Questions on the utility of GEN

Q.) From our community Telegram it was asked by Acheever (@Acheever): "Please, what’s the use of GEN tokens on DAOstack?"

A.) Answered by @matan [DAOstack Architect/CEO]

GEN is a skin-in-the-game token.

The GEN tokens are used for stake on predictions about the fate of proposals made in DAOs that are using the DAOstack platform.

This prediction game/market is critical for enabling a large-scale, resilient and decentralized decision-making / governance process.

From another angle, GEN is the “gas” token used to purchase human collective attention (rather than the ETH “gas” paid for computers collective attention), that is attracting predictors to screen (and stake over) proposals, and by that out-source the navigation of the collective attention to an open market for greater efficiency.

P.M (@lovemecrypto) followed up with: @matan just to be clear - for the genesis DAO - you guys are managing funds that were raised? As in investing it” If so. Investing in what specifically? Other crypto projects?

Funding any activity that supports the DAOstack ecosystem.

  1. Starting from small tasks in line with the DAOstack project (bug findings, small dev tasks, content writing and what not),

  2. then to developing more components and tools that will integrate with the DAO stack (more governance modules, improving API layer, reputation systems, browsing interfaces, wallets, social identity integration, other external integrations -Slack, Trello, Github, etc)

  3. then to developing and integrating new interfaces with the DAO stack (wether for particular DApp use cases or new interfaces for DAOs such as Alchemy),

  4. to developing DAO projects that will be using the existing interfaces (such as Alchemy).

Anything that will support the growth of collaborate decision-making using the DAOstack platform — with GEN staking enabling all that, directly or indirectly.

Tahtapot (@pulsarx) followed up with, "[Y]ou can reveal very good software but if the token is worthless, nobody will see it."

it’s not just a good software — it’s a software, and an ecosystem of softwares, in which GEN will be used as a utility token. So far, pretty much all tokens values are increasing from pure speculation (ETH and BTC are the exception which actually have utility, and that’s exactly why they’re leading). We intend on making a real utility value for GEN, and we’re intending on making it in the near future. All the rest (which I don’t disregard) is pushing on speculation. The real thing is building products that require GEN as a real utility, and growing their adoption. We’re very committed to our backers, also at the short term, but mostly looking at the long run.

Q.) On the community Telegram a related question was asked by Alex Cort (@irunach):

"Perhaps someone can explain in a bit more detail what this means? “GEN oracle network effect of predictors accross the DAO-verse (and thus will loose the capability of scaling up their governance).” How does not using GEN hinder scalability? And what if many people use ETH as their staking token, won’t an “ETH oracle network effect” be created too?"

A.) @matan [DAOstack CEO/Architect] replied with:

Dear Alex, you could have asked the same question to ETH itself (or any other blockchain or open-sourced, network-effect based DApp):

People could have downloaded the ETH blockchain client and make in it a small change so that gas would be paid in Bitcoin and not only ETH. If enough people would do so, there would be created a network effect of Ethereum client with Bitcoin gas support.

Of course nothing like this ever happened.

You could have also asked why not implementing the ETH client with Bitcoin fees from the beginning?

Well, any new project is trying to create a new token in order to create and stream value to a new network effect around its new product. If Ethereum have asked for BTC in their client the value of the network would have streamed to BTC holders, and not the enthusaistic ETH supporters who made it to what it is today. It is all about the alignment of incentive around a shared goal — in the ETH case the building of the ETH platform and its adoption (including the miners network effect around it), and in the DAOstack case the building of the DAO stack and its adoption (including the GEN oracle network effect around it).

Why would a DApp creator bother to change the contracts and anchor it on ETH? by that he’ll need to re-create the GEN oracle (predictors) network effect, but more so, he would lose the support of the original dev team that is diligently trying to establish and develop further the platform and the network effect around it. In the same way that anyone who’d implement the Ethereum client with a different token for gas would lose the network effect of ETH miners, but more so, the support of the original Ethereum foundatoin and dev team. In fact, this did happen — it was “Ethereum Classic”, which indeed lost that foundation. In that case, though, the fork was relying on an actual difference in value systems, and resultingly there was enough (albiet still little) people who quickly maintained the new network effect.

On the contrary, if you want to build a DApp on the DAO stack it means you believe in the platform/framework/project. Which means you believe in the people who’ve develope it, and most likely you’d like them to keep developing it. You have all of the right incentives to maintain and support the GEN network effect around the project, and more so, if you believe in its success even hold some GEN yourself.

Bottom line, any DApp ideally requires its own token and network effect, and its users have the direct incentive to support it, as long as it is defensible! Defensibility means that no one can “fork” the technology and use it with a new token, without losing the network effect around the project. (If you could do so you would indeed change the token from GEN to your own token.) Defensibility is established by a network effect of adopters that provides the usage value in the system (miners in blockchain, oracle network in DAOstack).

Defensible network effect — critical element for every successful DApp; not easy at all to establish. (As far as I know none of DAOstack alternatives have a viable defensible network-effect based token model.)