2/#Layer2 is coming and in these networks we must capitalize state channel hubs in order to create throughput. This creates a substantial hurdle for running hubs & caps commissions.
3/Instead of locking capital, hub operators might leverage lending protocols to borrow it & increase throughput. However, the borrowing rate will inform the commission hubs will charge (and vice versa).
One approach to address these issues has been quorumless voting. This is a good approach, and does increase the liveness (ability to move forward) of DAOs.
But this in itself is not enough. 👇
The flat DAOs we see today suffer from massive dispersion of responsibility issues, which get exponentially worse with every new marginal member.
DoR is when everyone is paralyzed because they assume that someone else is moving the progress of the DAO forward. But no one is.
The natural mechanism that begins to form in this context is delegation. Delegation allows stakeholders to deputize and elevate certain individuals into positions of responsibility, and the trade off is that those individuals begin to retain more influence in the organization.
Hi all, today I am open sourcing some thinking I have been doing around valuing #DecentralizedGovernance. I am releasing a formal spec and Python code to describe the framework and to get community feedback.
The central question I am trying to answer is the following. Given a governance token distribution, how do we quantify the influence that a particular token holder’s stake exerts over the governance process?
To answer this, I define a measure called “decisiveness”.
Intuitively, the decisiveness of a stake relative to a token distribution is the expected % of the time that this stake’s vote (or lack thereof) can overturn the outcome of a proposal.
The properties of decisiveness are based on discrete partitioning & are somewhat surprising.
3/The main takeaway was that value capture did not seem to happen ideally in equity. Traditional VC investors would have to consider whether owning tokens was a better exposure mechanism to protocols. Subsequently, many VCs adjusted to token investments and SAFTs.
Token models have "eroded" somewhat these past few years: it's hard to make a token accrue value! But governance is being touted as one of the few activities fundamentally valuable to a network. How does this actually work?
3/There are actually not too many *actionable* models in this space that I can find. But there are some. . .
So many terms floating around lately in relation to #DecentralizedNetworks, protocols, staking, and mining. The following Twitter-Wiki is how I understand all of these closely-related, but subtly different concepts. . . 👇
At my generalized mining talk, one audience question was really interesting. It was, essentially, “Why would a business choose to build their app on a decentralized network, when bootstrapping is so much more expensive than a centralized solution?”
It took me a minute to verbalize the answer. I was taken aback because the form of the question diverged extremely from my understanding of decentralized networks.
So the practical answer is: well, it’s early and the cost of decentralized solutions decreases exponentially over time, like with any developing technology. The assertion makes sense today, but won’t tomorrow. Businesses will perhaps adjust to building products on such networks.
We define “#GeneralizedMining” as “any supply-side service provided by a third party to a decentralized network in exchange for compensation allocated by the network”.
Chances are the compensation is provided on-protocol & denominated often, but not always, in a native asset.
#GeneralizedMining opportunities span staking, but also curation, liquidity provision, computational resource provision, TCR voting, governance, market making, and beyond. The market of generalized mining opportunities and supply-side providers is a “third-party economy”.
Investors, and their active participation in networks, is relevant to a subset of the third-party economy. As @TusharJain_ writes, and @fredwilson summarizes, that subset deals with opportunities that help to bootstrap networks.
The @LivepeerOrg team has planned and executed a tremendous undertaking for their decentralized protocol so far. 🍻 Putting down some thoughts on the realities of Livepeer’s token model as it exists today. . . 👇
- $LPT is more accessible than funding rounds of startups. You can even get a better deal on $LPT than its private investors by mining it, running a transcoder, or getting it free in the airdrop. That’s cool & these opportunities are overlooked by the ICO-obsessed mainstream.
- On that note, while the early sell orders on $LPT hang around $7-10 (on low volume), Merkle miners have obtained $LPT priced as low as $0.66, better than the last round. Other miners have elected to pay as much as $37 per $LPT in recent conditions. 🤔 (etherscan.io/tx/0x7d4a0a709…)
(Thread.) Some learnings in blockchain over the years, in no particular order. . .
You can emerge completely new technologies by correctly combining existing technologies. (2009)
Holders of particular valuable assets are financially incentivized to be biased toward the assets they hold and against other assets. From the perspective of other asset holders, those holders may behave irrationally. (2014)
(State channel rant.) An explainer on the exciting developments blockchain is heading for with *state channels* and *generalized state channels.*
I’ll try to keep this mostly non-technical but it is a technical topic, alas. . .
First, state channels are a “Layer 2” technology. Layer 1 is the blockchain — txs are relatively slow and expensive and require consensus and fees. Layer 2 is an “off-chain” layer which can be settled or “taken” on-chain; it doesn’t require consensus and can be very fast.
[Aside: there are only two layers we actually understand fairly well right now — Layer 1 and 2. If someone tries to sell you Layer 3 or Layer 0, caveat emptor.]