DAO Governance Primer: Flat DAOs

Flat DAOs: Peaks and Valleys of Participation

The short history of DAOs began with a mantra that DAOs are flat organizations. While much of the lore of “flat” DAOs resides on Twitter, esteemed groups have made serious efforts to foster DAOs that have no formal hierarchy and have equal participation among contributors. These DAOs are collectives: participants are free to join, vote, and add value without formal restriction. MetaCartel, an early venture capital DAO, voices this vision for DAOs: “Many future companies will be formed as DAOs, with flat hierarchies and equal participation.” Aragon, an operating system that facilitates DAO launches, envisions DAOs enabling a future where “we are equally serving and served, rather than just serving.”

Several DAOs operate, or strive to operate, as collectives in line with the aspirational egalitarianism of the early DAO community. No formal delegation of power is made to specific contributors, nor is any contributor crowned as having superior powers. In their idealized form, participants enter and engage with co-equals to add equal (or similar) value to the community. In a DAO that lives up to the flat hierarchical model, mutual participation and effort is crucial; otherwise, differential participation will enable those who care the most, or who have the most interest in leading the collective, to shape policy and become leaders in fact if not in name.

Data on early DAO collectives suggest that the reality has yet to match the ideal. Without conducting forensics on the specific DAO communities, we can assess whether DAO collectives are flat using proxies for participant status and participation to reach a directional view on whether the DAO functions as a flat organization or not. Two useful data sources are Discord participation and governance participation (specifically, proposal generation and voting). For the uninitiated, Discord is the communication platform of choice for DAOs. DAOs create servers on Discord that permit contributors to organize discussions within specific channels (e.g. operations, events, memes).

Surveying the Discord participation in flat DAOs reveals a trend of exponential decay: the top few users comment at a much higher rate than any other. The chart below shows participation trends for four DAOs that aspire to have flat structures: RaidGuild, a design and development collective for Web3 products; HoneyDAO, a decentralized venture capital collective; VitaDAO, a collective of longevity scientists and enthusiast; and, LexDAO, a collective of lawyer-engineers.

Source: Discord. Includes only public channels. Excludes bots.

The charts reveal a steep decline in the frequency of participation between the top participant and the fifth most frequent participant in each collective. The participation curve flattens from the 30th to the 50th most active Discord commenters. The trend suggests (but does not prove) that a very small number of individuals drive discussions within the community and carry forward the efforts of the DAOs.

Discord participation is only one dimension to consider in assessing whether informal hierarchies have emerged in DAO collectives. Frequent commenting does not necessarily signify credibility within an organization; nevertheless, in the sample of DAOs shown in Exhibit 1, the top commenter made an average of 6.8 times more comments than the tenth most frequent commenter. The top commenter is either the first or second-most referenced participant by other participants for each of the sampled DAOs. The skew in the frequency of comments and the corresponding frequency of mentioning the top participants suggests that a handful of participants are leading thought and effort within the collectives.

Governance in DAO collectives also displays highly skewed participation. Proposals are generally made by a handful of participants, with a similar decay pattern as displayed for Discord participation.

Source: Deepdao.io as of March 9, 2022.

The rapid decline in number of proposals generated by each user indicates that a limited group of contributors initiate governance actions in flat DAOs. Proposal initiation does not have a strong correlation with the success of the proposal, nor are those who initiate the most proposals necessarily the most frequent participants on Discord. The data counter the view that equal participation characterizes collective DAOs.

Voter participation shows similar, albeit less drastic, trends of disparity in participation.

Source: Boardroom.info as of March 9, 2022.

The participants that have expended the most effort to become thought leaders within the collective have a significant incentive to vote in a manner that preserves their elevated status. The voting records, on their own, are not revealing as to whether the collective functions as a de facto hierarchy, but the skewed results of MetaCartel, the LAO, and VitaDAO suggest a considerable amount of voter apathy beyond a small number of frequent voters. An environment where few voters have a heightened interest in participating and the remainder often defer discourages equal participation and creates opportunities for the few to shape actions and policies.

In aggregate, the trends revealed on Discord and governance participation indicate that DAO collectives are operated by small groups. In some circumstances there is no significant correlation between Discord participation and proposal generation. The lack of correlation suggests that different groups may dominate different axes of power within the DAO collective. If that is the case, it would be difficult for a new DAO member to know how to navigate the respective hierarchies or how to become “more equal” than other DAO members. Hierarchies in DAO collectives emerge, but not in an orderly manner, which could frustrate coordination over the long term, as DAO members aim to align with the ideal of a flat organization but have no compass for how to flatten the participation curves in the multiple dimensions of the DAO community.

Hierarchies on Deck

In the next installments of this primer, we will look at different forms of formalized hierarchies that have emerged in DAOs. We will look at the development of “reputation” systems, which avoid building formalized hierarchical structures but work to align ascendency with the mission of the DAO. We will also look at delegated and representative democracies to assess how they live up to the seemingly competing missions of decentralization and structured effort.

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