On-Chain Governance of Decentralized Autonomous Organizations: Blockchain Organization Using Semada

Abstract

This paper initiates an analysis of the consequences of different options in the choice of regulatory protocols and reward structures when founding distributed autonomous organizations (DAOs) on a blockchain. The Semada Team invites all interested parties to participate in and contribute to this joint vision herein and related research projects. With the proper incentives, independent and selfish actors can be organized to collaborate productively toward a common goal. The objective is to identify the ideal protocols that should be chosen for promoting the values and goals of any particular DAO. On-chain governance gives DAOs the opportunity to achieve complete decentralization, anonymity, and autonomy. The first incentive structure that encourages healthy collaboration is a focus on long-term reputation instead of instantly fungible currency rewards. When the focus is on reputation instead of more fungible rewards, damaging arbitrage is demotivated. The Semada platform is a fully decentralized and autonomous blockchain distributed application (DApp) which vests users with verified reputation. Semada is designed to be secure against all known attacks on digital reputation, including Sybil attacks and tyranny of the majority. The next major concern for creating a healthy DAO is a governance model that rewards value enhancing contributions from DAO members, deters bad actors, and evolves over time as circumstances change. No single, static protocol for running a DAO can be complicated enough to properly reflect the will of its members, while remaining immune to gaming by naturally selfish parties. Yet, DAO governance requires a clear system for reaching consensus on new protocols for DAO member behavior. We propose a clear procedure for achieving on-chain regulatory and legislative governance. Semada is designed as an evolutionary platform which rewards continual development of new governance protocols to anticipate and react to inevitable internal and external attacks. Unlike centralized platforms with reputational elements, the decentralized Semada platform gives users complete power to improve the platform and police any diminishments. Semada incentivices value-enhancing contributions and legitimate policing by sharing the totality of all profits amongst its users.