Can the launch of Colony v2 relieve DeFi’s governance woes?

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Colony, an early Ethereum undertaking geared toward constructing decentralized governance tooling, introduced immediately that it’s making ready for a relaunch that’s been 5 years, a number of missteps, and some half-starts within the making.

If profitable, nonetheless, the brand new app might be a boon for the handfuls of decentralized finance (DeFi) protocols presently scuffling with the clumsy mechanics of DAO governance — an almost universally-acknowledged drawback in dire want of an answer.

Virtually a half-decade in the past, the Colony blog first laid out the group’s imaginative and prescient for “The Way forward for Work”:

“By aligning the incentives of the workforce round productiveness, folks anyplace on the earth will be capable to construct organisations collectively on-line with out the necessity for hierarchical administration.”

This imaginative and prescient led to a 2017 whitepaper, after which an unsuccessful preliminary product launch — one which even the corporate acknowledges was a failure, calling the early app a “as nice a consumer expertise as root canal surgical procedure, and never as helpful.”

In a weblog post immediately, the Colony Basis revealed a brand new app with a number of options that handle most of the challenges each DAO members and buyers regularly grumble over: cumbersome voting mechanics, a lack of flexibility, and ossification of power. The relaunch is presently scheduled for February fifteenth on the Ethereum and xDAI chains.

In keeping with Colony cofounder Jack du Rose, the brand new launch higher displays the imaginative and prescient set out within the whitepaper — and, even earlier than that, a number of the foundational philosophy that gained Colony spots on early convention mainstages and hackathon prizes.

“Colony will get its title from ant colonies — advanced adaptive methods the place you’ve bought easy units of guidelines that collectively, together, lead to refined, emergent conduct from a gaggle as a complete,” he mentioned.

Easy guidelines and sophisticated conduct — maybe precisely what DeFi wants proper now.

Unruly governance

DAO zealots would have you ever consider that decentralized governance is the inevitable way forward for how human organizations compose and advance themselves: open, permissionless innovation and bottom-up worker-owner buildings, they argue, will inevitably outcompete centralized entities in the long run. 

Nevertheless, the present actuality is that DAO buildings are nowhere close to including worth to a corporation.

“The difficulty that we’re seeing with DAOs as they stand proper now’s that they don’t lower the transaction prices of the market mechanism for labor. They actually don’t lower the coordination prices, they improve it as a result of they require all the pieces to have this ludicrous decision-making mechanism round them,” mentioned du Rose.

Voting on protocol upgrades has lengthy been a goal for critics and a ache level for tasks, requiring tedious sure/no votes on easy protocol modifications. As such, one among Colony’s key options shall be “lazy consensus” — a protocol-level assumption that many key selections are made on the social layer of a DAO, and that votes are solely vital when a member objects.

Equally, critics have referred to as into query to what diploma DAOs truly live up to their “decentralized” label: most of the largest and most profitable preserve excessive token concentrations on the founding workforce.

Not solely does it ossify energy within the palms of some (in some ways the alternative of what DAO governance seeks to attain), this centralization makes hiring tougher, as newcomers may really feel as in the event that they don’t have a good shot to make their voices heard and earn a stake within the success of the enterprise.

To this finish, Colony deploys quite a lot of instruments to stop an “aristocracy of affect.”

“Fame decays over time, which signifies that the Fame everybody has within the group will normalize over time to pretty replicate the worth of their current efforts.” says du Rose.

Newcomers can step by step earn”Fame” in devoted subgroups, comparable to “Advertising and marketing” or “Product”, each time they receives a commission within the colony’s native token, which in flip confers potential to stake and vote on proposals as effectively.

Du Rose says this balances the power to draw new expertise and elevate their voices, whereas additionally correctly rewarding founders.

“They confirmed the initiative to again one thing when it was promising in its very early phases, however that doesn’t imply they need to have all of the affect, as a result of it very effectively might be that one of the best folks come alongside when it’s constructed a head of steam,” he mentioned of reputational decay. “These folks ought to be capable to earn the say inside the group that they deserve.” 

From DAO to DAO

Whereas DeFi protocols are the obvious preliminary product-market match, du Rose envisions centralized entities deploying Colony as effectively. 

“You’ll be able to go from DAO to DAO — Dictatorial Autocratic Group to Decentralized Autonomous Group,” he jokes.

As he sees it, many organizations inevitably begin out as a dictatorship/a one-man startup, and finally shift to extra flat energy hierarchies out of necessity.

“All organizations can profit from being extra automated, and from the choice authority being pushed out to the perimeters of the group such that the people who find themselves doing the work even have the latitude to simply go on and do it with out a lot administration overhead.”

What actually excites du Rose, nonetheless, is the sci-fi potential inherent in DAO organizations. He smiled as he described a doable future the place NFT-based games mean 15 year-olds are entrepreneurs, creating and distributing digital worth to guild members by way of a DAO.

“You might find yourself seeing guilds which might be unicorn-sized which might be solely digital.”

The way forward for work is finally tough to foretell, nonetheless, as emergent methods result in new and emergent behaviors.

“A extremely attention-grabbing interoperation and composability that begins to emerge between protocols, governance protocols, and the folks doing the governance of them that’s simply going to turn into actually deeply interlinked, and can lead to some actually attention-grabbing conduct of the advanced system that’s the Ethereum ecosystem.”