Musings on Governance-Reverie

If a grants program has a $2M budget, ~10% is typically set aside for paying the grants team (leaving $1.8M available for grants). When these proposals are put forward, the community almost always focuses on discussing compensation for the grants team (which is ~$200k in this case) instead of debating whether the grants program is a good idea in th... See more

This isn’t meant as a knock on openness. DAOs should be open, but they should also keep the quality bar incredibly high. Practically, what that looks like is everyone should be welcome to join the DAO, but to contribute, the quality bar should be set very high. 

The biggest trouble with DAOs being extremely open is they attract excellent talent, good talent, and bad talent too. Excellent and good talent is what you want. Bad talent is not. By being open, many DAOs open the floodgates to low-quality contributors, which are a net-negative to the DAO. The problem feeds on itself too; once you attract low-qual... See more

Our advice: require contributors and other governance participants to disclose their conflicts of interest for meaningful conflicts (e.g., investments that are >1% of their net worth).

For example, we’ve seen part-time contributors encourage unfavorable integrations, partnerships, and/or investments in other DAOs due to their personal stakes in them. While conflicts of interest are an unavoidable fact of life, without disclosure, they can lead to DAOs making decisions that benefit the individual making the proposal at the expense... See more

**Note:** Resist the urge to use funds for investment vs. operationsWhile there is nothing inherently wrong with working for several DAOs at once, it does bring up potential conflicts of interest.

While a DAO may be able to generate 10-30% returns by investing its assets in financial assets, a well-managed DAO can generate far higher returns by investing in things that allow it to control its own destiny — investing in people (contributors), marketing, growth initiatives, and acquisitions. In our view, the returns from making the DAOs produc... See more