D2D Interactions

DAOs should not be understood as isolated governance entities, but digital cryptonetworks defined and reinforced by the communications, resource, and service exchanges between on-chain bodies.

The D2D Fractalizing Handbook is a great place to learn about D2D interactions!

Prime is currently specifying a robust interface to support DAO to DAO interactions. Such interactions could range from token swaps to establishing joint ventures and/or launching funding rounds that support new builder teams and enterprises. Through this interface, PrimeDAO can distribute itself into fractalized orders, delegating or formalizing relationships with a network of sub- or partner DAOs.

Background

Decentralized autonomous organizations (DAOs) have a lot of potential to grow, but need to evolve beyond the relatively closed nature of singular DAOs to exponentially scale. The reason DAOs are relatively siloed from one another is that it takes a lot of effort from individual DAO stakeholders to bootstrap the network and contribute to it, limiting their attention and their potential to engage with multiple DAOs. Although in many cases anybody can join a given DAO, that doesn’t necessarily mean that DAOs interact with each other in ways where the individual efforts of a stakeholder in one DAO benefits the stakeholders in another DAO.

Today, most interactions that happen in the Open Finance (DeFi) space are zero-sum, where one’s gain is another’s loss. A proposed solution to this is polycentric governance, where multiple independent and cyber-physically close jurisdictions develop common policies and rules to solve their problems more efficiently. Communities are, in reality, overlapping and osmotic. This means that while different communities might seem different from the outside looking in, they are quite similar in essence. When formal systems fail to acknowledge and represent this reality, they inevitably produce frictions, inter-organizational conflicts, and suboptimal collective outcomes.

DAOs come in all shapes and sizes. We can imagine a Diversity of DAOs, where a cryptonetwork is composed of many on- and off-chain entities with various tasks and specializations. Presentation by Michael Zargham of Block Science, an ecosystem governor of PrimeDAO.

It follows from this that reducing the costs of interacting with a network of networks, or cryptonetwork, should be the first step to achieve this goal of a more connected DAO ecosystem. DAO to DAO relations (D2D) seeks to bridge that gap by pursuing a polycentric framework for network governance, mutual skin in the game, and communication between these nascent digital organizations. D2D is a unified strategic model that envisions a network of entities that iterates, optimizes, and develops synergistic mechanisms that augment the capabilities of the whole. As they say, a rising tide raises all ships. In order to establish a functional polycentric governance system that supports an Open Finance commons, Prime must specify, implement, and improve upon D2D interfaces. Imagine interfaces for mutual shareholding and governance, formation of joint ventures for common product and protocol development, and shared community resources.

D2D can establish a neutral, co-beneficial ground of mutual interest, which offers the dual advantage of curtailing the potential for the network to be forked. That is, with DAOs, the software can always be forked and other communities can copy that DAO’s operations. However, with D2D, the DAO becomes more than itself in terms of its established linkages — its cryptonetwork — which is much harder to recreate.

Interaction Types

  • Common liquidity pools: DAOs can reinforce their economic relationship by including their respective tokens in shared liquidity pools, or engaging in open market operations when one DAO token has devalued against the others. Prime is uniquely poised to experiment with this mechanic, given that one of its first products is a DAO-governed Liquidity Pool Manager, powered by the Balancer protocol.

  • Governance swaps: DAOs may choose to exchange or offer Reputation in other DAOs to decentralize their governance without compromising the economic integrity of their native tokens.

  • Token swaps: Similar to exchanging Reputation, DAOs may choose to exchange their tokens. We can imagine the co-creation of exclusive markets where members of both DAOs have the opportunity to swap their tokens at a discounted or bonus rate. Prime will execute its first token swap with the API3DAO, per the passing of this proposal, offering 2% of its tokens in exchange for 2% of the API3DAO’s tokens.

  • Common spending and joint ventures: Similarly to common liquidity pools, the formation of joint ventures with shared treasuries allow for DAOs to solve common problems. Imagine two DAOs co-funding a multisignature wallet of a given squad tasked with launching a product that will benefit both. Prime has been actively conducting early research in this direction using the Gnosis Conditional Tokens framework.