Iām a new commenter here, and not a delegate, but Iāve been an active follower of this topic due to my interests in ENS and in protocol + business history.
I want to contribute to the way weāre talking about misaligned incentives (e.g. @alextnetto.eth mentioned the Cobra effect, and various other participants have talked about the difficulty of incentivising āmeaningfulā participation.) I think we can have a more productive discussion if we have a better framework for thinking about this.
The framework that I like to use comes from software programmer Kent Beck.
Beck observes that Cobra Effect/Goodhartās Law type situations typically occur when there is a loose relationship between Effort and Outcomes. (I am simplifying here. The full piece has more: Parts One and Two.)
Let me summarise quickly. Some activities have a very tight relationship between Effort and Outcomes. For instance, a recruiting pipeline is easy to incentivise. This is because Effort (a recruiter filling a candidate pipeline) is quite tightly connected to Outcomes (a hire at the end of an interviewing process). You can incentivise Effort (pipeline fill rate) quite safely.
The danger is when there is a loose relationship between Effort and Outcomes. Software developer productivity is notoriously loose: a developerās Effort (lines of code deployed) is not directly related to Outcomes (change in user behaviour that leads to higher engagement in the software and eventually more revenue). This is why rewarding a software developer on lines of code deployed is usually a bad idea.
When we say that we want to incentivise āmeaningfulā engagement, I think itās important to clarify what we mean by āmeaningfulā: is it in terms of Effort, or in terms of Outcomes?
Most of the discussion so far seems to assume that incentivising on Effort is difficult but possible (e.g. one, two). However, in ENSās case, I suspect engagement should be incentivised based on Outcomes (the long term success and growth of the ENS protocol) instead of Effort (governance activity).
This is because there is a loose relationship between governance decisions and the long term success of the protocol.
For precision:
- What is the DAOās vision for long term success, that it can incentivise towards? Is it the number of name registrations? Is it fee growth?
- If we can agree on a long term Outcome that is worth incentivising towards, then perhaps we can have a more productive discussion about how to connect that to a specific form of governance incentive.
I know this sounds theoretical, but I can give you an example. Tradfi is rich with examples of Outcome incentivisation because theyāve been grappling with the problem of meaningful governance for longer.
The Visa payment network was basically the worldās first DAO. In its original form, Visa was not a company ā it was a network governed by a for-profit, non-stock, membership organisation. Any bank could apply to be a member, and each member was given a non-transferable right of ownership (basically, a āsoul-bound tokenā). These Rights (or tokens, heh) gave each member bank three things: 1) the right to vote on a governance proposal, 2) the right to propose a vote, and 3) a share of transaction fees generated by the network, where each memberās share was determined by the % of transactions each member bank sent into the network.
Member banks were often competitors outside of the network. Inside Visa, much like ENS, representatives would be elected to policy boards to govern the growth and disputes within the network. But they were not rewarded based on their governance activity. Instead they were incentivised based on outcomes. And the outcome here was a profit motive: the long-term growth of the network for the benefit of all members. This reduced some of their competitive tendencies. (Source)
Iād like to apologise for a long post. I hope this is useful, and am happy to answer any questions about these concepts. I also look forward to reading more on the current debate on LSTs ā this is an interesting development I did not foresee.