There’s nothing quite like a market crash to embolden crypto-sceptics and make the mainstream question everything. We’ve entered a phase where the schadenfreuders are louder than the shillers, and the lights on the community’s guiding torches have dimmed.
It’s easy to dismiss the gleeful voices shouting “I told you so”, but engaging in critical discussion is healthy and necessary to progress. The critiques of Web3 range from absurd to moot to genuine and address blockchains, NFTs, cryptocurrencies, the culture and Web3 itself.
One specific problem in Web3 is that of hyperfinancialization. This is particularly interesting because while hyperfinancialization is one of its biggest issues, financialization is an intrinsic benefit of Web3.
The word ‘financialization’ is commonly used to describe the increasing size of a country’s financial sector relative to its whole economy. In Web3, I’m taking it to refer to the value and power placed on financial capital. One of the most glaring symptoms of hyperfinancialization in Web3 is governance plutocracy.
A plutocracy is a society ruled by wealth, one where money = power. One might remark that money is always power,, but within the governance of Web3 projects this relationship couldn’t be more explicit. The prevalent method of decision making in most DAOs is via ‘coin voting’, where one fungible token = one vote. Money literally is power in this method of governance.
Coin voting is often defended by pointing out that the biggest token holders have the greatest interest in a project succeeding, and should therefore have more influence over it. However, this way of thinking misses an important point: an individual actor’s interest in a project is not just determined by their ownership share of the project itself, but also the size of the investment relative to their whole portfolio. An investor may be the biggest token holder in a specific project, but this investment could be the smallest one in their portfolio.
One outcome of this form of governance is that financial interest is valued over any other interest. The values and interests of stakeholder groups like DAO workers and users are underrepresented relative to investors. As a result, proposals may skew towards decisions directly impacting financial value, at the expense of those impacting other community values.
One response to these challenges has been to distribute tokens to stakeholders who didn’t buy their way in. We’ve seen this play out with airdrops, where tokens are retroactively distributed to protocol users and contributors as a way of sharing financial upside and voting power. Additionally, active protocol contributors are able to earn tokens as payment for contribution via bounties or part-time work.
As Li Jin put it “A core philosophical tenet of web3 is that there are more ways to provide value to an ecosystem than through capital — and furthermore, that value should be able to be earned, not just purchased”.
Despite community token allocations, the distribution of tokens remains very uneven in most projects. Taking the example of Uniswap, which is the top DAO coin by market cap - a small number of employees and investors hold 40% of Uniswap tokens, giving them outsized power in governance decisions.
In a recent proposal in Lido DAO on the topic of treasury diversification the impact of whales in coin voting was shown on full display. The outcome of the vote was effectively determined by the votes of two whales owning 17M and 15M LDO each (combined they made up 49% of the vote).
There have also been prominent discussions around a recent MakerDAO governance proposal that saw criticism because of the power of a few VC firms to sway the outcome of the vote.
Hyperfinancialization is not intrinsic to Web3, and is a solvable problem. While coin voting is common practice, it is not the only way to distribute influence to project stakeholders. The beauty of voting via rules written in code is that we can make them custom and complex such that they balance various needs and objectives.
Quadratic voting is one way of increasing the influence of small token holders. This voting mechanism allows individuals to use additional votes to indicate how much they care about an issue. Individuals’ aggregate number of votes is tied to the ownership stake in the organization, but by spending multiple votes they can increase their relative influence over the issue.
Using additional votes gets increasingly more expensive, so this mechanism is vulnerable to a Sybil attack, whereby an individual uses several wallets to vote multiple times. The first vote on each wallet is cheap, so this mechanism gets you more influence at a cheaper price than casting 4 votes from one wallet.
A more Sybil-resistant way to address governance plutocracy is to introduce a non-financial governance token. In order for a token to be non-financial, it needs to be non-tradable (aka non-transferable or soulbound). This is because governance tokens that can exchange hands will be sold to the highest bidder. Soulbound tokens offer more possibilities for Sybil resistance because a collection of diverse SBTs based on contribution history can be used as a reliable indicator that an individual is a unique human.
The beauty of non-financial governance tokens is that they can be distributed in any manner of ways. There remains a high degree of flexibility and customization, so projects are able to create governance systems that reflect the complexities of their communities.
“Transferable tokens held for some period could unlock the right to SBTs that confer further governance rights over a protocol. SBTs open a rich possibility space to experiment with mechanisms that maximize community engagement and other goals.” (Weyl, Ohlhaver, Buterin)
One straightforward way that a community might employ soulbound tokens for governance is to distribute one token to each unique individual participating in a project. Tools such as Proof Of Humanity and BrightID can be used to verify the uniqueness of individuals before they are allocated a governance token. Offline cooperatives and countries have long used the principle of 1 person = 1 vote to ensure that the interests of individuals are protected. With soulbound tokens, this method of governance becomes accessible to Web3.
Soulbound tokens can also be used to generate a complex governance model that takes multiple inputs into account. There might be different kinds of governance tokens with varying weights granted based on depth of protocol participation, for example. Alternatively, there might be different governance tokens for each stakeholder group, with each token having the scope over a particular set of decisions.
Using non-transferable tokens for governance doesn’t have to come at the exclusion of traditional ERC-20 coin voting. Optimism has recently established a two-chamber governance system whereby OP (transferable) token holders control the ‘Token House’ and holders of the non-transferable Citizenship tokens govern the ‘Citizens House’. This is an interesting experiment and will likely provide valuable insights for new organizations designing their voting system (such as Lido, which is exploring bicameralism as well).
Soulbound tokens are one of the key mechanisms with which we can start to definancialize Web3 and introduce more nuance into governance. While there has been a lot of criticism of SBTs in recent months, the challenges raised are addressable. Before throwing the baby out with the bathwater, it is important to remember that SBTs will be a key tool in the next generation of sybil-resistant and non-financialized governance.
At Otterspace, we believe that the future of Web3 is less financialized, and that non-transferable tokens are an important piece of infrastructure to make this future possible. We’re building a protocol and app to leverage the power of badges - join the Otterspace waitlist to start using non-transferable tokens in your community governance.
Subscribe on Mirror and Twitter to stay tuned for new releases.
Since the publication of Decentralized Society by Weyl, Ohlhaver and Buterin, soulbound tokens (SBTs) have become one of the most discussed topics within the Ethereum community. Futures have been imagined, sparks have flown and flags planted in the ground.
As one of the projects contributing to a non-transferable token standard since before the publication of the DeSoc article, we want to join the discussion by clearing up some misconceptions and explaining why we have chosen non-transferable NFTs for the Otterspace DAO badges. For more background on the problem we are solving with the Otterspace protocol, check out this article.
“What the heck are soulbound tokens? Even after reading the paper, I still don’t know” - Kate Sills
The misconceptions with soulbound tokens start with the fact that they are not a clearly defined thing, but a collection of ideas tied to a highly expressive term that invites people to imagine and interpret. The term ‘soulbound’ is itself problematic, as it conjures images of permanently tying some fact or object to the deepest places in your being.
<blockquote class="twitter-tweet"><p lang="en" dir="ltr">Wonder if we could have eschewed semantic arguments by using “community bound tokens” (CBTs) instead “soulbound tokens” (SBTs)? <br><br>CBTs better captures the starting point—communities—-and scale of n stakeholders, naturally differentiating from self-sovereign VCs & DiDs.</p>— Puja Ohlhaver (@pujaohlhaver) <a href="https://twitter.com/pujaohlhaver/status/1531216210154627072?ref_src=twsrc%5Etfw">May 30, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
Discussing a specific token standard, protocol and use case allows us to have a more concrete conversation about the risks and utility to the community. In part 1, I’ll dive into some misconceptions around the non-transferable token standard we’re working on at Otterspace, and in part 2, I’ll explain why we chose to use an NFT for the Otterspace badges.
One common critique we’ve heard of non-transferable tokens is that they can be used to non-consensually and permanently tie public information to your account. For example, someone could doxx me by dropping an SBT with my home address to my account. The difference between SBTs and ERC-721 NFTs is that with a 721 I can transfer that token out of the account after someone airdrops it to me and with an SBT I can’t.
The protocol we’re working on alleviates this concern in two ways: tokens can be burned by the holder and they cannot be airdropped. By enabling burnability of the tokens, the account holder is able to disassociate themselves from the token and any information held within. Burning a non-transferable token has the same effect as transferring an ERC-721 - the history of the token in the wallet is still available on-chain, but the token itself can be disassociated from the account.
We recently added a ‘mint with permission’ function to the Otterspace protocol. This ensures that the tokens are never airdropped to accounts, but only minted (‘claimed’) by the ultimate holder with permission from the issuer. In practice this means that we have better protection against non-consensual airdropping than the widely used ERC-721 standard.
Privacy concerns are a moot point since the token holder has themselves minted the token and its associated information publicly to their wallet. The Otterspace protocol is designed to serve communities in the context of issuing public badges similar to scout badges, medals and in-game awards. In this context, publicity is a feature, not a bug.
Any long-term user of blockchains knows that regularly changing your account is important to maintain security. A common critique of SBTs is that since they are non-transferable, they make it impossible for users to start using a new account, or recover their tokens if their account is hacked.
It is indeed true that one of the key features of the token is that it does not include the ‘transfer from’ and ‘transfer to’ functions contained in ERC-721s. Without these functions, the tokens cannot be freely traded, and marketplaces like OpenSea are able to recognise them as a different kind of object than a digital work of art, for example. Without tradeability, the tokens can be used as a reliable signal of information about an individual.
“... because NFTs are tradeable items, another big part of the answer inevitably becomes that NFTs are about signaling wealth. If someone shows you that they have an NFT that is obtainable by doing X, you can't tell whether they did X themselves or whether they just paid someone else to do X.” (Buterin, Jan 2022)
Removing the transfer functions from the primitive does not make reassignment of tokens between wallets impossible. The process of verifying and executing a legitimate transfer is not defined in the standard, but is left open to the implementer to design for their use case. In the case of the Otterspace protocol, we are experimenting with community and social verification to manage the token reassignment process, for example. This allows communities using Otterspace to maintain the integrity of the token collection while supporting key rotation and recovery.
In the next section we’ll discuss the Otterspace protocol use case and why we’ve chosen to work with a non-transferable NFT instead of a different tool like a verifiable credential. But assuming non-transferable NFTs are in fact useful, why create a new standard instead of simply modifying the existing standards by removing transfer functions?
By creating a new standard, we enable wallets and dApps to recognize the fact that these tokens are fundamentally different from tradeable NFTs which may be bought and sold on marketplaces and airdropped to friends. As a result, the tokens can be displayed appropriately by applications.
Removing the transfer function from an ERC-721 token means that interfaces assume transfer is possible - when transfer is attempted, it simply fails. This is a hack and not an acceptable user experience.
The Otterspace protocol makes it easy for DAOs to issue badges to members for a wide variety of use cases. The most common ones we have seen are: DAO or guild membership, role, level, awards, completion of tasks, tenure and event participation. You can check out the full story of the problems we are solving and why the model of badges is useful in our blog posts here (part 1) (part 2).
In order to delve into why we have chosen non-transferable NFTs for the Otterspace badges, we first need to understand what badges are and what problems they need to solve.
Communities and societies have used badges to represent achievement, reputation, affiliation and recognition for centuries in the form of tattoos, coats of arms, military awards, scout badges, laptop stickers, trophies etc. If we look at the history of badges, we can distill some common themes:
We decided that Otterspace Badges should be public by default, as one important purpose is for the holder to signal affiliation, status and reputation. We can see this behavior play out in several real-world examples.
Scouts proudly wear the badges they have collected and earned on their jackets or sashes in order to signal their affiliation, identity and status. In the context of web3, individuals collect POAPs as a way to signal their status in the community by showing the history of conferences and events they have attended. In Discord communities, members use roles to indicate their level in the community.
By putting badges on-chain as NFTs, individuals can showcase them in their wallets as a collection of digital trophies, affiliations and achievements. In the Otterspace protocol, each badge is associated with the organization that issued it, and voluntarily claimed (minted) by the eligible individual.
One of the biggest advantages to using NFTs for the Otterspace Badges is that they become immediately interoperable - easy to integrate - with other dApps. Tokens are already an accepted model for governance, access and membership.
By making badges tokens, DAOs can easily use them in their Snapshot governance strategies, enable token-gating via existing apps like Guild.xyz and Collab.land, and devolve powers and permissions to holders of badges. By using tokens, we take advantage of the composable nature of web3 and enable quick integrations to expand the range of user experiences.
A related advantage of keeping badges on-chain is that they can be issued without permission based on on-chain data. This is a use-case DAOs are particularly interested in, as it would enable them to create an objective set of on-chain requirements for earning a badge, and enable DAO members to mint themselves a badge once they meet those requirements.
One of the arguments for keeping badges off-chain is the cost of minting each badge. With the improvements afforded by L2s and Optimistic rollups, we are confident that affordability will not present a barrier to adoption. As Vitalik Buterin mentioned in his recent article, sometimes blockchains are just a really convenient place to store stuff.
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It’s an exciting time to be working in web3 as we’re experiencing this shift towards applications less driven by profit and speculation. At Otterspace, we believe in the potential of DAOs to make the next generation of the internet community-owned and governed. Through our work with DAOs we have learned that badges are an important missing cornerstone, and are excited to bring these to life via non-transferable tokens.
We hope this article has quashed some concerns around non-transferable tokens and shed light on the potential this technology affords. We’re keen to keep healthy discussion going so we can improve the design of standards and protocols to make them abuse-resistant.
Follow us on Twitter to join the conversation! 🦦🚀
Special thanks to Rafa the Builder, Abbey and Vishesh for their feedback on this post.
Much has been written about DAOs as a new form of organization, and how they can be built and maintained sustainably. We are very much still in the iteration and discovery phase as we learn how DAOs can best structure, govern, attract and retain members and produce value. However, it is not too early to start thinking about the implication of DAOs as a new organizational structure.
As DAOs adopt new forms of operation, this will affect how they collaborate with, sell and service each other and other organizations. This blog post tells the story of what we have learned about DAO go-to-market (GTM) as a young, small organization building primitives for DAOs.
In his post on the DAO landscape, Coopahtroopa defined DAOs and segmented them by industry. This is an obvious starting point in trying to make sense of DAOs and forming a high-level view of the space. However, stopping the segmentation at this level misses an important point: there are many other properties that make DAOs different from one another. As a DAO tooling builder, we learned that these other properties were more relevant in defining which DAOs we worked with.
DAOs are fundamentally different from traditional organizations, both in their mode of operation and culture. Their fluid nature, positive-sum culture, and distributed decision-making set them apart, but also introduce attributes that make DAOs very different from one another. Simply starting from the comparison point between DAOs and ‘organizations’ may lead us down the wrong path. We might instead start from a framework that compares DAOs to ecologies or sense-making organisms – networks of interdependent actors.
This connects with a broader theme we are noticing in web3 – the use of assumptions and heuristics from the past often leads us to miss the point. In order to effectively build for, collaborate with and sell to DAOs, we need to shed our assumptions and go back to the basic questions. In the case of GTM, this means building segmentation from the ground up, understanding organizational decision-making, and embracing DAOs for what they are.
Before we dive in, it’s worth mentioning what we have found makes DAO GTM hard:
With the challenges laid out above, finding an effective way to navigate the beautiful messiness in the space can present itself as an opportunity to differentiate and find success. Below are some strategies that have helped us – maybe they will also help you.
Effectively segmenting DAOs for your specific case is essential both for product development and GTM. Understanding who you are building for will help you stay focused and hone in on depth over breadth. We have found that starting with the problem is the most effective way to build good segmentation. Ask yourself what types of DAOs are likely to feel the problem most painfully and why?
Some of the properties we have considered and found helpful in segmentation are:
In addition to considering what properties are relevant to your problem, it also helps to consider the properties that will make your DAOs a good customer. How are they funded? Are they likely to become long-term users? Will they refer other DAOs? Asking this question led us to a cluster-based segmentation of DAOs, mapping out loosely affiliated groups of DAOs with strong ties amongst contributor networks. These are entirely subjective clusters, but they may help you too:
DAOs are constantly learning, evolving, and updating their methods of operation. If you need to spend 6 months to put something in the hands of your customer, you might miss the boat as the DAO evolves beyond last year’s issues. GTM always starts with having the right product, but in this case, it couldn’t be more important.
The evolving nature of DAOs favors straightforward products that solve specific and highly painful problems. By overengineering or overdesigning a solution, you risk building in assumptions or needs that quickly become irrelevant or take too long to build.
As we have iterated on the Otterspace product from MVP onwards, we learned that stripping away functionality would allow us to start with a simpler product and evolve with the DAOs using our solution. Keeping products focused and simple is not a new concept, but we have found it especially important in the DAO space which is evolving so quickly.
Lean into the permissionless nature of DAOs by building self-serve and single-player use cases that foster bottom-up adoption within the DAO, instead of trying to sell to the DAO as a whole. If you are building a product that is valuable in multiplayer mode, focus on DAO sub-units such as guilds or pods instead of going for DAO-wide adoption.
By considering the DAO as an organism or network, you can seed small projects within a DAO and let them percolate upwards through built-in growth loops, thereby spreading adoption. This takes advantage of the bottom-up and permissionless nature of DAOs and reduces the amount of direct sales work needed.
At Otterspace, we started by serving only onboarding member journeys with the intention of expanding to other journeys later. However, we quickly realized that the onboarding journey relies on many more stakeholders and is more time-consuming to implement. By allowing any DAO member to create any journey, we make product adoption easier by individuals and guilds. The natural growth loops built into our badges product allow easy adoption – once someone earns a badge they can go and create a badge for someone else.
We are all early and nobody is quite sure what DAOs need or how they will continue to evolve. In order to have the highest chance of success, we all need to put our heads together, learn from each other and build flexible, interoperable tools.
The beauty of web3 is the ability to build modular and easily composable components that form part of a greater whole. By collaborating with adjacent projects, you can together build an even greater solution and benefit from increased distribution. Similar to how we framed DAOs as ecologies, we can also consider DAO tools to be an ecosystem of components that can symbiotically work together to enable DAOs to compose their ideal whole.
It also goes without saying that the values of positive-sum, open-source, and minimal extraction are deeply rooted in the DAO culture and you will most likely fail if you try to sell DAOs something that is centralized, siloed in a walled garden, and extractive.
At Otterspace, we’ve been bringing together a group of leading DAO tooling projects to collaborate in a symbiotic way. We believe that together, we’re more likely to be able to learn and build a better tool stack for DAOs. Stay tuned for the DAO-in-a-box piece, which is coming out soon!
Try to build a community as early as possible. Your community will help you prequalify potential DAOs who want to try your product and act as the top of funnel that drives awareness about your product and the problem that you’re addressing. It will also support the middle of funnel in teaching users how to use the product during the consideration stage. Most importantly, your community also acts as the unified megaphone that will amplify your differentiated message. This is important in becoming the signal in all the noise.
At Otterspace, we realized early on that quality over quantity is what makes an engaging community. We, therefore, decided to curate our community based on the Otter NFT campaign which launched in February. We wanted to make sure that everyone who joins our community resonates with our mission and vision, and is incentivized to spread our message.
Since we will plan on launching our product publicly, we will open up our community with that as well. Stay tuned for our public launch soon!
While we certainly don’t have a silver bullet for every problem, we hope our approach to solving some of the GTM challenges will also help other DAOs and DAO tooling providers. By publishing this piece, we hope to engage in public discourse on what works and what doesn’t. Please reach out on Twitter to contribute to the public discussion on this!
In Part I, we told the story of the Otterverse coming under attack from Moloch as more and more Otters floated in and coordination became harder. The rocks ($ROC) the Otters use as a currency for ownership and governance were not good enough for running the Otter planets. In part II, we tell the story of how the Otters discovered a new model for organizing the Otterverse.
Otters are clever and curious creatures who do their own research. As they review human history for clues, they stumble upon The Badge…
Badges have been used in many forms throughout human history to recognize achievements, demonstrate community affiliation and display social status. We can consider the badge an atomic social unit that is itself simple, but carries a great deal of meaning. A quick survey of the use of badges throughout history illustrates this simple but powerful concept.
The coat of arms takes us back to 12th Century Europe, where organizations (families, corporations, states, schools) and individuals represented heraldic achievement in a visual composition including a motto, supporters, crest and shield. Individual knights bore a coat of arms to signal their rank and affiliation. The system was used as a visual representation of rank and pedigree in society, and some countries like England even had entities in control of granting arms to organizations.
The military have been using badges to recognize achievements and qualifications since the 17th Century, with some badges being awarded for exceptional conduct – such as the British Victoria Cross, and others being purely used for identification – such as the US Army Military Horseman badge. Similar to the coat of arms, the badge is a simple object with all its meaning coming from who granted it and the circumstances under which it was granted.
The scout movement was started in England in the early 20th century by an Army General who most probably drew inspiration from the military in the use of a uniform with badges. Since then, scout badges have grown into a world of their own, being used to represent group affiliation, progressive awards, proficiency awards and event participation. Individuals sew the badges onto their uniform in order to display their achievements and affiliations.
The rise of massively multiplayer online games was marked by the success of World of Warcraft, first released in 2004. The game is based on players adopting an avatar to interact in the virtual world, completing quests and engaging in combat to earn experience points and level-up their character in the game. Players earn costumes, titles, objects, skills, XP and gold which accrue to their avatar and form the basis of their perceived reputation in the game. One big challenge with World of Warcraft and other MMORPGs has been the selling of in-game currency and entire accounts, undermining the reputation system.
Twitter’s blue checkmark is an example of a badge granted by a Web2 organization to attest that an account of public interest is authentic. While initially used as a tool for content moderation and curation, the blue checkmark has become a symbol of social status and reputation, as it is only granted to ‘notable’ accounts.
The history of badges teaches us several important attributes:
Since their rise, we have observed many DAOs struggling with:
To read the full break-down of the problems we are addressing with the badges, check out Part I of this blogpost series.
In order to bring more order and recognition into their communities, we have observed DAOs using levels, roles and guilds to break down community membership into more granular units, and recognizing achievements and event attendance via POAPs.
The badge model suits these types of organizations because without a centralized, hierarchical decision-making machine, individuals need to carry their reputation and affiliations with them. Badges allow DAOs to represent community and sub-community affiliation, community progression, achievement, event participation and skill acquisition.
Within the Otter Protocol, badges are a non-tradeable NFT issued by a community, used to grant power and permissions and displayed to show reputation, history, experience, social capital and standing in the community.
The Otters found what they were looking for – a way to give Otters a sense of identity, reward achievements, enable autonomy and fight the whales. The Otter Badge was born. The Otters decided to craft badges from pearl oyster shells and meteorites and give them unique names, but they needed to figure out how to grant badges to Otternauts.
The Otter Badges are based on an open set of Ethereum smart contracts that can be used by any DAO. The design of the badge object itself is as un-opinionated as possible, while still retaining enough structure to have meaning. The design is inspired by what we have learned from historical instances of badge systems, as well as hours of conversation with leaders at DAOs like ENS, Gitcoin, PrimeDAO, Juicebox, Mirror DAO, Metastreet, LlamaDAO, CabinDAO, Synthetix and DAOHaus.
There are several types of actors that are relevant to a DAO:
In the Otter Protocol, any of these agents can hold badges and play a role in creating, distributing, revoking and reassigning badges. Within the protocol, agents are identified by the badges they hold.
While DAOs can be considered agents when acting as a single organism based on a governance vote, we also see them as an important entity in the system. One of the key design decisions we have made is that a badge must be associated with an organization or sub-organization. In this sense, DAOs are both agents and organizations or networks to which other agents and badges can belong.
An agent designs a badge by creating a schema for the badge, in line with the structure set out by the protocol.
For example, Louie 🦦 the community lead at Otter DAO might design the “Rock holder” badge by providing the required metadata and other parameters. The Rock holder badge then becomes part of Otter DAO’s badge collection and can be minted by DAO members who meet the eligibility requirements.
The badge’s proof is the rule-set for the circumstances under which the badge can be minted. Every badge must have a proof associated with it when designed, or else anyone could mint any badge.
Badges must be attested before they are minted. This is the process whereby an agent completes/meets the requirements and another agent or system verifies that the requirements have been met. At the end of this process, a mint voucher is generated.
Importantly, agents with a mint voucher must mint the badge themselves rather than having the badge airdropped. This ensures that all badges are associated with an agent by consent.
Badges can be revoked, making them inactive. Inactive badges are still visible and associated with the agent as a record of history. For example, Louie holds the Otter DAO “Alpha Otter” badge, representing that he is the community lead. Unfortunately, he swims off with the DAO’s shrimp budget, and the DAO votes to revoke his badge. The badge itself remains part of Louie’s collection, but is in an inactive state.
The core principle of badges is that they can only be earned, not bought. As such, they should not change hands between agents. There have been multiple proposed design approaches to this problem, including verifiable credentials, but we have chosen to work with a non-transferable NFT. We believe that with the possibility of reassignment, an NFT meets the requirements of this problem.
Badge reassignment happens when an agent loses access to their wallet or wants to change wallets for a different reason. In reassignment, the tokens in one wallet are burned and reassigned to a second wallet.
We view the badge as a primitive that does not assume a specific use case – as such, it is similar to the types of badges we have observed throughout history. We have based the metadata schema on the examples we have observed in the DAOs we’ve worked with.
To learn more about how the badges work under hood, including the metadata, Otter badge schema and the minting process, sign up to the wait list to be the first one in line to try our private Beta.
Badges create an implicit network of agents (badge-holders) who have rights (governance, ownership, access) within an organization (or DAO) by virtue of owning a badge. This network structure is emergent and organic (self-organizing) rather than artificially or arbitrarily pre-defined by leaders.
Various apps can represent the data in this network in different ways, such as an org chart, talent marketplace, or leaderboard. Other apps might want to interpret the data held by the network to calculate skills, reputation, trustworthiness, and other scores.
DAOs can use the ownership of a badge as a requirement for an agent to be able to access spaces (e.g. Discord), knowledge (e.g. Clarity), governance (e.g. Snapshot), tasks (e.g. Wonderverse), Code repos (e.g. Radicle), multisigs (e.g. Gnosis Safe) and compensation (e.g. Utopia Labs or Coordinape).
The Otter Badges are a public good that can be used by DAOs as a foundation for any type of badge system to represent membership, distribute power and recognize contribution. The Otters are still at the early stages of building the Otterverse and welcome all Otternauts with ideas for improvements or collaboration. 🦦🚀
The Otter Badges are used to represent affiliation with a planet, give governance over the planet and recognize the achievement of extraordinary Otternauts. As Otternauts collect the badges and tuck them in their fur, they can show other Otters who they are and access the interplanetary rafts. Moloch doesn’t stand a chance against this level of coordination.
Equipped with a new tool to manage the growth of the Otterverse, the Otters are ready to welcome new Otternauts on board their mission.
Join us by following along on Twitter, or sign-up to the wait list.
A long time ago, in a galaxy far, far away, the Otternauts lived peacefully – floating on their backs from planet to planet. The Otterverse was distributed equally between planets, and they used their special floating powers to travel and collaborate with each other...
The Otternauts have been bringing humans into the Otterverse, and away from the tyrannical regime of the FAANG creatures, but the number of new Otternauts has made coordination difficult...
Mint your Soul Otter and join the mission!
Over the past week, we have been excited to see a lot of conversation happening around the topic of identity, reputation and Soulbound tokens. The paper published on May 11th by Vitalik, Glen and Puja begins with a clear declaration that “Web3 lacks the primitives to represent such social identity” and is therefore dependent on Web2 structures.
At DAO camp last week, we went deep discussing reputation systems in DAOs with Zakk, rafathebuilder, Shreyas, Chase Chapman, Jon Hillis, Spencer Graham, Evin, Aaron Soskin, Will Papper, Richie Bonilla and DrNickA, among others 🤝 🏕
At Otterspace, we have spent the past months working with many DAOs to deeply understand their challenges with contributor journeys, onboarding, engagement and membership. We want to call out and thank Tim Daub, Rafa from Mirror, Abbey from Radicle, Zeugh/Zom from Juicebox, Alp/Ata from PrimeDAO, David/Werdnalpha from Metastreet, Mitzy from Gitcoin, Coltron from ENS, AD/Konstantin from Lido, NiMA from SeedClubVC, Matt from Synthetix, Shreyas from Llama and Bau/Ξ2T from DAO Haus, who were all instrumental in sharing their ideas and allowing us to learn from them. We are in the process of synthesizing and open sourcing our learnings so that together we can tackle this problem and slay Moloch. 🗡👹
Similar to many of you, we have come to believe that a new primitive is needed for better incentives, membership, and coordination within DAOs, and we’re excited to share that we have been working on a protocol to address this need. We hope to bring together a community of like-minded Otternauts on board this mission. 🛸
This is part one of a two-part blog post that will summarize some of our learnings and reflections of the challenges within DAOs specifically that we hope to address. Part two will focus on laying out the details of the Otter Protocol and will be published in the coming week, so stay tuned! 👀
As the Otterverse grows and the population of planets is increasing, the Otternauts quickly realized that the rocks ($ROC) they give each new Otternaut are a useful currency for trading space fish and star shrimp, but not good enough for running the Otter Societies. Moloch started rearing his head...
Currently, individual members of a DAO are only distinguished from one another by how many tokens they own. In most cases a boundary is drawn between owning zero tokens (not a member), owning some tokens (community member) and owning more than N tokens (full/voting member). Looking at the current on-chain representation of a DAO’s members, all we see is different wallets holding different amounts of a DAO’s token.
But in reality, membership of a DAO is far more nuanced – with some individuals contributing to the DAO full time, others just attending events or participating as a guest on a project.
The limited representation of DAO membership is problematic because important decisions about DAO governance, equity and operations can only take single-dimension token ownership as input, or else rely on manual human assessment. Apps like Snapshot and Clarity that use token ownership to grant access or action permissions can only take the degree of ownership of a single token type as input. More complex permissions rely on human intervention/assignment. A group lead might manually grant the new project lead a Discord role or access to the repo, for example.
If DAO membership were represented by more specific units, decisions about the rights, permissions and powers of individual members could be differentiated. A Web2 analogy is the concept of roles and associated permissions – someone with the HR role in a company has the right to publish job postings. However, our hypothesis is that roles are not the right atomic membership units of Web3, and that membership should be emergent rather than designed and represented as a role. The Otter Protocol allows the nature of someone’s membership in a DAO to be inferred and emerge from the badges they hold, and for specific badges or combinations of badges to be used to assert powers and permissions.
DAOs that operate on a single-token model are restricted to rewarding behaviors, tasks, contribution and commitment by paying people in their DAO native token or a different fungible token. Individuals who need the money to pay their bills are forced to sell the tokens, removing any accrual of value/influence/power in the community as a result of their contribution and creating downward pressure on the token price. The fact that they have contributed is not captured, recognized, saved or otherwise permanently visible or accessible.
This is a missed opportunity, because recognition and other non-financial benefits can be powerful rewards (and therefore incentives) for providing long-term value within a space. Vitalik makes a great analogy to soulbound items in World of Warcraft, which keeps the game interesting. In the DAO space, Cabin has been exploring this concept with their Passports and Stamps, whereby members earn stamps to add to their collection and display in their passports.
By reducing all contributions to a mere financial value they become commodities and members are incentivized to maximize reward on a single dimension, rather than investing in a community long-term. If DAO members could accrue reputation and receive recognition, there would be stronger incentives to maintain long-standing and positive relationships with the communities they are part of.
The Otterspace App uses a model familiar from role playing games and communities like the Scouts to issue non-monetary rewards to represent achievements. Scout badges have been used for many years as a way for community members to progress in a self-directed way, and showcase their achievements, experiences and rewards as part of their identity. Displaying the collection of badges/trophies shows off a person’s standing in the community and can be used to infer their reputation, history, experience and social capital. Important to call out is the fact that reputation or social standing are not themselves part of the badge, but are inferred by the viewer from seeing the badges collected by a person.
Because of the limited token model on which they operate, DAOs are forced to rely on implicit and interpersonal mechanics. For example, individuals refer and vouch for each other for their past work in other DAOs, manually assign roles based on social validation, manually distribute tasks based on conversations in meetings, and onboard new members by reviewing applications. Human intervention is necessary because there is not enough trusted information captured on-chain about an individual in a DAO. Humans must execute based on a combination of social and non-social signals, which reduces the autonomy and permissionlessness of the DAO.
Reputation, quality of work, social capital and experience are already being used by DAOs to make decisions about how to treat specific members, but if these qualities could be inferred from an on-chain record, DAOs would become more autonomous and permissionless. Decisions could be made automatically, such as unlocking new spaces or granting greater governance power.
By breaking DAO membership into smaller units and capturing these on chain, badges enable the DAO to automatically push power to the edges without human intervention, realizing the promise of both decentralization and autonomy.
The problems with coin voting have been widely explored, and are neatly summarized by Vitalik Buterin in a 2021 post:
However, one of the main benefits of coin voting is that it is very sybil resistant, as agents would need to accumulate 51% of the tokens to take control. Unfortunately, it is challenging to implement effective forms of non-coin voting without relying on Web2 infrastructure for sybil resistance. Proof-of-humanity is often suggested as a model for ensuring that one person has only one vote, but many communities want to keep pseudonymity possible.
The Otter Protocol does not directly tackle governance, but provides an additional primitive that governance frameworks can take into account. Governance power over specific domains could be distributed to holders of specific badges, or governance weight could increase based on ownership of a badge. Using badges for levels is a common use case we have explored with several DAOs and we expect will become an important element of governance. An even simpler version is where 1 vote is given to each account holding a badge issued by the DAO. Assuming that earning badges is less gameable, we have a sybil-resistant way of creating a 1-agent-1-vote system.
Our vision is to give DAOs the tools to better represent the varying nature of membership, improve member engagement, coordination and distribution of power and permission. By doing so, we also aim to progressively improve their autonomy and permissionlessness, while surfacing clear paths and incentives for individual members to deepen their participation. 💪
We will soon be releasing the first version of the Otter protocol, allowing any DAO to use Soulbound tokens to generate badges for their members. The Otterspace App will provide an easy-to-use no-code interface for interacting with the protocol, enabling non-technical DAOs to participate.
The Otternauts are clever and curious creatures, and they will work together to find a new type of rock for better governance of the Otterverse. Join the mission and hold hands with the Otternauts as we float on our backs through Otterspace.
To be continued...
WAGMI 🦦🚀
Check out our Soul Otter minter on Testnet to mint your own Soul Otter based on the EIP-4973.
Editor’s note:
Contrary to other widely shared NTT implementations, our Soul Otter minter doesn't use a regular EIP-721 token that reverts upon calling transfer. Instead, for weeks now, we've been busy drafting EIP-4973 and collaborating with the Ethereum community on integrating their feedback.
As wallet implementers are supposed to check an NFT's EIP-165 interface identifier dynamically and hence adjust their app's UI, we think reverting on transfers isn't a great solution. A machine can't interpret the reasons behind a revert.
Instead, we're proposing to only use EIP-721's ERC721Metadata (id: 0x5b5e139f) without ERC721 (id: 0x80ac58cd) to allow wallet implementers to lean on socially scalable feature detection via EIP-165. For more details, see our submission EIP-4973 on github:ethereum/eips.
How we come together online is changing at the speed of light.
Before the global pandemic, remote work, virtual concerts in the metaverse, and Discord servers thousands strong were only a curiosity. Now they are the norm.
We are living through the single most important shift in human connection in recent memory.
DAOs exploded onto the scene in mid 2021, but the foundations were laid long before. COVID-19 made remote collaboration the norm, GenZ is seeking independent online entrepreneurship and employment, and crypto infrastructure has become mature enough to support mass adoption.
Web3 promises a future state of the Internet that is collectively owned by its users, where value is distributed fairly to those who create it, and where there is no room for walled gardens, strong-armed monopolies and belligerent platforms.
If Web 3 is the what, then DAOs are the how.
DAOs are the organizing principle of Web3, and the vehicle through which everyone can be an owner and a contributor to the projects that matter to them. Web3 is about individual ownership, but those owners need to somehow come together and collaborate or nothing great will be built.
DAOs enable independent individuals to come together around a common goal without the need for a central, trusted entity. While their level of autonomy and decentralization vary, the core principles and culture of DAOs empower individuals to collaborate via shared incentives and trustless rules of operation. They unlock human potential by removing barriers to cooperation and will lead to an explosion of innovation.
We believe in the power of DAOs not only because they are essential in bringing about a decentralized internet, but also because societal shifts have made the rise of DAOs inevitable.
Online communities have exploded in recent years, partially as a response to the era of passive consumption on platforms like YouTube and Instagram, and partially because connection and belonging is a basic human need, and digitally native internet users are pushing it further into online spaces.
If coming together online has been a slow growing trend over many years, working together online is clearly the opposite – COVID made this the norm for millions of people from one day to the next.
The global pandemic turned work on its head, not only precipitating the shift to remote work as default, but also bringing about a mass exodus of employees in ‘The Great Resignation’. Independence, flexibility and purpose are becoming more important than ever. More than 50% of GenZ Americans want to start their own company in the next 10 years.
The final trend is perhaps the most important: everyone wants to be an investor. The next generation is financially literate, has the tools (read: apps) in their hands, and a firm distrust of government and institutions. They not only want the independence and flexibility that entrepreneurship provides, but also the financial upside.
DAOs combine community, ownership, work and fun with a healthy dose of subversiveness. While we believe they have the power to revolutionise how we come together to cooperate around missions, problems and interests, as individual contributors, we have witnessed first-hand the friction that comes with joining and contributing to a DAO.
We see a number of important problems that need to be solved before DAOs can truly go mainstream:
1. New member onboarding and activation
Integrating new members into a DAO is not as straightforward as it sounds. Effective onboarding needs to be designed, executed and scaled with the community. Individuals need support finding their way, but prescriptive approaches conflict with the DAO ethos of autonomy. On top of that, onboarding is a massive lever for long term engagement and retention by preventing early churn.
For individuals joining a DAO, the process can be overwhelming and confusing, especially for those who are newer to Web3. We need scalable onboarding pathways that help individuals find their way into and within DAOs without getting lost or overwhelmed.
2. Managing member reputation, roles and permissions
New members onboard and offboard from DAOs with much greater frequency than traditional organizations. DAO participation is highly liquid. Managing the roles, permissions and reputation of members within a DAO and between DAOs is therefore an insurmountable challenge if it is to be done manually.
In the future we see DAO members having an on-chain record of their current role in the DAOs they are part of, which can unlock access permissions, influence voting power and act as an on-chain resume.
3. Member retention and engagement
Member retention and engagement are struggles for most DAOs. Staying involved and participating regularly are challenging for those who only have a few hours a week to spare. DAOs ‘live’ on Discord, where a 24h absence leads to a tsunami of missed conversation, and notifications are so overwhelming that servers are often muted entirely.
Some DAOs have already set-up internal newsletters that are manually curated with important information and updates from Discord, meetings and town halls, so members don’t need to ‘scroll up’ and follow the conversation that happened on Discord while they were away. Solutions based outside of Discord will be needed in order to make the experience of participating in a DAO more manageable and straightforward.
We are building Otterspace with the mission to help DAOs onboard their first hundred to their next million members by making the experience of joining and contributing to a DAO clear, straightforward, and familiar for the inhabitants of Web2.
By improving the experience of joining and participating in a DAO, we hope to make the space accessible and attractive to the next generation of contributors, and help DAOs unlock their full potential.
The DAO contributor experience is not just a tooling problem but requires thoughtful design that includes human touchpoints. We will bring to the table not only a modular and composable toolset, but also community-derived best practices that empower DAOs to make the most of our tools.
We believe in collaboration, crowdsourcing and building in public, and want to introduce our principles to keep us accountable to the community we serve. With that in mind, our principles will grow and evolve over time with input from the community, so stay tuned for ways you can contribute and participate.
Decentralization
We believe in the power of decentralization, but are also mindful of the present realities and constraints that will require trade-offs in the short-term. Our approach is to decentralize our own infrastructure and organization progressively over time.
Community
Community is at the heart of everything we do, and even while we cannot yet call ourselves a DAO, we strive to build with and alongside the DAO community from day zero. We hope to make our own Discord community a place where DAOists can come together and share best practices and learnings as we build the DAO future together.
Positive sum mindset
We want to leave behind the Web2 mindset of building walls and locking users in. We believe in the power of collaboration, incentive-aligned networks and win-win outcomes.
We’re just at the beginning of our journey into otterspace, so join along for the ride and help us define the future of the otterverse.
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