Soft and Hard Consensus - BanklessDAO's First Week
A week ago, BanklessDAO launched. Since then, three thousand people have joined the discord. From an amorphous blob, we see emergent organization. This diary entry is a sample of that conversation.
DeFi is to TradFi what DAOs are to TradCorps (noun - Organizations that follow a traditional centralized structure).
DAOs rely on digital methods of hard and soft consensus to rapidly make decisions
DAOs will flip TradCorps. There’s no stopping it.
On May 4th, BanklessDAO launched with a surprise retroactive airdrop based on their participation with BanklessHQ, the media company run by RSA and David. And just like that, the world minted its first media DAO. I was one of those lucky few. I had only joined the Bankless movement in January ‘21. Along with thousands of others, I joined the community Discord and it sucked me in like a black hole. (I didn’t even know ETH had pumped to $3,800 until hours later.)
What you’re reading is a diary entry of my observations of emergent organization. Specifically how soft and hard consensus offset the complexity of thousands of members having to make micro and macro decisions.
What is a DAO?
I imagine to many readers, a DAOs(Decentralized Autonomous Organizations) is a hazy concept. “Yeah, it’s a group of people that do… what exactly?”
Just like we can use terms like DeFi and TradFi to differentiate the possibilities of decentralized finance and the limitations of the traditional financial system (I have 1 $GME), we can use similar terminology with DAOs. DeFi is to TradFi what DAOs are to TradCorps (noun - Organizations that follow a traditional centralized structure).
In this referential analogy, DAOs and TradCorps broadly accomplish the same thing: release products/services to drive shareholder value. (Note: I loathe agency theory. Shareholder value can serve as a proxy for value creation, but not on its own. Just like GDP doesn’t represent the health of a nation.) But what is different is the scale and speed.
TradCorp has a marketing plan. It is usually drafted by a Product Marketing Manager with some input from other business channels. It then goes to the VP of Marketing for edits and finally up to the executive suite for a final approval.
BanklessDAO also has a marketing plan. It was voluntarily drafted by two people, one with a couple months of product marketing experience and the other with 25 years in marketing. It was then proposed it on a public forum with a dedicated Discord channel for discussions. At this stage, members with a variety of backgrounds, some in marketing and some not, all participated with criticisms, suggestions, dissent, and support.
The final step is to redraft the original proposal until there is majority support before moving on to a snapshot for shareholders to vote on.
The takeaway? Same outcome, completely different process.
Okay, so they do the same thing. Great. But surely DAOs are a mess? You’d think more people == more time, right? Well, not always. It may seem counterintuitive, but this approach balances soft and hard consensus to facilitate progress.
Soft vs. Hard Consensus
Hard Consensus: Achieved through a collectively-accepted signaling mechanism. (🗳️ Turning in a ballot to cast your vote)
Soft Consensus: Achieved through some implicit signal of preference depending on scope of impact. (The crowd that yells louder than others to signal preference 🔊 > 🔉 )
DAOs need a combination of soft and hard consensus unless they want to get bogged with bureaucracy (only hard) or divisiveness (only soft). In fact, consensus mechanisms can have “softness” and “hardness” both. Plaster is softer than wood, which is softer than steel. Steel is harder than wood, which is harder than plaster. At BanklessDAO, I’ve seen the emergence of multiple layers of soft and hard consensus.
Starting at the bottom is our Discord server where 99.89% of our activity occurs. This is where consensus is fluid, changing rapidly using 🔥👍 and 💯. By fluid, I mean minds are changing as discussions progress. Reading a dissenting opinion may sway my own mind. Three or four 🔥 tell me what others think. And then there’s this:
Information like this tells us when we need to escalate up the pyramid. Out of the discord and into the forums (0.1% of activity).
Possible reasons to escalate
Change in budget
Significant shift in sentiment
Things that make you go, wait, she’s got a point…
Forums are less fluid. Conversation is less frequent and decisions are signaled more formally. Everyone knows that forums are up a layer, which gives them legitimacy as a source of ongoing activity, should you not have time to keep up with the lim(n -> infinity) of active conversations. Here, polls are conducted, standardized around (1) Hard Yes (2) Soft Yes (3) Soft No (4) Hard No. Between these layers, ideas move up and down freely. Enough dissent on a forum means going back down to the drawing board and revising in Discord channels. Rinse and repeat.
The final layer, as always, is governance. By this, I mean snapshot votes. Hard consensus. The final 0.01%. Decisions made as votes signal hey, something is going to change that affects you. A busy working mom doesn’t have time to read lengthy proposals and keep up with the chatter. But she wants to know if there’s a proposal that may give her more BANK or some lofty grant is paid by the Treasury. It’s important not to abuse the attention and mindshare that proposals command.
DAOs Will Rug Pull TradCorps
The previous section looked at how DAOs make decisions, but that doesn’t necessarily make it better than how a TradCorp makes its marketing plan. This is, however, false for a few reasons.
Speed & Momentum
Like RSA and David said, Layer 0 are the people. BanklessDAO is able to move at incredible speeds because of the quality of its community. There are enough people to fill into spaces where there are things to do. They literally crop up everywhere. A conversation about legal status turned into the 🏛️ Legal Guild and is slowly beginning to make moves.
If we take startups as the TradCorp version of DAOs, acquiring skilled laborers is one of the hardest problems to crack. Even evaluating a single candidate is a grueling process on both sides. Because startups can’t afford to hire the wrong people, interviewing is a lengthy and demanding process. Only afterwards do both sides feel comfortable entering into a long-term commitment, and even then it’s never usually optimal.
The absolute opposite is true for DAOs. Where TradCorps source talent, DAOs crowdsource it. Talent comes to us, in droves. It finds niches based on what excites them. Just like compound growth, the buzz of activity generates momentum and things start happening.
Digitization and Diversity
Working in a DAO is like asking everyone in a room “Who’s the dumbest person in the room?” and each one saying themselves. When people that are capable, empathetic, and fun all work together, they all consider themselves in positions to learn. It’s like a drug. Like a riptide, the momentum generated by decentralized collaboration sucks you in. Only instead of drowning, you turn into a mer-creature and discover Atlantis.
In 2020, TradCorps went remote. The natural default of physical presence mattering had to migrate to the internet. DAOs, on the other hand, are internet native. They are open to anyone and anywhere, all over the world. Having that reach afford a diversity of thinking that TradCorps cannot achieve. For example, of the community members that have naturally assumed leadership roles, one of them is a college student. Another is an expert on breathing techniques. There’s a blue collar worker, an educator, a FAANG dev, a 🍺 brewer, and others. The BanklessDAO has people from all walks of life.
Study after study after study tells us that diversity of thought, experiences, and worldviews shape the best outcome. I’ve experienced this in the form of trust. I trust these people. I trust them to make decisions that are aligned with Bankless values and I trust them to make smart choices and consider all points of view before acting.
The final nail in the coffin for TradCorp is the Bankless movement as a whole. It’s directed focus, vitality, optimism, and values cannot be copied by any TradCorp. TradCorps do not start companies to change the world. Sure, they have a mission and vision, but are ultimately profit-seeking entities. BanklessDAO is growth-seeking. We wish to expand our message, not our products.
DAOs aren’t for everyone. TradCorps will never truly go out of fashion and there’s no telling when the DAO flippening will happen. Case in point, we have crypto but people still use cash! It’s my opinion that blockchain will change the world in a way similar to the internet. One of those changes comes in the form of how people organize.
Since all of history, organizing began in person. But we live on the internet. Many of us would consider ourselves digital natives. The innovation of distributed and trustless information systems (blockchains/distributed ledgers) and programmable contracts gives us digital natives the tools to organize leveraging the power of the web.
To sum this all up in two words: Join BanklessDAO