Why GEN for prediction?

Internally, on DAOstack’s BizDev team, we commonly get a question similar to the following from the Genesis Community chat:

[Forwarded from Jerome raymond]
if I use arc to build out a dao does it have to use gen tokens?

… or the more generic variation, neatly summarized:

Why can’t I use my own token for predicting?

I’d like to start this discussion by quoting the last page of the DAOstack whitepaper:

The GEN Model

DAOstack is a DAO that… incentivizes contributors to participate and develop the DAO stack and its ecosystem. In that sense it is a decentralized collaboration. It intends to use part of its raised funds (collected via its token sale) for investments in projects that would come on top of the DAOstack (as well as in projects which will build and enhance the DAO stack), and accelerate the ecosystem, while also expecting return on investments. In that sense it is a decentralized cooperative. Finally, it will also be a decentralized curation network, in particularly for governance elements and DAOs, but possibly for many other DAOstack things. In all contexts, the GEN is the token that drives the effective navigation of the collective attention of DAOs on top of the DAOstack ecosystem, and in particular the token that engines the prediction games described above that are critical for holographic consensus and effective governance of large organizations.

However, generally, there’s a few canned ways I respond to this:

  • Usability: if we use the analogy of a traditional application such as Reddit (a content curation site) it becomes immediately clear why the GPN needs a ubiquitous, common token across all DAOs. Imagine, for instance, on Reddit, that for every subreddit, that is, every unique content curation feed, you had to have that subreddit’s specific token to either like or dislike content. This would effectively cripple Reddit’s network effect as users would have to carry a basket of tokens for each subreddit. By default, users are subscribed to some 50 odd default subreddits: imagine opening an application and having to trade for 50 unique tokens in order to participate in the mere defaults. GEN is much the same. As we move away from isolated DAOs into an ecosystem of DAO to DAO interactions–and interfaces that reflect these interactions–it becomes more and more succinct to have a common protocol for prediction across all DAOs.

  • The network effect of the GEN Predictor’s Network (GPN): we don’t expect that most users will want to predict. Most DAO members will likely want to vote and curate proposals, or submit their own, while only a handful of users will be drawn to the prediction mechanism. In fact, we can imagine alternative interfaces built on the DAO stack that eschew or hide prediction, perhaps leaving it only to be opened by an ‘experts’ tab or something similar – the assumption being that the GPN will continue to provide its boosting service insomuch as the DAO can cover the cost of DAOstaking proposals (the default downstake applied in the Genesis.2 protocol) in order to enable resilient, scalable governance. It’s important here to emphasize the service aspect of boosting, as it is ultimately what enables DAOs to scale efficiently and resiliently under the holographic consensus framework. That is: boosting is not free to a DAO, because governance costs are not free, and this cost has to be covered somehow, leading into the next point…

  • Monetization of attention: for this we can reference this handy blog post from Matan:

Human attention, and in particular intelligence, is a scarce resource, and thus has to be represented by a scarce element. In other words, attention has to be monetized: acquiring collective attention on a network of intelligent agents has to be paid for by a valuable token.

This is also the basic economic model behind the blockchain itself and specifically the notion of gas in Ethereum. However, in a decentralized governance system, acquiring attention works differently than paying miners to verify transactions in the blockchain: there is no single voter approving a proposal at a given time analogous to the notion of a successful miner of a block.

Monetization of attention allows a decentralized, wider decision-making process, while protecting it from abuse and maintaining resilience in the network.

  • …and one additional note, GEN is not meant to replace a DAO’s native token, and we expect many DAOs to have native tokens that they use for any number of utility purposes, and perhaps in some jurisdictions, more of a “security-like” design. It is in fact planned that native DAO tokens will have an increased range of features available to them through DAOstack’s various modules, such as the Continuous Funding module currently being developed by dOrg.

Why not just use ETH?

This is a common variation of the aforementioned question, and this too has a simple answer: because it is the DAOstack ecosystem and not the Ethereum ecosystem. This in-and-of itself should be a sufficient answer, but if we consistently apply this logic, it would approximately look like so:

“Why should Ethereum exist, just use Bitcoin!”

“Why should Bitcoin exist, just use fiat!”

etc… but more than this, imagine if in the future GEN moved to its own chain, or was a token on another chain other than Ethereum, or DAOstack was supported on multiple chains: what then, do we use, as the common GPN token? How could the Genesis DAO be able to effectively coordinate actors within the ecosystem, in order to accelerate its growth? What token should be used for ecosystem-wide “commons” registries, such as the upcoming Arc.Hives, which will provide services such as identification of unqiue individuals or registration of new DAOs and modules?

There’s a misconception today that ETH will be observably used by everyone: once the UX of Ethereum is made friendly to a larger audience, and primitives such as meta transactions, and native browser Web3 injection exists, most users will be using Ethereum without even knowing. Already these primitives exist in some respects: with the Gnosis Safe (our recommended smart contract wallet), for instance, you don’t need ETH to pay gas fees; with this, users only need GEN to effectively use Alchemy. With this, you effectively need one token to interact with every DAO on DAOstack. Neat, right?

I still want to use my own token

Sure, no worries. You’ll find a lot of great DAO libraries on Github to build your own DAO’s architecture.