DAOs, Multi-Sigs, and Which is Right For You
It's a question of speed vs. decentralization.
Welcome to DAOhaus. Where I'm obviously going to be writing about why DAOs are awesome, and you could probably use one... right? Well, yeah, we'll get to that. But, the answer, like most things in life and crypto, isn't so simple. The answers to the ultimate question, "multi-sig or DAO?" exist on a spectrum.
Regardless of bias, this is where we live at DAOhaus, so we've done some thinking on the matter.
Here's what we've got: (Read the thread from hausDAO member Spencer Graham. 👇)
First, a quick primer on the terms: a "multi-sig" is a crypto wallet which requires multiple signatures to a transaction before moving funds. A DAO, or "Decentralized Autonomous Organization" is a wallet controlled by a system of proposals and stakeholder votes. Both of them are ultimately an effort to coordinate human decision-making around those funds quickly and fairly.
A multi-sig leaves all the coordination around "how" or "why" those signatures are there to other human layers, be that Telegram or a bunch of lawyers with contracts. A multi-sig is, bluntly, a vault with a bunch of different codes and not much more. Because all the rest of the coordination takes place via established comms channels, multi-sigs can move faster.
If this is a spectrum, DAOs fit at the other side. DAOs are an attempt to build as much of the "why" into the code as well. This means DAOs are apt to move slower. They have things like "voting periods" and DAOhaus is run by a DAO, and we use SubDAOs for internal budget management. Clearing funds for a payment to an individual takes a few days as it works through the proposal process. But, this process is controlled by code, so it is very predictable, and machine readable.
We think what actually matters here comes down to speed. In this case, we're calling it "executability." How fast can you execute a transaction, given the threshold requirements for a fair "decentralized" decision?
So, let's talk about this, and which is right for you.
We'll start here because we probably don't need to say much to you on this one if you're already reading this.
Multi-sigs and DAOs are both attempts to effectively—and fairly—decentralize control of an organization. Eventually that comes down to the question "who controls the money?" Now that this stuff has been digitized, the answer is, some spectrum of decentralization versus other factors. We think the counter is "executability." Speed. So let's get to it.
A multi-sig wallet gives you high executability. A multi-sig can be a speed demon. Let's say there are five people with keys, three people need to be there at any given time to allow a transaction, that's all that matters. They can just talk on the phone. Transactions underway. This is not as decentralized, but can work quickly. This speed means projects can move faster, which is necessary early in their lifecycle when nimble decision-making is critical. (To be fair, it can also be horribly slow if there are too many people, or useless if everyone is hit by an asteroid.)
Along the spectrum as we travel toward DAOs we have numerous emergent solutions, which are all trying to handle “human coordination via software” in a different way. Some are faster than others. A multi-sig tied to something like Snapshot can still move fairly quickly by recording votes in-house, selectively reporting the data to the more decentralized layers, but automation seems slower in our experimentation.
Then the introduction of effective, fair, dispute resolution can help. This is more of a backstop solution, and one we do believe is necessary. When things go wrong enough, escalation to some form of fair dispute resolution is a human right. (For real, it's literally one of the UN’s “Sustainable Development Goals”.) But, more bluntly, it helps people move faster, while still feeling safe. Reducing risk increases executability, while ultimately making things slower for long tail of cases.
Why We Love DAOs
Ultimately, at DAOhaus, we think of DAOs as composable solutions to the same problem. And the benefit is flexibility. Starting on simple DAO framework allows a project to grow toward progressive decentralization from the start. A core frame, with the right modular boosts is enough to get going. This could be as simple as "a multi-sig with rage quit." Tight voting windows. Minimal proposal requirements. The right to nope your money out of there if you don't like how it looks on the field.
Or, you can opt for a DAO with longer voting windows and higher vote requirements for proposals to pass. With “share” structures you can also give some more power to vote than others based on contribution, or responsibility. At DAOhaus we do all of this. It takes a few days to get the money after we submit a proposal, and some people have more power to vote a proposal down than others, but that's okay. I know it's not because a bank somewhere is holding a check for 3 days, it's because the space exists for any contributor or stakeholder to take a look, voice their concerns, help find a solution, and ultimately cast a vote.
Because of this, I know they're behind what our camp is doing, and I am empowered to keep cranking. If nothing, they are accountable to their vote, or their silence, if a proposal passes. Worst case, anyone who doesn't like it can rage quit at any time and take back their proportional share of the main bank.
Launch your own DAO. Boost it.
If this sounds cool, check out DAOhaus, because what we're building is the platform to let everyone start with a DAO from day one, without sacrificing Executability.
Start simple. Add boosts to fit your needs.
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