I'm a big believer in the DAC concept, recently spent a lot of time thinking about it and this is the future I think I'd like to help create. Please read it, and tell me what things I've gotten horribly wrong so we can get the bugs out of the concept and change the world
-Adam B. Levine
Editor-in-Chief, Let's Talk Bitcoin!https://docs.google.com/document/d/1PBjrpMBViJh1-QrWJ80XMcQmhqcG3NhhoeSn0C_ML7Y/edit?usp=sharingApplication Specific, Autonomous, Self Boot-Strapping Consensus Platforms (And the DACs that live on them)
by Adam B. Levine, December 24th 2013 - [email protected]
Recursive Music: https://www.dropbox.com/sh/eywks5bfousf017/XorrU3jrb9Definitions:DACP
- Distributed, Autonomous Consensus PlatformDAC
- Distributed, Autonomous Consensus (Rides on top of a DACP)Voice, Vx
- DACP Specific Tokens, analogous to “bitcoins”Voiceholders
- Anyone controlling more than .001 Vx (Enough to create 1 New Vx) of a brand new DACAcknowledgementsWhat follows are ideas I am articulating, but do not claim as my own. I have drunk deeply from the open source cryptocurrency and the nascent cryptoequity ecosystem, and the document that follows is more a connecting of the dots than a piece of original art. I encourage you to improve on my work, leave comments and help me think through this next part of our Cryptocurrency development.
Bitcoin Started Something Unstoppable
Bitcoin is to Money what DACPs are to any “problem” or market need that is not being filled with the maximum possible institutional efficiency.
Bitcoin was a first; something new. The pseudonymous creator worked in the open to collect and vest stakeholders in the platform and at the earliest opportunity walked away from the project. Distributed Computing as “mining” served this purpose as it presented a learning curve that biased the initial community towards technically savvy early adopters rather than the conventional early adopters of a currency system.
Bitcoin is a platform for assigning and transacting a digital asset (the token form of bitcoin) without requiring any central concentrations of responsibility. This had been attempted before utilizing centralized mechanisms, but due to non-technical reasons these attempts failed after a modest amount of time for threatening the existing infrastructure stakeholders.
Once the network had been seeded and a continued interest in the systems development embedded in the hearts of others, the catalyst prudently withdrew. When the implications of this new system was eventually recognized, there simply was no owner to even speak to, only the caretaker who knew him years ago and subsequent generations of open developers.
Only a few years later, we see even such a disruptive innovation as Bitcoin will be judged on its function rather than its creator simply because it is such a compelling solution in an area rife with systemic inefficiencies.Distributed, Autonomous Consensus - How and Why
Turns out this is not unique to finance, and in fact wherever you find existing, centralized legacy companies you’ll find a structure that is woefully inefficient for the purposes of performing the stated task. This is not to say these companies or their owners are bad, just that they are operating in an older and incredibly inefficient paradigm that we are no longer restricted to.
A legacy structure has the intelligence seated at the top of a hierarchy, automation serves to perform the will of the intelligence at the human level. This is why when legacy companies make cuts for efficiency, they cut at the edges of the network. Low level humans are the least valuable and most easily replaced parts, while to trim from the brains is to cripple your decision-making capacity which no intelligent organism would do. This all changed when Bitcoin introduced the idea of autonomous distributed consensus, automation at the center of the network and intelligence on the edges.
Unlike in a legacy company where decision-making authority is concentrated at the executive level, in a DAC(P) the decision-making authority is the part automated in that it has specific rules which are followed without possibility of deviation from expected form, and has no humans in positions of anything more than fractional organizational power.
Power and authority rather than being collected at the top is spread to the edges of the network by allowing VoiceHolders to influence the decision-making and priorities of the DACP proportionally with their Voice holdings.
If anyone can be blamed for the creation of a DACP or DAC, it is the VoiceHolders who exchange their Digital Funds for DACP specific Voice. Those funds are used by the DACP to hire contractors to create it according to a spec selected and approved by those Voiceholders. This is yet another reason why it’s so important the investment The Game of DACs
Think of a service, function, cause, technology, wish, whatever. You must have a desire to either know an outcome or for a specific outcome. For the purposes of this paper we’ll be talking about “MUSIC, DACP”, “CONFERENCE, DACP” and “ RESEARCH, DACP”
DACPs are created through the articulation of a desired outcome (the pitch), those who agree with the sentiment send funds to the DACP (the fundraising) and after a value-threshold is met, the DACP acts to bring about the desired result. Funds that are raised during this process are not releasable until a majority of those who put the value there in the first place, or those who purchased their voice, agree to both the need for the expenditure, and the final product being submitted for reimbursement.
Because only those invested have a say, the dynamic will bias towards conservative use of the collected funds unless the idea really pushes forward the goal of the DACP, where it will get overwhelming support. Proposals to spend and the submission of solutions is a completely open and transparent process everyone can participate in (you do not need to be a voiceholder to perform a job for a DACP)
A DACP is a DAC, but a DAC is not always a DACP. Distributed Autonomous Consensus Platforms Outcomes, not Means or Methods
Although this may sound futuristic, these autonomous platforms have no “Artificial Intelligence” at the top of the pyramid. Where the capstone used to be the ultimate centralization of power, now it is only the nexus point for consensus from those participating further down the structure. It has the ability to spend funds, but only at the direction and authorization of the majority of Voiceholders.
Because of this, it is advisable to give a DAC the very specific outcome you wish it to achieve but to let the actual humans performing the work for the DAC innovate at the edges of the network.Purpose:
Music - Identify and Rank all Musical Acts against each other.
Conference - Organize and operate Conferences about DACPs.
Research - Identify Research Opportunities and bring solutions to market.
There is another, general rule - All DACPs MUST operate as for-profit entities, even charities. If a DACP ever loses all its money, it will fail and its tokens will be substantially devalued.
What is Voice?
Voice is the power to influence the spending (or saving) priorities of a DAC or DACP. Owning Vx of a DACP is a speculative play that more people will want to use the platform rather than specifying a project to tie its fate to.
Since DACs (like SnoopLion DAC) are created, trade against and operate on top of DACPs (like Music DACP), the relative price movements of DACs are completely independent of the value of the DACP’s currency it trades on top of. Whether the BTC price of ResearchDACP is going up or down, a promising or growing DAC project ,on its platform should be growing when denominated in DACP Vx, the underlying DACP currency. Conversely, an unpopular project that had initially seemed promising might lose value as people cease to believe in it and exchange their DAC Vx directly with the DACP for general platform Vx. This is the creation process in reverse, Vx is refunded at a 5% premium to the last 24hr market rate. The redeemed DAC Vx is destroyed and removed from the monetary base.Everybody Plays by the Rules, Even The Creator
Just like Bitcoin, DACs and DACPs are consensus driven, rules-based systems. To be part of the system is to follow the rules, so there can be no pre-mining, no individuals with privileged status at all. Privilege is the antithesis of efficiency, and these structures seek efficiency above all things.
On the one hand this means a creator can neither rest on their laurels indefinitely and be perpetually rewarded for their one time contribution, they need to be active participants. An active creator obviously competant and acting in the best interest of its creation would surely find regular work with the DACP or DAC they inspired, the Vx Holders having all the authority to make it so and likely being thankful to the creator for catalyzing the vehicle they have all invested value in.
A “Bad” creator, acting against the best interest of the platform on the other hand would be shown the door by invested VxHolders very quickly. Even though they have an advantage, the fact that they’re doing wrong now means they should no longer be able to do wrong. Past behavior does not guarantee future behavior, so neither should it guarantee an ongoing role.
Any DAC or DACP contractor who does not perform their role simply will not continue to have a role, no matter if it’s the newest maintenance worker or the original creator of the DACP SpecificationOverwhelming Success breeds Overwhelming Competition
The ongoing success of a first-to-market DAC is not guaranteed. Because the whole ecosystem is open source, DACs and DACPs can be completely forked, including DACs contained on a DACP and a snapshot of systemic VxHoldings. Any DAC that operates with any degree of profitability above the bare minimum will likely find forked competition before too long who takes their work and turns a 10% fee into a 1% fee. And then a 1% fee into a .01% fee, until whatever the minimum possible operating budget is found.
Because it is impossible to stop this from occurring, it is better for a DAC to START at the bare minimum of operating profitability in order to dissuade forked competition. Lacking easy money, those people will probably go on to create more innovative DACs that can find investment on their own merits. Ultimately which market succeeds doesn’t matter as there will be an enormous incentive to honor all positions on a forked market so the users of the (legacy) DAC will be able to seamlessly transition to the new operators lower priced service. Helplessness is Blamelessness
On the other hand, because there is no possibility of special treatment you not only have the efficiency gains but there cease to be any good targets to blame. Who ordered the creation of ResearchDACP? Well, one guy created a document that described the idea, then thousands of people contributed to the funding address. When the address passes a funding threshold, it put out a work order (Bounty) for the creation of a DACP specific proposal page, and then solicited proposals for how best to continue.
Those proposals are voted on by the people who invested in ResearchDACP and they take actions, accepting proposals that cause the creation of the platform itself. This will almost certainly involve systems design that is not included in the Specification.
Given this, is it fair to say the individual who proposed the DACP is responsible for it? Seems he would be less responsible than those who funded it, but even they were only putting value into an account towards an idea - Not individually or even in a large group could any non-majority cause an action from the DACP, it requires proposal and then consensus.
So who is responsible? Everyone, and if 10,000 people are “responsible” that’s as good as nobody. Our legal system lends itself to the prosecution of ringleaders to discourage other ringleaders, in this paradigm it is very possible and quite desirable for a system to operate at a high level of efficiency while having no majority shareholders.The Process
DACP Spec is proposed with Kickstarter Address collecting Ethereum/BTC
Recieved funds comprise development fund and initial DACP monetary base
Kickstarter Address hits funding Threshold and DACP Proposal Hub bounty is issued and rewarded by DACP Vx consensus
Proposals to develop DACP are created, one or multiple accepted
Completed bounties are reviewed, and bountys are released by Vx consensus. DACs CANNOT integrate submitted Bounty solutions until the winner has been paid.
Once the platform is created and operational, DACP Vx holders can sell their Vx for Ethereum/BTC at current market rate, hold it to speculate on the platform becoming more popular relative to the fixed number of DACP Vx, or exchange their DACP Vx with the DACP itself for DAC Vx as described above.Proposal
Proposing a new DAC or DACP will have four standard and expected partsExecutive Summary
- 1,000 Words or less, describes the purpose, mission and function at a high level
Kickstarter style Funding address“Patent Style” descriptive summary
- Describes all the outcome/process details that are desirable to map in advance Test Code
- Lays out test problems and parameters that the DACP, if properly implemented will return in the expected and clearly defined way. DACs vs. DACPs
Generally speaking, DACPs are markets that specific categories of DACs trade on. DACPS tend to be perpetual, since the market always needs to be served while the specific DACs that live out their lives atop it will change over time.
Because DACs are purpose specific, once the purpose has been served the assets can be liquidated and the funds returned to Voiceholders as the DAC essentially buys itself out of existence.DACs Bootstrap their Money Supply
It’s hard to be smarter than the market, so rather than setting rigid parameters about the monetary fundamentals of DAC token systems, a variable should always be left open. This can be accomplished in several waysVariable money supply
, fixed priceFixed money supply
, variable price
Hybrid - Issuance = sqrt(price). 100x Increase in interest increase both the quantity of units and the price by 10x
In a Variable money supply paradigm, you charge say .001BTC per Vx. This means if you get 10BTC worth of value, 10,000 Vx will be generated. If 10,000BTC worth of value is recieved, 10,000,000 Vx would be created, all worth .001BTC at the start.
In a fixed money supply paradigm, you generate say 1,000,000 and if you receive 10BTC worth of value, at the end of the fundraising period they are allocated at a price of .00001BTC/ea. If on the other hand you raise 10,000BTC, each Vx will be distributed at a price of .01BTC/ea
Once DACs are being built on DACPs, you have access to the combination method proposed in the prior examples.
All new DAC Vx are initially created at .001/ea of its host DACP Vx, but they trade immediately on the host DACP, even if the initial created amount is only 1Vx worth (1000). Those can be offered for sale at any price. If that price is higher than 5% above the last 24hr average traded price (or the minimum .001), it’s a better deal just to exchange your DACP Vx directly with the DACP. The DACP charges a 5% premium, adds your DACP Vx to the DAC’s development fund, and creates new DAC Vx
This means while the DAC is initially funding, its money supply and price BOTH float with the DACP Vx -> DAC Vx conversion process at a 5% premium acting as a buffer against sudden shocks. It is a guaranteed buyer and seller maintaining the money supply and moving with the market to accommodate short term shocks. Initial Value of Vx is backed by the collected Development funds
DACs create bounties to fulfill their purposes, VxHolders vote on which bounties to issue based on submitted proposals that require an affirmative action rather than implementation through inaction.
As VxHolders approve bounties and subsequently approve submitted work and pay out those bounties, the “intrinsic” value held in development funds is depleted, but it should be replaced by infrastructure or ecosystem that are worth more to the network than the funds were before. In the VxHolders are doing their jobs, spending will be targeted and conservative with those with the most to lose having the most power to influence the decision.
Referencing back to the discussion of mining, this is why it is so important to have very wide initial distribution, prevent centralizations and the associated problems both from a legal and regulatory perspective, but also from a consensus collapse scenario. Bitcoins 51% attack is in reality a hostile takeover of the network consensus. This is possible because capital based proofs of work scale really really well, so given enough money an individual or small group can capture the consensus reality. The Spark
There is a hurdle - Moving from “funded proposal” to functional DAC requires the DAC to act of it’s own accord before it has the ability to act of its own accord. To solve this issue, a standardized chunk of “Genesis” code should be available free and open source for inclusion in any DAC requiring catalyst.
This mechanism should be pre-set with a “threshhold” funding amount - Just like Kickstarter, it can receive more than that threshold amount should there be more wanting to support the idea, but this represents the minimum amount required before the project can be embarked upon.
This loop of code would check the Bitcoin/Ethereum funding address laid out in the specification, and when that amount is passed the initial bounty to fund the creation of the DAC or DACP specific “Hub” page is released and promoted. This is the page all subsequent proposals will be posted to, and basically be the DACs official interface on the internet.
Once that initial page is created, the system builds itself through a cycle of proposals -> Proposal approval -> Bounty submissions -> Bounty Submission approval -> Integration of the resulting work product into the DACs system. Introduction of Stake-based Voting Mechanism
The wallet or tool that tracks DACP and DAC ownership must have an easy and transparent way to request feedback that allows VxHolders to vote proportionally to their Vx holdings. For DACPs, Vx allows financial decisionmaking about the further development of the platform. For DACs, Vx allows financial decisionmaking that furthers the goals of the DAC.
Voting should be threshold based and require a greater than 70% consensus to authorize spending.
To ensure Bounties actually get released rather than just offered but not awarded, DACs can only release funds to pay for bounties where the work has been completed and approved. DACs cannot incorporate new code generated from bounties until the bounty has been paid according to the original solicitation.
The fact that there is something major to vote on should be very obvious to any user of the platform, this needs to be as easy as possible and if it is people will opt to participate rather than delegating. There are those who will delegate authority, see appendix B.