The Incentive Glue: Mutual Self-Interest

So far, we spent 4 (nearing 5) months writing extensive smart contract code, completely separated our core business (Slock.it UG) from the DAO framework we built, spent 5 figures of our own money to have its code audited by an independent company, then gave it away free and open source for anyone to re-use (complete with whitepaper).

Yet, Slock it UG will hold exactly zero DAO tokens. No, there is no hidden “pool” or premine either. It’s the DAO that will steer itself, and no one else. The “A” stands for “Autonomous”.

Thankfully, we haven’t lost our minds — we just believe in synergistic relationships. When a suitable DAO presents itself, Slock.it UG will submit to it a very strong proposal to become a Contractor to the DAO and build the Ethereum Computer as well as its ecosystem of apps+dapps: products that the DAO will then be able to sell access to.

That’s mutual self-interest. It would be myopic to think that the DAO story starts and ends at the first proposal — DAO contractors will want to ensure they will do a good job in order to be selected for the next proposal, and the following, and the following, for years to come.

Slock.it UG itself is incentivized to demonstrate how successful this model can be, and how a synergistic relationship between a DAO and its Contractors can make revenue flow both ways, far more than any ‘traditional’ model would.

Which brings me to my main point, mutual self-interest. When I hire a contractor to build a wall for my house, I do not hold shares of the building company and that contractor doesn’t hold shares in my house either. Call me crazy, but in spite of this I still expect the wall to be built, and to be built to my satisfaction. I’m demanding like that.

DAOs aren’t Kickstarters… DAOs will will have many Contractors working sometimes in isolation, sometimes in parallel and sometimes hand in hand. This will take place over time, and involve multiple, separate companies in the physical world.

Contractors will also have other clients than the DAO, maybe even other DAOs. In fact, I foresee the creation of a marketplace, with the order book composed of Contractors Proposals on one side and DAOs RFPs on the other.

If this sounds familiar, it’s because that’s exactly how client/supplier relationships already work in the real world. And that’s a good thing.

When you hire a contractor to build a house, a piece of software, or a hardware product, you want to involve companies that have prior experience, and the capacity to deliver. You want that company or supplier to succeed, so that they do a good job to completion, leverage talented, well compensated workers and stay available for future work.

This relationship is governed transparently through immutable contracts, not of the obscure, inscrutable legal kind, but of the smart kind: a Proposal consisting of an irrefutable sets of rules held on the blockchain defining the engagement between the DAO and its Contractor(s). For example, a Contractor could be compensated for its efforts on a monthly basis and not a lump sum.

Contractors therefore have everything to gain in the continued development of the DAO’s product line(s) and overall success.

We think these concepts forms the basis of a healthy relationship between DAO and Contractors. We certainly hope for our 100% decentralized, fully autonomous framework to become the DAO standard going forward — and we would be happy to provide completely free advice to startups out there on how to bootstrap their own DAO (just come and say hello in our Slack).

It’s our way of saying thank you to the community and share into the success we had as developers on Ethereum. What’s most exciting to me is that several organizations including charities already approached us, willing to fork the repository and explore this new transparent governance model themselves.

I’ll finish by paraphrasing my friend Nicolas Loubet, from Think Tank Cellabz: “Our study shows with very little uncertainty that the FLOSS communities are waiting impatiently for new governance models — such as the DAO. They open the possibility to build a software community of the highest caliber, on a global scale.”