. A community can exist in a DAO, but it is also separate from the DAO. there are a bunch of events that are Orange DAO runs and our DAO members show up and they're just there for the good vibes and fun and to have good conversation with their peers. We don't bounty that. We don't give you tokens for doing that. We're like shake one hand, one token, like we're not token driven machines. What the DAO is actually doing, is it saying there are economic activities that used to be social, but we should actually reward people for the economic activity.

That creates a place where people can say, "Hey, I can participate both on the social side, as well as the economic side."

Andrew: So going back to Twitter, the social side of you get to post and people get to see you and you get that's all that community stuff. We're not paying tokens for that. But if you say we're creating a hashtag and the hashtag starts to become a major feature, you should be rewarded for it. If you translate us into a different language and bring more people in, that's not you doing it for fun, that's you doing it for the good of the, of, of the product you should get tokens.

So what you're saying, "What we're rewarding for is contribution to everybody else's welfare contribution to the product.” That kind of a thing.

Ben: Contribution to the revenue model contribution to the treasury or some supporting structure for the community that the community values.

We have to think about it in terms of how do you use incentives, so that a thing that the community wants is done better.

We're not saying that it can't be done with tokens. We clearly have communities that thrive and do really well in the absence of tokens, but a company like Origami is really helping these DAOs design the incentives and the structure so that you don't end up tokenizing the handshake. Cause if you tokenize the handshake, we have just ruined the community vibe.

Everybody's like, "Well then Andrew is just coming over for his freaking token. All right. I'll shake his hand." That sucks.

So if you tokenize the wrong things, even though it is tokenizable and people are like "more handshake equal better experiences," that's not what this is about. Right? It's about creating a program that everybody believes has value monetarily, but that has non-negative social value, hopefully positive social value, but that's not tokenizing.

Andrew: All right. So then fair to say, all the old community tools that you've helped pioneered and other people have online apply and are necessary here. We're not talking about that. We're assuming that's built in before the DAO ever happens.

Ben: We are assuming that people are good and there are challenges to that. Because, again, DAOs are new, they're different than your regular online community. And everybody kind of brings their perception of what a DAO is because of what they've read online. And then the reality is different, and because it is a community that powers the DAO, when there are friction points between the members, you have to go figure out how to resolve that and also decide if you want to resolve it or not. It is a peer group and what it teaches you is how do you actually learn to respect one another to value each other's contributions and also not impose your idea of a DAO upon each other.

Andrew: You did that with Orange DAO by saying, "Look, we're getting this carry. This is all the upside from the investments that we make. We should be taking it home and buying things with it. Instead, we're giving it to the community. We're trusting that if we give you this, you are now going to see that there's money in this, even though it's coming in the future now let's make it even bigger."

What are some other examples of DAO creators who said "we are putting in value first?"

Origami’s secret customer

Ben: Origami is working with a customer. I can't disclose their name. However, they are a massive user base. They have about 2.4 million users on their platform and they said, "Hey, we would like to figure out a way to reward our community for being on our platform."

The problem is how do you actually do that? How do you do that in a fair and transparent manner?

And so they've set aside a portion of their revenues that they're going to give to a DAO and let the DAO decide how to use those funds to actually improve the lives of our customers.

That is an incredibly powerful idea that you as a business who want to give back are not doing it so that it goes to the CEO's pet charity, that you're actually giving it to the community and saying, we believe that you understand how to make your lives better and in order to do so, we will actually give you money that you can share and control together to multiply the value of that money.

DAOs: Last bastion of trust

Andrew: You wrote the DAO is the last bastion of trust in Web3. What do you mean by that?

Ben: There's this philosophy of trustless in what three, in other words, it is not the absence of trustlessness. It is that the system works in a way that trust is not required for it to function properly because in every transaction and business, there's always an element of trust.

Somebody said, "The difference between a contract between two parties who trust one another versus a contract between two parties that do not trust one another is a hundred K and a hundred extra pages."

So if you don't trust one another in the real world, the cost of business just keeps going up. In Web3, because of smart contracts, and because of the way the blockchain works, you don't actually have to trust each other. You just need to know the data, know the facts, know the code, then you can say, "great, I'll give you money to borrow against this collateral. And if X thing happens, I will take the collateral and you can keep the money. So I don't have to know you."

That works at the software level, but when you start to get into a community in a DAO, you still have to trust one another. You still have to actually communicate, you still have to build that social structure so that you can agree and not constantly be worried who's going to screw me.

Andrew: Then what do you mean when you say that DAOs use trustless systems, even though they are in the last bastion of trust?

Ben: I guess I would pose this question back. How does one learn to trust?

Andrew: Giving trust and seeing that it's, that it's earned.

Ben: I think people learn to trust one another when they see that the person's words and their actions are consistent. What Web3 proposes is that even inside a community like this, you build trust faster when you can see that consistently people have voted for X in their self-interest or against it, or what have you.

Those records are online, that those records are visible to all. That communication is not happening behind closed doors. And that you can actually put up a recording like this of us having a conversation about what to do in the DAO and actually ask for feedback from the community. It's a lot of work, right?

There's a lot of conversations going on, but what's happening is we are learning to actually build the open, at least inside that community. And so if you say one thing to one person and, something different to another, that brings your integrity into question.

Voting in DAOs

Andrew: I wanted to see how many times Friends with Benefits. I wanted to see how many times they. Proposed something and was shot down.

That was my indication of whether they really had a community that got to decide things or if the people on top were so charismatic that they basically were using the community to rubber stamp it and sure enough, I can go and see through Snapshot, that they were shot down and it wasn't that they were shot down and then they rephrased it and said, "come on, guys, this is important." And got to come back and say, here's the same thing. And they were voted up. All of that is public.

Ben: Yeah. If you fucked up, you fucked up. Own it and then figure out how to solve it and DAOs that can actually do that quickly will build more trust. It is not that people won't screw up. Right. It's how you fix it that really builds trust.

Andrew: Okay. And all of it is for new people to see. And at the same time, it's in the community's culture to see this is how we operate.

Consensus in the community, before voting

Ben: The vast majority of proposals that we see pass almost unanimously. That is not actually a bad thing. In many cases that's happening because the community has had chance to provide input prior to the vote going up. Right. So it's difficult to distinguish whether a DAO is being rubber stamped or it truly is developing consensus.

Andrew: I've seen that. Like on Discourse where they'll say, this is what we think we should be voting on. Let's talk about it. And then after they do that, then they take it and they actually vote. Am I understanding the process right? Often?

Ben: Yeah, so every DAO uses a slightly different process. We're actually building out a rather full feature set in Origami that actually gives you a way to start an idea and actually shepherded it through the community all the way to vote and execution.

Andrew: Okay.

Ben: At Orange, that's happening in Discord. At VC3, the Kauffman Fellows now that's happening on WhatsApp. Different communities have different methods of communication. And this, this is where like "the medium is the message." Different applications that you use actually color the flavor of the types of dialogue that you can have. Um, but. All that said, what people are trying to do is come to a consensus.

Andrew: Before the actual voting happens.

Ben: You can also say, "we have consensus in that we will not reach consensus," and this vote is going to go up and it may fail. Right. And that's okay. Um, that is up to the person who's writing the proposal and that group to decide when to push it for voting. So the DAO cannot say, "you cannot put up this proposal."

There's no mechanism of the DAO that says you "cannot put up this proposal." Anybody can do it.

Andrew: It will just get shot down if it's not getting consensus before or during the vote.

Ben: You're rolling the dice. If you are a member of the community and you have not followed the process that everybody has agreed to and decide that you're going to put up a proposal, you will probably get some, you know, dagger eyes, right. It's like, "dude, what the heck? Like, why are you doing this? You're just wasting our time. Cuz we're going to vote this. down" right. Um, so there are some like anti-spam features that get built, but inside most of these communities, a lot of that social interaction matters. And that is actually, uh, one of the reasons why existing communities tend to fare better at moving themselves on to Web3.

Direct democracy doesn’t work in DAOs

Andrew: Okay. Anything we left out of this?

Ben: Direct democracy.

There is this myth that DAOs are about direct democracies, where you vote on everything. And let me tell you, I've tried that and it is not fun. It is so not fun. Um, there's a reason why people do great in small teams and direct democracies bypass the nature of small teams. And so the DAOs that we designed at Origami are all about enabling transparency, enabling bottoms up ideas. It's about not just representative democracy, but to build that trust with the community members so they can be more efficient. So that, you know, Andrew, you don't have to vote on the change of the button of the color in Discord.

Andrew: You're saying the problem with direct democracy is that if you give people too many things to vote on, it becomes decision fatigue for them.

Ben: Direct democracy has decision spam, right? And so you start to ignore all the decisions that are, that need to be made, and you can't tell a important decision from an unimportant one. And so everybody just disengages and so proposals that go live in a direct democracy tend to have very little interactions over the long term, which is net a security risk actually for that community.

Andrew: Do you have an example of someone who had too many decisions in their DAO?

Ben: Yeah, actually Crisis DAO, uh, which is the very first DAO that I set up with my friends to buy JPEGs. It was a direct democracy. I mean, it was a small number of people, but it was like, "Hey, if we wanted to change our logo or change the channels in our Discord, do we need to put up for a vote?" And the answer was, yes.

You have to do that because we all had a say in it. You couldn't just have one person unilaterally do it, and it quickly realized that's not going to work. So direct democracy work like in a couple. Like literally in a relationship, that's a great model for a direct democracy.

Andrew: I don't even know if it's that good there, my wife and I are spending forever trying to decide how to do the guest room here, partially because we each get a vote.

If not the direct democracy, how do you create the equivalent of representative democracy in a DAO?

Ben: In the Origami framework, we actually have a three branch system:

Governance. Who's responsible for communications and the proposal process and voting and elections.

Treasury. Who's responsible for making sure the treasury grows and is secure.

And then Programs, which is anything else that is outside of those two organizations.

This is the kernel of the DAO. Those members get elected and they get to actually replicate their responsibilities and, and subdivide them out to other members. And so there's this kind of a, a roll up of responsibilities that are not shared so that they have independence from each other.

Audience feedback

Andrew: I think we've covered a lot here. going to do what I've done before, which is say, if anyone out there is listening and they want to reach out, email me, and Ben, what's a good way for them to reach out to you?

Ben: Yeah. So Twitter's great @BenHuh, B E N H U H

or email

Andrew: Bye everyone.

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