DAOs, Tokens, and Goodhart's Forest

Incentive DesignTokenomics are a tool for aligning the incentives of participants in a network. It is extremely important to identify what behavior is required from each participant in an ecosystem in order for the network to achieve a virtuous cycle. Equally important is designing suitable token incentives that encourage the desired market behavio... See more

One of the reasons that there is so much confusion around token design, and value accrual specifically, is that tokens, and the DAOs and protocols that issue them, are so multifaceted. Sometimes, the issuers want them to behave like shares in a corporation. Others issue “governance” rights to skirt regulations while insiders pump the tokens in the ... See more

Without a specific idea of the good to build towards, the financial interests of large tokenholders have become over-represented in protocol governance. In our view, this constitutes a centralization risk.

Why does it matter? Everything is falling apart. Terra collapsed largely thanks to its token design. Projects that attracted millions or billions of dollars with the promise of absurd APYs are learning the truth of the old adage, “Easy come, easy go.” The regulators are coming. Tokens that were worth a lot of fiat a couple weeks ago are worth a lot... See more

The most existential question in crypto: what will be the relationship between tokens and communities? At stake: can DAOs bring virtue back to scaled organization? Or will they accelerate the economics-only mentalities that have been corroding society? A way-too-long-🧵👇

Incentives are powerful. But getting incentives right is hard. 
Communicating intent is hard. 

Blockchains can help align incentives among a tribe of token holders. Each token holder has skin in the game. But the benefit is actually more general than simply aligning incentives: you can design incentives of your choosing, by giving them bloc... See more