Sacred Finance — Crafting our DAO

The origin of firms

Over centuries, humans have come together to accomplish goals that were otherwise impossible for individuals. More recently, firms have formed with walls, legal bindings and other boundaries.

Why do firms exist?

In 1837, Ronald Coase wrote on why firms came into being. Though simple, his proposal won him a Nobel prize in economics. In a nutshell, he concluded that firms (or companies) are better at reducing 3 types of costs:

  1. Bargaining and decision costs (Agreeing on compensation)
  2. Policing and enforcement costs (Checking the quality of work)
Traditional firms are governed by an elite
  1. Agree on a fee
  2. Ensure the code was delivered correctly.

Although firms are superior to the free market, they are also controlled by the entrepreneur and workers have no share in the decision making process.

Credit: Medium

Enter the DAO

A DAO at its core is an organization that enables the collective management of community owned goods. These goods can be anything from a simple investment DAO that manages a treasury and investments, to a more complex set up with many moving parts.

All voices are equal in a DAO credit: Etsy

Bridging the Market and the Firm

Like a firm, a DAO tries to minimize its transaction costs by finding aligned, long-term members but also giving them the power to vote and choose the direction of the DAO. The key differentiator is that a DAO is co-owned by all of its contributors who all have skin and interest in the game.

  1. Coordination — How can you organize a decentralized group of people with different talents, cultures and skill levels?
  2. Governance — How do you give them a voice so that they can vote on decisions of the DAO?

Crafting Sacred’s Dao

These functions need to be organized with both centralized and decentralized tools, to make sure the DAO can work efficiently. Centralized tools are a short term concession until more decentralized tools become available.

Communication

Two types of communication mediums (tools) are needed:

  1. Pivotal communication (forums where each thread is geared to debating the pros and cons of a specific proposal). The goal of this communication medium is to ‘pivot’ on a decision finally through a vote.

Coordination

Cooperative work needs to be coordinated to succeed. Broadly, a DAO has ‘departments’ or workstreams that serve specific functions, such as product building, marketing and strategy/ business growth.

  1. Minor tasks that can be done by an individual
  • In what way? (voice/ asynchronous)
  • What tools should the DAO use (e.g. DeWork, Notion, etc.)
  • Goal setting
  • Task assignment
  • Work approval
  • Payment

Governance

  1. Purpose (our why), Principles (our beliefs) and Process (how)
  2. Org structure — What ‘departments’ does the DAO have and what functions to they serve?
  3. Membership process — What entails membership into these departments?
  4. Decision making — How are minor and major decisions made? Minor decisions can be passed unless vetoed within a short period, while major decisions could need a quorum to pass.
  5. Arbitration & Conflict resolution — How are conflicts handled?
  6. Dividend Distribution — How are permanent members compensated?
  7. Contracting or hiring staff — Who decides when to hire and contract?
  8. Record keeping — Where are meeting minutes stored?
  9. On chain parts — Which parts should be on the blockchain?
  10. Off chain parts — Which parts can stay on a forum?

Governing the Treasury

The treasury deserves special mention as a part of governance, since it finances the DAOs activities. The storage, diversification and management policies of the treasury all need to be agreed on.

Involving you, the Sacred community

We have entered the stage where we can begin to build out our DAO by considering and refining all of the parts above. We will soon open up discussions to help us refine the current ideas we have, and also open up to new ideas that can improve our DAO structure.

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