Problems Facing Decentralized Ownership Economies

For Yearn-specific discussion, I’m reposting Adam Cochran’s recent thread on Twitter, as I thought it pretty nicely summed up many of the issues that we clearly face today. Many of these issues continue to be discussed in various threads on Discourse. I’m curious to hear the community’s thoughts on the following:

  1. If you had to rank these problems from most important/urgent (1.0) to least important/already solved (24.0), how would you rank them? I set up the ranking poll here.
  2. Of the Problems that have not yet been addressed, do you have any ideas for a solution or are you in favor of a solution that has already been proposed in the past that has not been implemented? If so, feel free to add here and/or post links to other threads where they are presented and discussed.

Problem 1: Lack of ownership definition.
Unclear on the roles, responsibilities, liabilities and legal rights to parts of the system, IP, and assets.

Problem 2: Securities Regulation
Not if something is or is not a security, but the burden of legal fees and opinions in this space that stifle innovation.

Problem 3: Short Term v Long Term Interests
Like the stock market, holders are motivated by short-term gain rather than long-term health of the project putting stakeholders and creators at odds.

Problem 4: Tyranny of the Majority
Avg users are often not involved or experienced enough to make nuanced management decisions, but, often hold the largest amount of voting sway or social noise.

Problem 5: Bystander Effect
Without companies driving innovation, many community projects lag while waiting on other people to take on challenges or assign responsibility despite the same lack of motivators.

Problem 6: Unclear Voting Standards
Systems often fail to define their governance models in terms of quorums, voting terms, majority standards, veto powers, how proposals are brought to stage or what can be voted upon. This creates massive community conflict when it fails.

Problem 7: Red Tape Slow Downs
Projects with an over dependence on community voting get bogged down by red tape in each decision and long delay times for implementation due to needing long enough for communities to vote and ratify.

Problem 8: Charisma Bias
In a DAO or community may only have a certain amount of vote, their influence is disproportional to their stake when they have strong charismatic communication skills that can bias other voters creating internal political cults of personality.

Problem 9: Perceived Authority Bias
Avg users don’t have experience in assessing candidate backgrounds and so communities managing hiring or representation give an extended bias to resumes with flashy names that may not lend actual authority or capability.

Problem 10: Trial by Public Opinion
Projects and their leadership are put on trial by public opinion and not fact. The communities that support them quickly turn into mobs during a price drop demanding actions and changes with no set due process.

Problem 11: Vague Brand Limits
Community projects run into major issues of brand limits. Who is an Eth contributor? Who is part of the Sushi team? Who represents these entities?
If anyone can, then anyone can also damage their brand.

Problem 12: Personal Professional Divide
Where does the project end and the individual begin?
What impact on $YFI should Andre’s personal statements or actions have? How do we separate these?

Problem 13: Appeal to False Idols
Due to our need to have personified leadership we place an over dependence on individuals (like Andre) on teams, or talking heads (BTC Maxi’s) which gives skewed authority and ties consumer confidence to people not communities.

Problem 14: Legal Liability Assignment
It’s unclear who is legally liable for which aspects of a smart contract or project. Who is on the receiving end of regulatory action and who foots the bill? Is front-end less liable than back-end? Is the treasury a defense fund?

Problem 15: Ability to Enter into Partnerships
Large BD deals can often require legal entities, agreement terms and indemnification - having an entity that can do this makes a regulatory target, but not having one may slow down partnership reach.

Problem 16: Tax Obligations of Decentralized Systems
Who owes tax when a smart contract makes a profit? Should tax be calc’d if it distributes a dividend?
If a company or entity owns it then yes, but where is this arms-length line, if anywhere?

Problem 17: Definition of Roles
What is the core team vs a contributor? What are the expectations of a multisig holder? Are they subjective judges or mere escrow agents?
Lack of expectations creates in-fighting and can leave those in the roles legally exposed.

Problem 18: Behavioral Reinforcement
Most ownership economies lack a system that motivates and reinforces positive behavior contributions - primarily because many of these actions are qualitative rather than quantitative and thus harder to account for in code.

Problem 19: Diametrically Opposed Stakeholders
When an asset becomes tradeable for currency, we now have stakeholders who are simply involved in the process for sake of short-term process. They may not vote, or will vote in favor of bias action.

Problem 20: DAO Actions Superseded by Law
We may think that all DAO’s follow code is law, but in most cases a corporate entity still must have legal documents which can ultimately supersede and bind the actions of any individual stakeholder in the system.

Problem 21: Cross-Jurisdictional Exposure
A system is only as strong as its weakest link, governments can take aggressive unfounded legal action against stakeholders to coerce cooperation within a system which effects all holders even outside that jurisdiction.

Problem 22: The Blind Map Problem
Contributors and large funders nearly always end up with insights into road maps and announcements (both good and bad) the decentralized nature of this results in it being tougher to make insider trading controls.

Problem 23: Monetary Distribution
Right now most systems reward, uncapped, early adoption and financial contribution (through either sale, yield or fee use)
This creates a reinforcement system where the same stakeholders monopolize most protocols.

Problem 24: Trial by Community
Because of community ownership most projects will aim to solve employee/stakeholder by public vote. Facts presented will always sully reputational standing and likely lean guilty until innocent just like trial by media.

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Wow, incredible write up. 24 problems are a lot to tackle and I think we just have to get through them one at a time. I think management is a full time job itself and there should be leaders in management that deal with these issues.

I would like to tackle the problem 1. I understand most of the current work by devs are the innovative type that does not work well within a set structure. But for tasks that are able to be “ticketed” or articulated via writing in detail, I suggest we use a proposal system.

Dash uses a proposal system to allocate funds from their treasury on a monthly basis. Proposals are submitted and approved on a monthly vote by the community. Once approved, the proposals needs to be completed via milestones outlined in the proposals in order to receive the monetary compensation. A subsequent vote on completion will judge whether the proposal is completed or not.

We can have a rule that only proposals over a certain dollar amount will warrant a vote instead of being handled by the multi-sig. This way only the large budget items will be debated within the governance community.