Genesis 1.0 : Proposed Reputation Adjustment

Overview

As has been discussed previously, there needs to be a reputation readjustment moving into Genesis 1.0. We propose that Genesis adopt a reputation structure whereupon its members have a vested interest in spreading the adoption of DAOs, the DAOstack platform, and use of the GEN token. Genesis 1.0 should be structured so that anyone with skin in the game of the DAOstack ecosystem can join and receive reputation.

Why do we need a reputation adjustment?

In order for Genesis DAO to grow into a mature ecosystem, we need to move beyond our small community dynamics. Specifically, teams and groups and individuals with skin-in-the-game should be given more reputation in the network, since they have something to lose.

Specifically, we are looking to enable the following two groups the ability to earn reputation in Genesis:

  1. GEN investors (groups who hold GEN tokens and stake these tokens in exchange for reputation)
  2. Genesis Funders (groups who send money to Genesis DAO in exchange for reputation). Note that this reputation distribution mechanism will be implemented after the implementation of 1) above. There are details here that have not been worked out (DAOtalk forthcoming immediately on why this is so).

At the end of the day, a reputation readjustment is needed to make better decisions, by allowing those with skin in the game to partake in our governance process. Those with skin in the game have the most to lose, and are incentivized to make decisions that will lead to the growth of our ecosystem as a whole.

Proposed reputation distribution of Genesis 1.0

Below are the proposed immediate changes to reputation distribution for Genesis 1.0. In order to minimize confusion, Genesis Alpha will be renamed to Genesis 1.0. Genesis Alpha members will not need to do anything, and will automatically be a part of Genesis 1.0.

We (DAOstack team) propose:

  • That the existing Reputation issued by Genesis Alpha is of ~47K. Reputation will be diluted at a rate of 5,875 Rep per month to those who have locked GEN.
  • That new members in Genesis will not receive reputation in Genesis 1.0 without completing work
  • Along with the suggested changes suggested to our reputation allocation, the social cap of 2% on Rep will be removed.

These changes could lead to the following reputation adjustment over the course of 24 months (Note: the exact rate of dilution depends on how much reputation is distributed to to proposers for their work). The examples below use a 5% growth rate in reputation distributed to Genesis 1.0 proposers.

In conclusion, Genesis 1.0 aims to reward those with skin in the game. This shift should better align our ecosystem, and allow us to make better decisions that align with our long term objectives. We hope you agree and would love to hear your thoughts, let’s discuss here :seedling:

This post was written in collaboration with @eric.arsenault :v:

  1. Genesis Alpha REP gets to vote on this, right?

  2. What happens to over 50% of the Alpha REP stranded in abandoned accounts or accounts obtained under false pretenses? As REP for Funding will take place much sooner than the two years, the chart represents the minimum Alpha REP dilution of more than 5X over 2 years, but is likely to be notably higher, taking even large Alpha REP holders down to 0.1% range.

  3. What is the policy of staking GEN for REP by those with a different cost basis:
    a. DAOstack insiders (in the sense of Section 16 of the Securities Exchange Act of 1934)
    b. DAOstack employees
    c. major pre-ICO and ICO participants
    d. Custodial accounts

  4. Does a direct translation of GEN staking for REP obviate the need for the per-proposal outcome-based staking, central to the holographic method? Does an ‘absolute’ vote remain and how will its level be calibrated?
    Currently even most active proposals garner low five figure GEN, while 40M+ has been issued (a factor of 2000X). With GEN positions tied to REP and a vote outcome that affects REP and decides proposal staking payout, there can be very strange arbitrage opportunities, at levels of six or even seven figures GEN, entirely unrelated to the proposal content, all taking place against extremely thin and opaque GEN market(s).

  5. By having a direct link between fungible GEN and REP, one can calculate a REP valuation using one of several accepted methods for the cost of staking. Once direct transactions of funds handed to the DAO for REP are instituted, fiat valuation is unavoidable. Will that create reporting requirements for the current Alpha REP holders, specifically in major jurisdictions of DAOstack operation, like Israel, Germany, Spain, Australia, the US? Some of these jurisdictions will readily classify REP as being a valuable consideration or having a material value, regardless of availability of legally compliant fungibility or presence of liquidity. When GEN is ruled to be a security in any of these or other jurisdictions, will it also taint REP?

  6. For the individuals who experienced REP buy-back with tokens of specific fiat value, what are the effects of a large difference between the rates they were offered (or imposed) compared with upcoming estimates of the REP valuation, given lack of disclosure of profound DAO structure changes being worked upon at the time?

  7. By explicitly designing in REP whales, many of institutional nature, don’t you forgo any appearance of decentralization and a human-based democratic process, leading to some as yet unseen but profoundly superior future? Now I understand the split vote of DAOstack employees on the “real name” proposal, with the larger percentage on the Against side and the top executives not voting. Identification requirements for the entities is unclear and requesting any identification from investors may lead to the requirement in major jurisdictions of doing it at the KYC level.

  8. I am surprised that for this organization “skin-in-the-game” translates into funds or fungible GEN quite so readily and on such a tremendous scale, supposedly since “they have something to lose.” Clearly, the ones staking GEN are not experiencing a loss in a GAAP sense, even if some opportunity or volatility cost may be attributed, hence REP valuation. The Funding entities will use their REP positions to drive their own causes and commercial interests, unless they are explicitly formed as a non-profit and such a grant is within their charter.

  9. I perceive that individual members, who are industry professionals and have contributed many hundreds of hours of a dedicated effort pro-bono, to have provided significant material value to Genesis, easily valued in five figures EUR. An objective method to price it would be to compare a fully burdened cost of DAOstack employees engaged with Genesis and their relative contribution over a similar time period. Likewise, in my professional assessment based on decades of experience in commercial technology business, most proposals have delivered value at a cost that is a small fraction of the prevailing market rates and should get a corresponding REP credit.

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Thanks for starting the discussion @wkarshat, there’s quite a few questions here so a response won’t be forthcoming to all till tomorrow.

Quick answer to 1. Yes.

Also one clarification - it’s not GEN staking for Rep, it is GEN locking. :slightly_smiling_face:

Thanks everyone for participating in the Genesis call today. It was clear there is still a bit of confusion around this topic. Here is the TLDR:

  • Genesis Alpha members reputation currently stands at 100%
  • We will introduce a scheme which allows GEN holders to lock tokens for certain periods of time, and receive Rep in exchange. Every month, the amount of new reputation issued to GEN lockers will be constant.
  • Assuming you have 2% rep currently, in one year you would have around 0.75% rep if you don’t propose anything, and don’t lock any GEN
  • The 2% social cap we’ve had on rep will be removed as well as part of this process

Hope this helps. Sorry Walter, I don’t have time to go into all of these points right now, hopefully someone else will jump in.

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@eric.arsenault if you don’t have time, maybe you can choose yourself the questions that you think are the most important, or the ones that you feel more comfortable answering, and have someone completing them.

I don’t mean to be rude, mate :hugs:, but I feel that it’s not appropriate to turn down answering Walter’s questions just because there are “too many” of them. This proposed change is massive, and Walter put a lot of effort into carefully crafted questions that address critical aspects.

Here is my take on some of them, as someone who just learned about the proposed change on yesterday’s call.

1- @Kate confirmed that Genesis Alpha REP would vote on this, which is good at least for signaling purposes. Now, since DAOstack provides the funds needed for Genesis to operate, it has also the power to impose the change, should it be rejected by a slight majority of current REP holders (by “forking” Genesis, so to speak, and letting the old one die).

2- I don’t think that this is a big problem anymore, in a context that creates an organic dilution of REP. That being said, I’d favor a specific dilution of REP hold by inactive members, including for REP issued to hodlers who would lock their GENs. If the very purpose of the change is to offer them a way to be more active in the promotion of DAOstack-powered DAOs, it would make sense to hold them accountable for it, by slashing unused/useless REP.

We have a situation now of being unable to pass non-boosted proposal because the REP turnout is way too low. In addition, it may feel unfair to many that some keep a high level of reputation without doing anything, while late-comers start with a much lower reputation level. Reputation decay for inactive REP holders could address these issues, that can only become more prevalent with the proposed change.

Admittedly, this could be a distinct discussion thread! :blush:

3- I don’t think the cost basis (which reflects differences in then-opportunity costs or risks or provided work) should be taken into account.

4- This question touches one of the critical issues for me. There was a separation of concerns between GEN/staking and REP/voting, which made DAOstack and the holographic consensus so unique.

Now, assuming after about seven months (according to the chart) 50% of Genesis DAO’s reputation is in the hands of the hodlers who locked their GENs, the people who get to decide what’s being voted are the same as the ones who decide how to vote.

And these people are contributors of capital, rather than contributors of work, as @Grace pointed it out on the call, so it may totally change the ethos of Genesis DAO.

One possible way to address this issue would be to set a ceiling on REP % issued through GEN-locking, so that there’s a set balance between labor and capital – balance that could be changed through proposals!

I want to emphasize the fact that this concern has nothing to do with the ability of the DAO to serve its mission of fostering the emergence and growth of DAOstack-powered DAOs. I certainly admit that having capital owners as the main driving force of an organization, rather than its workers, may be more effective. In itself, it may be a sufficient reason for supporting this change, from the perspective of both GEN holders and DAOstack supporters. The end may justify the means, for some of us. Personally, I’m still unsure.

5- Sounds unlikely to me, for many reasons, but I’ll let lawyers discuss it :slight_smile:

7- The only way to maintain decentralization through a REP cap by member (like the current 2%) would be to force physical identification of the participants locking GENs.

We can work with pseudonyms when REP is given to contributors of work because there’s only so much that a single contributor can do. Such 2% cap would be useless with capital contributions (GEN-locking) since large hodlers could use multiple addresses.

Hence the alternative is: keep the 2% cap, but enforce physical identification of members, or remove the 2% cap, and welcome REP whales who may eventually govern Genesis DAO. I’m holding my breath here, waiting for the blog post to come :slight_smile:

8- Very valid point. In that sense, GEN locking is very different from a real work contribution, for which people actually SPEND time and effort. The “skin in the game” argument is not that strong.

9- I disagree with this last point (too bad to end with a disagreement!), at the very least for practical reasons (I think @matan mentioned them yesterday). A fair assessment of past pro-bono work would be a nightmare. I have many other reasons, but I think that this point is related to a different concern, so I’ll stop here for now.

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Hey @philh great responses.

On @wkarshat questions I mentioned that we’d indeed be responding sometime today @patdaostack is thinking on a couple of the more legally technical ones (and getting domain expertise input) to ensure true robustness. I don’t think @eric.arsenault is turning down answering them - it’s not all on him. I sincerely appreciate the time you have taken :seedling:

From your responses I’m seeing a couple of interesting proposals to specific problems.

REP dilution/slash for inactive members. As you mention unused rep will eventually be diluted by the proposed model but I understand your inclination towards designing for active REP, if we were to also do a slash - what would be the ratio - we might not want to make it too harsh…? Agree that this could be a separate discussion thread but let’s continue here for a bit :slightly_smiling_face:

REP ceiling to GEN locking is an interesting proposal - of course a main effect would be to limit the amount that some could lock GEN and necessitate identity. Technically this is complicated as the scheme has already been built and audited (not specifically for this case - it already exists) I’m curious to hear from others what challenges this could bring?

Identity verfication indeed this is the main reason for identity verification - if we’re going to cap anything we need to be able to prevent multiple addresses.

Skin in the Game can also mean work in the DAO so perhaps we need some different wording: to paraphrase @ezra_w who has forseen this problem ‘simply contributing work often means you have some skin in the game already: if I’ve invested time building and learning the DAOstack system, I will gain more from that system succeeding. Likewise if I’ve invested in relationships in the DAOstack community. So maybe it’a more correct to say we want to “fortify” that skin in the game with GEN.’ The ability of those who work and propose to receive REP and ETH/DAI and also GEN (which they can also additionally lock for REP) in Genesis 1.0 means that there is good value flow with the ability to gain livelihood and influence - do you agree?

And Phil, while I’m all for elegant intellectual tennis and digging further into the mechanics can I ask for your personal reaction to the proposal? Do you see the need? Like it? Dislike?

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It’s “satisficing”, seems like a pretty good next move on the chess board.

But it has a lowering interest rates feel to it. It will work for a while, but if Genesis keeps solving problems like this, it will blow-up.

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Hi @Kate, thanks for your answer!

Sorry if I misunderstood Eric’s answer, I know how cool and supportive he is anyway, so peace :sunglasses::peace_symbol:

REP dilution/slash for inactive members.

Colony has an interesting decay function. It has been already discussed on DAOtalk: Reputation Decay. I don’t have a firm opinion here, because this topic is itself part of the more comprehensive issue of “compositionality” mentioned in DAOstack whitepaper. I’d vote for a decay function though, but knowing that it wouldn’t be enough to address some issues raised in the thread I just mentioned.

REP ceiling to GEN locking is an interesting proposal - of course a main effect would be to limit the amount that some could lock GEN and necessitate identity.

It wouldn’t require any change regarding identity. What I had in mind was a REP ceiling for ALL GEN-locking REP holders, seen as a collective stakeholder. BTW, this approach inspired from multistakeholder coops could be equally valuable with respect to other stakeholders segments such as DAOstack-powered DAOs and Contributing organizations, mentioned in Q1 Genesis Update. A fix distribution between these segments is compatible with a dynamic distribution within each group.

And Phil, while I’m all for elegant intellectual tennis and digging further into the mechanics can I ask for your personal reaction to the proposal? Do you see the need? Like it? Dislike?

Honestly, I just don’t know! :exploding_head:

I’m sorry if I sounded like playing some gratuitous game. It is not my intent. I sincerely care about all these issues. And it’s actually easier to grasp well-delimited questions like the ones listed by Walter than to assess the whole thing. The proposal is really big. I need more time and more information to process it. I need to understand not only how it would work and what are the risks, but also which purpose it serves and what are the consequences for each type of stakeholder.

But I can say that generally speaking, I tend to favor the inclusion of all stakeholders in the governance. Therefore, it seems legitimate to me to give a way for GEN hodlers to participate to Genesis DAO. I suspect that Genesis DAO may be perceived as the initial experiment of DAOstack mechanisms, a sort of lab handled by a small community of practitioners. This narrative collides with the scenario of granting influence to investors. However, considering that “supporting the GEN economy” and “contributing to the development of the DAOstack software” were set as goals for GenDAO put things in a very different light.

BTW, there might still be some relevance to a DAO dedicated to practitioners, researchers and experimenters, with contribution-based REP only. It’s probably easier to have only one DAO to focus on at this stage, but the new “version” doesn’t necessarily mean that the current one is pointless.

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On the topic of Genesis 1.0’s Rep distribution:

As Kate wrote in the top post, I think the idea here is to

adopt a reputation structure whereupon its members have a vested interest in spreading the adoption of DAOs, the DAOstack platform, and use of the GEN token.

To do that, we need to design a system that is sure to grant appropriate amounts of Reputation to those with a stake in that mission. I think we’re modeling two basic stakeholder groups for Genesis 1.0:

  1. Long-term GEN holders: this one has been talked to death. It uses the GEN-locking mechanism, etc. etc.
  2. People with a stake built from time and labor invested into the DAOstack ecosystem. This includes both current Genesis Alpha participants and future participant-workers in Genesis 1.0. This type of stake is much more heterogenous and unquantifiable, but starting with

current REP (for people that have some now)
+
value of work done + some GEN that can be locked (how workers will ask for Rep in Genesis 1.0)

seems like a fine starting point.

Reputation Decay

In 1.0, like in the Alpha, Reputation will naturally decay because of inflation. This is actually quite a complex mechanism, since any amount of Reputation can be given out or slashed in proposals, and the GEN-locking parameters can also be adjusted. If the DAO feels investors are getting too high a portion of the Rep, it can choose to gift workers more Reputation per work done or change the amount of Rep granted for locking GEN. If the DAO feels Reputations are decaying too quickly, it can start minting Rep slower, or even slash some (new schemes could be created to make this easier).

If you have 1% of total Rep, the only way you’ll maintain 1% over time is by continuously locking more GEN or doing more DAO work, or the DAO has to be slashing Rep as fast as it’s minting it. It’s really hard to predict how the DAO will behave, of course, but this dynamic seems complex and flexible enough not to introduce a specialized Rep decay scheme right away.

Note that voting and staking in the DAO give little to no Reputation right now, and so simply participating as a voter or staker will probably not be enough to stop your Reputation from decaying, unless the protocol is changed.

Disclaimer: I don’t know exactly how the GEN-locking mechanism is going to work, and I also don’t know what the research team is looking into wrt the protocol right now. Some of these assumptions could be pretty far off.

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