https://cointelegraph.com/magazine/dao-hyped-voting-decentralization/

Ask 10 different people to define a decentralized autonomous organization (DAO), and you’ll likely get 10 different definitions. But there is at least one thing most agree on: DAO governance is a mess. At best, it’s an experiment in the works.

According to DeepDAO, DAOs today handle a whopping $17.2 billion in value. Yet many DAOs managing millions of dollars have proven hopeless at heeding even the most basic of lessons in business management 101. One does not have to look too far in the annals of crypto history to recall major DAO catastrophes.

Recall Wonderland DAO, an Olympus fork that birthed arguably one of the most notorious scandals in DAO history. At its peak, Wonderland enjoyed a near $2 billion in total value locked, which came to a skidding halt in January 2022 when its treasury manager — who went by the pseudonym 0xSifu — turned out to be none other than Michael Patryn, co-founder of the failed crypto exchange QuadrigaCX and a convicted criminal for financial fraud.

Or consider a more recent exploit with the Solana-based trading protocol Mango Markets. In October, attackers exploited the DAO’s loosely governed parameters to acquire a disproportionate chunk of the DAO’s MNGO tokens. In an absurd turn of events, the attacker proceeded to propose on governance forums an offer to return half their heist in exchange for the DAO not to prosecute him, then voted “Yes” on it with the stolen tokens. The vote eventually failed, but Mango still ended up paying off $47 million to the attacker.

Case studies of DAO failures are not exclusive to outrageous one-off spectacles like the ones above. Despite the Libertarian rhetoric of self-sovereignty and self-custody, dozens of DAOs that kept their monies on centralized exchanges also saw their treasuries implode during the carnage of 2022’s blow-ups like FTX.

The truth is, DAO governance isn’t easy. Founders have to balance a multitude of priorities, like solving voter apathy, committing to decentralization and product market fit. A “best practices” manual doesn’t exist, and where there is one, it’s not widely shared. 

The good news? Die-hard DAOists are hard at work to rid these problems, one experiment at a time. 

The problem of voter apathy

Take voter apathy, for instance, arguably DAO governance’s most widespread problem. As a “decentralized” community, tokenholders must vote if they desire resilient protocols. But token holders don’t vote because it takes time. When voters do turn up at the voting booth, or Snapshot, they lack the expertise or context to make an informed decision. Worse still, voters who care may not even be aware of a vote until it’s over.

To combat voter apathy, a burgeoning landscape of DAO infrastructure tools has been developing tools to streamline DAO voting into one-stop platforms. Products such as Senate and Goverland are trying to aggregate governance proposals across dozens of DAOs with direct integration on popular voting platforms, such as Snapshot and Tally.

Senate founder Paulo Fonseca tells Magazine, “At present, it’s cumbersome for most DAOs to see off-chain and on-chain voting separately on different platforms. One of our product’s key value-adds is simply for users to consume all the information on one page.”

Because governance proposals typically open to vote for a limited duration, Goverland, in turn, is putting a strong emphasis on mobile integration so voters are notified in time. “It all starts with an in-time notification. With mobile, it’s far more convenient to help boost voter participation,” Goverland founder Andrey Scherbovich tells Magazine.

Others believe that for DAO governance to improve, it needs to go beyond pure token-based voting based on duty. JokeRace, a voting protocol that aims to make governance “fun,” was designed with this goal in mind.

Instead of expecting thousands of tokenholders to vote, JokeRace is exploring the use of incentivized “contests” that allow governors to gate voting proposals in any way possible via a highly customizable allowlist, from a fully public forum to select DAO participants. Co-founder Sean McCaffery tells Magazine:

“Many DAO projects want to give non-financial utility to their token. What we are doing is opening a horizon on top of simple token voting and incentivizing people to hold tokens for more than just speculative reasons.”

“For a highly technical proposal that wants to draw on the wisdom of experts or loyal fans, a creator can gate the vote around criteria, such as minimum liquidity provision for three months or holders who have held the token for at least a year. It enables everything from low-commit fun ‘GM contests’ to serious proposals where only active contributing DAO participants can vote,” he adds. 

In short, JokeRace strives to reimagine governance right down to the bottom social layer. 

Delegate voting

To thwart low voter turnouts, DAOs are also turning to the real world of public governance for wisdom. One such tried-and-true method that has caught on in the past year is delegation, where tokenholders entrust voting rights to delegated “politicians” or “stewards” who would vote on their behalf.

From a PR perspective, delegation is nice in that DAOs get to have their cake and eat it, too. It allows the DAO to scale faster without having to pass all decisions through months of debate. DAOs also get to deflect the criticism of “insufficient decentralization” since tokenholders are technically expressing a demonstrated preference to vote, albeit indirectly.

Most major DAOs today have embraced delegation voting, and while it’s helped voter apathy to some extent, it’s hardly a silver bullet. Delegation voting in itself has surfaced with problems. For instance, delegation can descend into a popularity contest where voters simply assign tokens to popular Twitter influencers or familiar company names.

“An experiment that could be worth trying is to have delegates vote specifically on their domain expertise rather than making them responsible for voting on every single DAO decision — which range from complex technology to finance — too wide of a range for robust decision making,” Kate Beecroft, governance lead at Centrifuge, tells Magazine.

Moreover, delegate voting suffers from apathy in itself. Delegates themselves don’t turn up on election day. According to Karma’s research, at least 53% of delegates in major DAOs have failed to even cast a single vote. Or it could lead to situations where voting decisions are the result of collusion made behind closed doors for mutual political gain.

For instance, a16z famously delegates voting powers to “blockchain university clubs.” While the venture fund claims that student clubs are “free to participate in governance however they see fit,” it’s not immediately clear what the relationship between these entities is.

Gitcoin founder Kevin Owocki insists that delegating voting is a step forward for DAO governance but also acknowledges its shortcomings. Gitcoin launched a fairly egalitarian airdrop to around 25,500 holders in 2021, but its decision to incorporate delegate voting saw a concentration of voting power back into the hands of only about 100 delegates. On top of that, delegates cycle in and out of activity over time, and even getting tokenholders to reallocate their delegation from inactive delegates every half a year was difficult.

“The problem that confronted us was keeping delegates engaged, accountable and slowly changing the DAO into a liquid democracy of dedicated Gitcoin community members that cared about our core vision of decentralized public funding,” Owocki states.

These problems are being recognized by builders in the DAO tooling, trying to improve delegate accountability. For example, tools like Karma have emerged to create transparency around delegation voting by aggregating all the information about delegates, including their voting weight, forum activity and voting history, on one page. 

The DAOmeter dashboard, a DAO maturity rating index by StableLab, also serves as a useful DAO public good for assessing the decentralization journey of DAOs.

StableLab founder Gustav Arentoft tells Magazine, “During the bull market, lots of DeFi DAOs branding themselves as ‘decentralized finance’ suffered exploits because they lacked even basic governance. The operational structure of these protocols was extremely opaque. As an individual, assessing the decentralization of DAOs was difficult and requires some form of standardized parameters, which is what DAOmeter tries to provide.” 

Ultimately, despite the popular notion that DAOs are “autonomous,” the reality is that much of it can never be fully autonomous and enforceable on-chain.

“You can have all the on-chain votes you’d like, but lots of DAO operations come down to the social layer. Who owns the GitHub account? Who controls the DNS [domain name system]? Who is in-charge of handing over a password to the elected personnel?” says JokeRace’s McCaffery.

Growth

While DAOs struggle to decentralize, many seem to forget that they are still fundamentally profit-oriented organizations. That means that DAOs can’t afford to forget about revenue and growth.

To scale, DAOs centralize some decision-making in the hands of experts. One trendy idea in the past year that DAOs have been experimenting with is “working groups.” In DAO nomenclature, they also go by subDAOs. Metropolis (previously Orca Protocol) calls them pods. Maker calls them core units, and Gitcoin calls them workstreams.

These structures resemble the ubiquitous M-shaped organizational structures in modern capitalism today. Historically, the capitalist firm was a centralized U-shaped firm with decision-making power concentrated in the hands of a few top executives. As the firm expanded into regional markets, it grew increasingly incapable of managing the rapidly increasing scope of complex administrative decisions.

To remain nimble and adapt as the firm grew, the modern capitalist firm underwent a structural decentralization, empowering mid-level managers with the autonomy to run the local branch as they deem fit. Pioneered by General Motors president Alfred Sloan in the 1920s, this crucial organizational innovation allowed firms to overcome knowledge problems and also aligned the incentives and rewards to lower management, effectively allowing them to work as “mini-entrepreneurs” within a large corporation.

DAOs are witnessing the same tendency toward a similar organizational structure, except that it’s evolving bottom-up from a dispersed, decentralized status quo.

James Waugh, co-founder of Fire Eyes DAO, tells Magazine, “In advising many DAOs, we sometimes recommend the setup of working groups to focus on certain areas that are hypercritical, particularly those involving technical work where smart contracts need timely upgrading.”

“Yet it’s entirely common for redundant working groups to exist and to be a complete waste of time, however. Whether or not they’re efficient really depends on the kinds of people in them.”

Decentralization maxis also complain that too many working groups and managerial experts might mean less transparency over how DAOs operate. It’s a complaint that isn’t completely without merit. 

“In the early days of Bankless DAO, many internal project managers requested for funds then delivered work of questionable value. We implemented a variety of solutions like reputational systems within Discord, KPI-based funding and timelocks to deter rent seeking,” Frogmonkee, an early core contributor of Bankless DAO, tells Magazine.

Ultimately, DAO governance boils down to the fact that DAOs are made up of a pluralistic archipelago of individuals with different value preferences and priorities. Some wish to pump their holdings in the short-term, while others are interested in the long-term health of the project. Some are genuinely altruistic actors, and then there are delegates exchanging favors under the table by agreeing to vote on each other’s proposals.

Dual governance structures

In such a marketplace of conflicting values, a clear separation of powers can help foil potential insider collusion. Some DAOs are actively experimenting with such “dual governance” models, such as Optimism’s “Token House” and “Citizen House.” OP tokenholders and delegates occupy the former, while the latter is an identity-based community of “citizens” with soulbound tokens that acts as a check and balance on the Token House.

Shawn Grubb, a delegate at Gitcoin, tells Magazine, “Optimism’s experiment with bicameral houses is a smart way to segregate the various stakeholder groups: the tokenholders who care about pumping their bags, the active contributors with a job, and the broader community who believes in Optimism and seeks project funding. The key is balancing the power of different stakeholder groups rather than the plutocratic status quo, where plutocratic tokenholders reserve only the power.” 

Optimism isn’t alone. In recent months, a group of Lido insiders have taken it upon themselves to push for a similar dual-governance model. The problem stems from Lido’s wildly successful liquid staking product, stETH, which controls a market share of 32% staked ETH. This poses a looming threat to the underlying security of the Ethereum layer 1, as it comes dangerously close to the 33% consensus threshold, which could theoretically allow Lido to exercise control over Ethereum’s consensus layer. In June 2022, Lido DAO proved that self-regulation was not forthcoming after it unanimously shot down a vote to self-limit its stake flow.

Lido’s proposed dual governance structure would, in theory, bring the DAO back into alignment with the interests of the Ethereum protocol. This is done by granting Lido users (stETH holders) veto power against the DAO, a feature that competitor liquid staking protocol Yearn.finance has also implemented.

“For Lido, dual governance (and implementing staking routers) should be its next logical steps. It alleviates many of the current concerns around the DAO,” said Hasu on the Bell Curve podcast.

Finding a balance

In sum, DAO governance isn’t easy. Driving growth while committing to decentralization is no small feat, and it will take many years before governance reaches equilibrium.

Yet the philosophical principles that blockchain organizations embody — decentralization, transparency, egalitarianism — are all values very much worth striving for. After all, it’s unheard of for a multimillion-dollar company in the traditional business world to be debating operational strategies openly on a forum or that allows anyone to enter and begin contributing without going through a tedious interview process.

Even in its imperfect state, the open and transparent context in which DAOs operate is perhaps the biggest bulwark against the centralization of power. 

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The post Are DAOs overhyped and unworkable? Lessons from the front lines appeared first on Cointelegraph Magazine.

https://cointelegraph.com/magazine/blockchain-games-decentralized-lattice-starknet-cartridge/

Despite promises of “decentralization” and “trustless ownership,” the vast majority of crypto games today are, at best, partially decentralized. Web3 is the branding, but in reality, most are “Web2+.” Game assets live on-chain, yet the game logic, state and storage remain off-chain on centralized servers.

Why? Simply put, it’s not easy to build a fully decentralized game on-chain. Blockchains in 2023 are still far too slow for processing the gargantuan number of transactions that video games require. Lattice CEO Ludens tells Cointelegraph:

“Building a fully on-chain game right now is a little bit like building video games on a computer from the 1980s. We don’t yet have complex on-chain games yet because the blockchains – even Layer 2s – are not powerful enough right now.”

Furthermore, developers have to make important tradeoffs when using blockchain technology to make the game widely accessible to non-crypto audiences.

For instance, Aurory’s developers created a hybrid inventory system called Syncspace, which allows players to leave their assets in Aurory’s custody, but move them into their Solana wallets if they wish.

“Syncspace is Aurory’s UX strategy,” Julien Pellet, Aurory’s infrastructure technical director, tells Magazine. “Not every player wants to handle the complexities of a crypto wallet. We accepted that tradeoff by building Syncspace and allowed some assets to live off-chain in order to bring Aurory to a wider audience of non-crypto-native Web2 players”

But there are passionate communities of degens interested in full-fat, on-chain “autonomous worlds” that are built from the bottom up by the players. One group even modded a game to form a communist collective so everyone “won” the same. Autonomous worlds, as they’re sometimes known, face a lot of hurdles, but given the limitations, the early results are impressive.

How Web3 games started

Web3 games are grappling with a bunch of other issues due to the brief history of the emerging sector. During the last crypto bull cycle, most blockchain games tried to be financial products first and video games second. 

That strategy helped catapult the play-to-earn gaming sector into brief mainstream prominence when token prices were going up. But unfortunately, if the appeal is based on delivering a financial return, then enthusiasm can disappear fast when token prices take a dive. 

Games like Axie Infinity, Pegaxy or Crabada, which once promised spectacular returns for players, have since fallen off a cliff. For Axie, unique active wallets peaked at around 700,000 in November 2021 but now tally more often in the eight to 10,000 range today.

The Metaverse Index (MVI) token, which tracks a collection of major gaming and metaverse tokens, is down 95.6% from its all-time high in November 2021.

In response, Web3 games are now shunning the “play-to-earn” catchphrase that helped propel the sector to prominence, embracing phrases like “play-and-earn” or “play-and-own,” and deemphasizing the profits while focusing on benefits such as the ownership of game assets, or simply how fun the game is.

“At the end of the day, the core focus of games should be leisure and entertainment, not delivering a financial return,” Aurory’s backend tech director Jonathan Tang tells Magazine. 

“As Web3 game developers, our job is to think of how to leverage blockchain technology and what it brings to video gaming, while keeping the game fun as a priority.”

Some believe the emphasis on financial returns has tainted the industry’s image, not least due to an influx of scammers.

Pellet adds: “The last bull run attracted scammers that have multiple elaborate strategies such as cloned websites and fake projects to divert millions of dollars from legit players and teams. With Web2 games, it’s much harder to pull off those types of scams.”

Enter on-chain games

Encouragingly, however, a smaller community of builders interested in building autonomous worlds are trying to bring on-chain maximalism to blockchain games.

In contrast to their Web2.5 counterparts, fully on-chain games have their assets, and the game logic, state and storage live on-chain. The game state refers to the current status of the gaming world, such as player progression and the items they possess, while game logic simply refers to the rules of the game — how players move, interact, collect and consume. 

Why bother with having it all on-chain? Doing so ensures the game’s state is always immutable and transparent on the blockchain. But most importantly, it opens the door to the same kind of open composability that is possible in DeFi and enables an aggregator like the 1inch Network to build on top of Uniswap or Curve to integrate Synthetix and allow for cross-asset swaps. 

Composability allows anyone to build second-layer rules on top of the game’s original rules. Second-layer rules in fully on-chain games exist in the form of smart contracts on top of the core game developer’s original smart contracts. They are simultaneously experienced by all players in the game, unlike third-party mods in traditional gaming that simply alter the player’s local gaming experience.

Collective action

Take, for example, the on-chain RPG Dark Forest, built on the Gnosis chain in 2019 by pseudonymous creator Gubsheep. Dark Forest saw groups of players in their own DAO (DFDAO) creating permissionless guild systems through external smart contracts. With the guild system, small players were able to overcome collective action problems in competing against big whale players by pooling their own in-game resources together. As DFDAO put it in its blog:

“Someone needs to beat orden_gg. Orden_gg has won twice in a row and is at the top of the leaderboard as we speak. If we band together for a collective victory, we can defeat Dark Forest’s unofficial raid boss together.”

DFDAO co-founder toe knee told Magazine: “The Astral Colossus (guild) was a mini game ‘above’ the core DF contracts, but in the eyes of the DF core contract, it was just another player. Instead of being an EOA account like everyone else, it was a smart contract with custom logic that shaped how it would behave differently. This contract was non-upgradeable and verified so players could confirm for themselves that we couldn’t change the rules and we couldn’t keep their planets after they donated.”

Dark Forest players have also created their own in-game marketplaces or even forked the game entirely onto a different chain/layer 2 — Gnosis Optimism. The new game – Dark Forest Arena – introduced new gaming modes previously unavailable.

Communist take over

Or take another on-chain game, OPCraft, a Minecraft-inspired experiment built by the Lattice team on Optimism. Weeks into the launch of the game, one player, calling himself SupremeLeaderOP, created a “communist society” where any player that opted into the guild would give up all their resources and share them with every other player in the society. 

These rules were not a social promise between players. They were binding and tied to an on-chain smart contract. SupremeLeaderOP could not, even if he so desired, rescind his promises to players or bend the rules of his communist guild. Some players saw the guild as a wacky fun experiment and immediately swore allegiance to the communist Republic, in the process, giving up all their in-game resources in return for access to the guild’s collective treasury. As documented on the Lattice blog: 

“Once a player had become a comrade, they were able to — through smart contracts that the Supreme Leader had deployed — mine material for the government treasury and build using treasury material on top of government owned land! The Republic even had a ‘social credit’ system to prevent freeloading comrades from spending more material from the treasury than they have contributed. Free loading comrades were not allowed to build anymore until they had ‘repaired their social credit’ through contributing their labor.”

In fully on-chain games, players can implement innovative changes rather than having to wait for a core developer to introduce the updates through a centralized patch. It’s a level of bottom-up spontaneous creative expression that extends far beyond how we traditionally think of video gaming, but in the Web2 world, experimenters tinkering around on custom game mods eventually spawned billion-dollar game franchises such as Dota and Counter-Strike. Dota was first created permissionlessly as a mod on Blizzard’s Warcraft 3 game, while Counter-Strike was birthed from a mod on Valve’s Half-Life game. 

The on-chain gaming space is nascent, and builders in this space still refer to fully on-chain games very differently. The popular autonomous worlds label was coined by Lattice Labs, but other builders in the on-chain space have referred to the concept as eternal games, infinite games or on-chain realities.

Although the terminology varies, the common denominator underlying these games is hard permanence on the blockchain. Just as smart contracts and tokens will forever exist on-chain, fully on-chain games remain fully uncensorable and alive long after a gaming studio abandons the game.

The tradeoff? Most on-chain crypto games currently resemble turn-based board games with simple game loops like Space Invaders and Pac-Man in the early era of video games.

Limitations, limitations, limitations

In creating the on-chain racing game Rhauscau, creator Stokarz tells Magazine he had to make a bunch of necessary tradeoffs in game design due to cost limitations.

“The reason why most on-chain games follow a traditional board game design with minimal game logic is because executing it all on-chain is inexpensive. On the smart contract level, it’s a one-dimensional play with agents simply changing the positioning of the play.”

Although Rhauscau is deployed on the layer-2 Arbitrum Nova, which boasts a throughput speed far higher than Ethereum mainnet, the game is still limited to simple game loops that last five minutes tops.

“The first tradeoff with Rhauscau’s game design was that it had to be centered around one simple game loop. Too complex games mean more transaction speeds, which would make it too costly for users to pay for it. It’s similar to early mobile games like Cut the Rope,” Stokarz added.

Partially decentralized Web2.5 games don’t face the same trade-offs as on-chain games because the only crypto layer within their games is assets in the form of nonfungible tokens. 

But they make an important sacrifice in another regard: the game’s open composability.

Future of on-chain games

No one denies fully on-chain games face an uphill battle, and scalability isn’t the only problem.

Ludens emphasizes that the immature state of on-chain games is also due to game designers lacking a set of coherent guiding game design principles for building on blockchain ledgers. “Game designers should think harder about how to harvest the full affordances of a blockchain ledger in their game design.”

But blockchain and software infrastructure is an issue.

“On old video games, we saw simplistic text adventure games first. When computers got faster, then came FPS games like Doom. With higher computational power on the blockchain, it will further increase what we can do with game design.”

“Getting chain infrastructure to a higher throughput would obviously help scale on-chain games greatly. It would allow sharding of the game’s state and executing it together on multiple chains at the same time.”

On the software side of things, he wonders what game engines like Lattice’s MUD (multi-user-dungeon) will look like years down the road. “Can MUD write powerful enough applications as we continue to push it?”

Today’s video game market is dominated by the Unreal and Unity game engines. Commercial game engines like Unreal only emerged in 1998 after decades of experimentation. Today, they serve as the go-to software framework for game developers to create a game efficiently with much less technical complexity.

MUD aims to achieve something similar for blockchain game developers. The software stack streamlines the task of building an EVM app with various development tools like an on-chain database.

On-chain and on ZK-rollups

Ethereum’s roadmap is built around scaling via ZK-rollups, and there’s a big opportunity on the various layer 2s for game designers to take advantage of faster and cheaper transactions. A small collection of builders on Starknet believe that the layer-2’s zero-knowledge proof native architecture is much better poised to scale a fully on-chain game.

Cartridge is building its own game engine called Dojo, among other developer tools for Starknet game developers. Its founder, Tarrance van As, believes that Starknet is the only one with a tractable path to scalability for hundreds of thousands of users eventually.

“With Dojo, game developers get a baseline capability of the framework because everything is provable all the time,” he tells Magazine.

“In the future, your game is not even going to be a layer 2 but a layer 3 or layer 4 on top of Starknet,” he says, referring to bespoke blockchain environments designed for specific types of applications that are built in another layer on top of the layer 2. But he adds ZK-proofs can even be generated on the same local PC running the gameplay.

“With ZK-proofs, you can even have logic computed on the client itself. We may even be able to run the game on our local device and simply provide the proofs that it was done correctly thanks to the mathematical integrity of ZK-tech.”

Van As sees a world of opportunity opening up and believes that in years to come, on-chain games will resemble blockchains a lot more than traditional AAA games. 

“On-chain games are free from the restrictions of traditional game publishers such as a financial runway, development cycle and its closed nature. They resemble Ethereum much more in the sense that it evolved from an emergent, bottom-up culture.”

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The post Is fully decentralized blockchain gaming even possible? appeared first on Cointelegraph Magazine.