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Stanford University Industry Journals: A Secret about Philosophies of Governance

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2023-03-03 11:00

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NFT is a new digital primitive that can easily guide ideologically aligned social networks. A Secret DAO is one such network.

A Secret DAO and the Philosophy of Governance

Original article by 0xBobateas

The metaverse SWAT Team

A secret about NFT DAO, established for more than a year, has gained increasing attention and discussion in Chinese currency circles since the beginning of this year. Today, the M7e Cosmic Task Force translates the article published on February 27 in Stanford Blockchain Review for readers.

1 Introduction

A philosophical approach to contemporary issues of cryptocurrency governance is worth explaining. Unlike many of our predecessors, today's philosophers no longer proclaim to the world what should ideally happen. We have become humble. We are no longer looking for universal laws of human activity, and we are well aware that the understanding of the past, and perhaps the past itself, changes reflexively with the philosopher's view. But the problem remains: no innovation in consensus mechanisms or parallel execution engines can shake hearts. To truly understand the impact of Web3, we must first understand humans. And to understand humanity, we must first understand our past.

To be sure, no previous experience, no matter how rich, and no historical research, no matter how thorough, can spare the current generation cruising the metaverse the creative task of finding answers for themselves. However, the history of knowledge is more instructive than many encryption purists believe. Through a case study of the principles and mechanisms of a noun DAO's autonomy, I will attempt to take a philosophical perspective on the impact of a Noun DAO on civil society, communities, and governance in the Web3 era.

My conclusion is that the future task of the NFT project is to engage in a painstaking process of world-building, putting meaning and symbolism behind these JPeGs, enabling them to foster a self-sustaining sense of solidarity, identity and democratic responsibility. Governance, after all, is the art of two things: those who govern and those who are governed. In an effective governance structure, the governed must be given sufficient incentives to remain in the community. Ultimately, a Secret aims to cultivate dual missions that promote democratic DAO governance principles and meaningful decentralization by harnessing the power of iconography for communication and solidarity.

Background: The value of NFT

Before diving into Nouns DAO, we need to understand the value proposition of NFT. Non-homogeneous tokens recorded on the blockchain are used for many purposes, such as securing digital property rights. However, with the homogenization token, Unlike Fungible tokens (FT), which derive value from the underlying product but do not participate in value creation, NFTS are usually the product itself -- think Fidenzas, Ringers, or CryptoPunks. Although NFT is usually a pointer to JPEGs hosted on IPFS, many NFT projects, including a secret and Cyberbrokers, actually generate and store their art directly on chains.

For a long time, many people thought of the NFT 1.0 era as nothing more than digital collectibles for easy tracking and moving along a chain. It was the era of the NBA Topshot and Satoshi Nakamoto's collectible card. The era of NFT 2.0, the age of the apes, touted by many as the next billion users' way into the crypto world, means introducing only vague notions of "utility" or using your NFT as a ticket to some event or an interest in a coupon for tacky goods.

The takeaway is that if you view your NFT only as a series of discounted future cash flows, or just as baseball cards for digital transactions, you'll never understand why they're so expensive (or have a low Sharpe ratio, God forbid). To me, NFT is a new digital primitive that can easily guide ideologically consistent social networks. A Secret DAO is one such network.

3 NounsDAO Overview

Nouns 500 [1]

A secret is a testament to the maxim that "simplicity is beauty." As is the case with experimental efforts, however, it has grown beyond that. First, it is an NFT project and a DAO (decentralized autonomous organization).

Simply put, a noun is generative works of art in the form of non-homogeneous ERC-721 tokens. They are created by shuffling and recombining predefined features, which include heads such as sofas and sharks. Each Noun (except for every tenth head reserved for the founding team) is auctioned off to the highest bidder. After the winner receives the Noun, his ETH will be deposited into a secret's fund. The auction goes on every day, and the community can influence the character of tomorrow's next Noun.

This brings us to another key part of Nouns: DAOs, which (like many other DAOs) use Compound governed fork software. Personally, I joined the community by winning the public auction for Noun 55. Although I may be late, a Noun is generated and auctioned every 24 hours through August 8, 2021, and currently our Noun is 591. This process is intended to continue until the end of the universe.

The DAO is first and foremost a democracy - a decentralized way of deciding how to allocate community resources. At a Secret DAO, as in many NFT communities, the primary "common resource" is a fund bank. Each Nouner, no matter how many NFT they have, has only a minimal say in how the DAO spends its money. Their voting power is proportional to the number of NFT they have (some Nouns entrust to well-known members, raising their voting power proportionally). As of now, there are 341 Nouners (holders, some of whom have more than one Noun) and 28,176 ETH in the coffers - that's a whopping $44.5 million.

Just as there are different types of democracy in the world (presidential, parliamentary, etc.), there are also many variations of on-chain governance. For example, the Curve protocol experimented with "voting rights escrow," locking up a CRV token in exchange for more voting rights. All of this comes at a cost, of course. As escrow systems bring more concentrated power, this leads to more effective governance, but at the same time, these centralized power systems can breed power monopolies that actually erode democracy (the more VecrVs you have, the more you can turbocharge the pool of liquidity that CRV rewards flow to you, giving you more CRVS and more governance power). We must keep this in mind when we return to the discussion of governance of Nouns.

4 Nouns DAO Governance: Reimagining "Civil Society"

The governance mechanism of a Nouns DAO demonstrates an elegant and powerful democratic system that recognizes the diversity of stakeholders and safeguards "the long-term growth and prosperity of Nouns" [2]. Any Nouner with more than 2 Nouns may submit a proposal, and each proposal is passed by a simple majority, subject to a quorum. In addition, to ensure that adopted proposals do not violate community rules and interests, Nounders reserve final veto rights.

This simple design proved surprisingly powerful in practice. A Secret of 218 proposals has been created at a Secret DAO that covers everything from the ETH of pledged funds to the allocation of available financial resources. Of these, 153 have passed and only one has been rejected, Proposition 60, aptly titled "Testing the Foundation's Ability to reject Proposals during time lock-in."

A secret about DAO voting [3]

These results hit at what I believe are the long-term ideological meanings of Nouns. On the surface, a Secret DAO seems to be nothing more than a successful community-funded hedge fund centered around cute pixel art. But in fact, the success of a Secret DAO has redefined the concept of "civil society," dragging outdated democratic institutions toward a decentralized digital plane.

With that in mind, let's talk about the philosophy of democratic governance and the role of "civil society." Niccolo Machiavell, a pragmatic political philosopher in Renaissance Italy, argued that all societies degenerate. In his Treatise on Livy, he wrote, "Monarchies easily degenerate into tyranny, into aristocracy, into oligarchy, while democracies often degenerate into anarchy.

Thus, if the founder of a country established any of these three forms of government, he did so for a short time, because no precautions he might have taken could have prevented it from sliding in the opposite direction "[4]. He believed that all forms of government were harmful and that rulers could only avoid degradation by systematically returning the republic to its original state before it occurred. Machiavelli wrote, "For the beginning of all sects, republics, and kingdoms must have some good will by which they may recover their first reputation and their first growth." [5]

Machiavelli believed that this revival could be achieved from within or without. From the outside, Rome was reborn after an external attack by the French; Internally, it has been chosen by the likes of Haratius Coclus and Regulus Attilius. Marcus Attillius Regulus, commander of the First Punic War, was reinvigorated by men of great virtue.

However, it is clear that neither of these methods of regeneration is reliable, and I believe Machiavelli was forced to endorse the brutal execution of Brutus's son and similar horrific acts to fight corruption. If Rome "held similar purges every ten years," he wrote, it "would never have become corrupt"; Only when death became more rare did people self-corrupt and start "breaking the law" [6]. In short, Machiavelli was forced to defend terrible punishments such as capital punishment because he believed they were necessary for the greater good. He carefully studied the fall and demise of the Roman Empire, but he missed the piece of the puzzle that could have saved his theory, even if many democracies were not corrupted by a crucial regenerative force: civil society, free and voluntary associations among people.

In his book On Democracy in the United States, the 19th century French sociologist Alexis de Tocqueville defined civil society as an organization network of autonomous gathering to express individual interests and solve community problems, namely "the field of intermediary organization standing between individuals and the state" [7]. On the eve of his departure for the New World, Tocqueville, who was only 25, marveled at the provincial decentralization of the colonies, at how each township ran its own affairs and organized its own committees on each issue. Fast forward to today, and scholars like Dana Villa have also equated civil society with newly born community life -- "without official state patronage... In short, it represents a decentralized, pluralistic public sphere capable not only of advancing society's demands on the bureaucratic/authoritarian state, but also of opposing large economic interests (such as multinational corporations) "[8]. Civil society must be embraced at the public-political level.

Of course, the characteristics of a good civil society must include voluntary participation, a sense of community, and shared purpose, but the greatest innovation of a noun lies in its ability to allow for democratic and meaningful decentralized symbiotic prosperity. The NFT must go beyond quirky collectibles to become the backbone of a coherent social network. You collect a Noun not only because you like Noggles (Noun goggles), but also because you subscribe to the ideological principles of a noun DAO. Like the self-organizing New England town halls that were so touched by Tocqueville when he traveled the United States in the 1830s, a Secret DAO must bring local town meetings into the 21st century blockchain [9]. In the age of the metauniverse, where we develop our identities through countless interconnections, we connect with each other in a way that is outside the family but non-political - and so the NFT has evolved into a digital badge for like-minded ideological community citizens, creating a networked civil society that begins at the grassroots level.

In practice, the ownership and voter structure of the Nouns governance model also demonstrate this decentralized and democratic process: voting rights are very evenly distributed, with nearly half of all voting rights held by individuals with only one Noun. Due to the dilution effect of daily auctions, big whales hold less than 20 per cent of the voting rights. Over time, the number of single owners is expected to increase, reducing the collusive risk common in other highly centralized DAOs. In addition, transparency on the chain ensures that there is no hidden ownership or impending unlock, making it harder for voters to conceal their positions and intentions - the only NFT used for voting also establishes a track record for the holder, achieving zero-knowledge trust.

5. The Growth of Cultural Capital: Iconography - Fluidity Flywheel

However, despite its unique governance structures, the livelihood of a secret depends on how well it disseminates its cultural values. Basically, a secret is just a fancy JPEG. To make this JPEG fluid, iconography must be emphasized first. In fact, iconography and fluidity are two sides of the same coin. Cultural capital (iconography) has become frictionless with tokens (liquidity) through the permitless DeFi protocol.

So, just as Rolex makes a million watches a year and maintains their value, fashion houses such as Balenciaga and emerging Tiktok influencers rely on the virality of their ICONS simply because of their instantly recognisable appeal and consensus as good investments. This is what I mean by the image-fluidity flywheel. Very broadly speaking, NFT becomes a repository of cultural capital by capturing the value of cultural memes (the power of memes, symbols and social status).

Extended reading:How did # RarePepe NFT recapture the cultural meme Pepe the Frog?

Thus, as fluidity increases, so does the graphological potency of Nouns. By beefing up graphics, more capital will flow into the project, giving it more firepower to go viral. As suggested by French sociologists Bourdieu and Baudrillard, the value of this cultural symbol is based on its position in the symbolic hierarchy.

The most expensive NFT tests this theory; How else could an Azuki spirit sell for over a million? However, since a secret is not a fixed supply, the only way to keep the price of a secret is to spread its icon, and the demand generated will kick off a virtuous cycle of "branding," where the more expensive these things become, the more popular they become. Once this starts to happen, just remember: demand is reflexive, but supply is linear.

Therefore, DAOs must use ETH in an effective way to attract attention, making a secret desirable. The Lil Nouns proposal (a fork of a Nouns DAO with 8 proper Nouns and its own mini-fund pool for starting its own liquidity-Iconography) is a step in the right direction, giving speculators a low entry point and thus removing liquidity barriers. Similarly, I am paying close attention to Proposition 218, which proposes "15 months to bring a Secret to more than 2 million people and integrate a Secret into the Alpine subculture at the best ski resorts in Japan" [10]. In return for the sponsor's request of $198,000, DAO will receive distribution rights to the goggles throughout the resort, features on their social media, posters on 247 cable cars, and much more.

While I view this proposal (which will be rolled out gradually until the second quarter of 2024) with boyish enthusiasm, I also recognise that many others have failed to gain traction. I'm not too worried, because my mindset about these proposals is very similar to venture capital - most will fail, but the few that succeed will have a big, incremental impact. Combined with re-invigorated market cycles, Nouns may prove to be the ultimate project to leverage the Holy trinity of NFT technology, DeFi, and DAO governance to reach its full potential.

However, as I will discuss in a later chapter, a secret must go beyond aesthetics. Art must be more than bizarre. To fully overcome the static friction of the flywheel, we must ensure that this art uncovers a value system - a set of memes, ideas and customs used to organize a community and its practices. It needs to build a way to engage with the world.

6 Execution: Proposition 129

Nounify New York Fashion Week [11]

While the "growth" of a noun DAO is its native form as an NFT, the "death" of a noun DAO is not. Like most other democracies, the governance model of a Secret DAO is most threatened by failure of implementation, and subsequent loss of trust. This is an ideological and resource allocation problem about broken promises, and infrastructure improvements will not solve it.

It's kind of personal to me, too. I was the proposer of "Nounify New York Fashion Week," or Proposition 129, which is now remembered for its broken promise. After talking to my friends at 1Confirmation, a venture capital firm with deep Stanford ties, I was introduced to the Advsiry team, They pledge Advice X Nouns attendance badges and Nouns gifts to guests at the prestigious New York Fashion Week, a major fashion show event attended by many celebrities, label the venue with Nouns, host a Nounish afterparty, Presenting a Secret object designed by Keith Herron on the runway, filming a documentary about a Secret, all for a price of 33ETH[12].

After using my connections to rally support, we passed the bill by a vote of 59 to 1. Fashion week came and went. Since I couldn't get to Oculus NYC, the arts landmark at the World Trade Center, where the runway show was being held, I had to rely on other Nouns in attendance. To my disappointment, according to a Nouner companion, there is in fact "very little nouner during the event." I quickly watched the video myself and contacted Advisry immediately. They apologized and accused them of poor planning and a lack of "adequate time to complete the proper paperwork," among other reasons. As for Nouns, they "rushed out a Secret from Italy and delivered it in time... but for some reason on the day of the show, it did not appear on the runway" due to "a mistake by the styling team." But there was no refund.

I claim responsibility for the failure of this proposal and the loss of 33ETH, but clearly this demonstrates a larger problem with the DAO: mobile governance on the chain fails to solve any of the democratic problems that the anti-majoritarian framers of the Constitution had to face. Trust between members of the community decayed, and people brainstorm ways we can get our money back, including legal action. Nevertheless, the emphasis here should be on the execution risks that DAOs face in the real world, as well as the underlying distrust of the novel art and community of on-chain governance, as well as its graphics and fluidity.

The Problem of Democracy: A Philosophical Perspective

Since ancient Greece, democracies have faced chronic problems of implementation and solidarity. In Plato's Republic, Socrates argues that the purpose of democracy is not to induce non-philosophers to try to be as good as possible. Democracy is not so much about cultivating virtue as it is about cultivating freedom, no matter how noble or humble a life may be. But it is precisely this freedom that is the greatest failure of democracy: you have to believe that you are not the only one paying taxes. More often, these democratic communities without a strong sense of common identity fall victim to the prisoner's dilemma.

For crypto skeptics, it's easy to point out that all the proposals are just trying to get some quick money out of the coffers. They can even find examples, like Proposition 129, where the money was wasted by bad actors with no consequences. An analogy could be drawn from the Greeks, who enjoyed their freedom but did not understand what made them free, and therefore disregarded their democracy and did not care about its death.

But skeptics and impediers alike are misguided: As decentralized, democratized entities, DAOs are fundamentally part of an open society in an increasingly diverse public sphere. Of course, there must be a great governance structure, but the governed must also have the same incentive to want to be governed. Here's the rub: open societies have a strong need for solidarity, we have to have it, and you do find it in viable democracies. Solidarity, in turn, requires a recognition of the importance of a common identity. It all comes back to the value of free association and civil society.

In a way, Nouns highlight a very immediate problem: technology has brought previously abstract and philosophical questions to the forefront of our concerns. When Jean-Franois Lyotard first ranted about the loss of postmodern meta-narrative, no one understood what he was talking about. Now we are forced to confront this epistemological crisis as a decentralized network economy and virtual simulations of a world out of time and space become reality. There is a breakdown of "proximity" and a flattening of the image space, where we become increasingly detached from the comfortable world we grew up in and are pushed into a mystical world of symbols where an hour of labor no longer translates into $15 worth of value.

Therefore, the biggest risk to the future of Nouns is a sense of nihilistic exhaustion. Trust in democratic institutions has declined and we no longer care about voting, as shown by the low turnout in most DAOs. We have lost the ability to judge when rules should be followed and when rules should be discarded. We've even lost the ability to agree on what the rules are. We no longer live in a world that recognizes this ability as the ultimate value. In a reality held together only by the balance of evil, I hope the restoration of our ability to judge does not require a return to the public executions of ancient Rome that Machiavelli would have been proud of.

Finally, politics takes place in small communities, just as it did in Greece. There are no universal rules, except to develop the ability to make rules. Like many others, Nouns are still suffering from a hangover brought on by the black swans of the centralized cryptocurrency industry, such as the FTX crash event. As a result, DAO proposals tend to be blind to the forest. We should not spend our time drawing up plans to withdraw ETH from failed proposals, distributing dividends from the coffers, or even giving to charities and other public goods in a desultory manner. A Secret DAO needs to re-establish its sense of unity and identity. We must reject the creeping nihilism that makes our collective actions both lack-spirited and dysfunctional. Finally, a Nouner must realize and realize himself in his identity as a member of this community - in his own Noun.

The future of 8 Nouns DAO

So, how do we reclaim our destiny? How can we promote civil society?

Perhaps the answer lies in first returning to using values of Nouns as a form of cultural capital, via the image-fluidity flywheel. After all, iconography is influence, and with influence comes ideological responsibility. Behind these fancy JPEGs should be a respectful community that actively forms opinions, revises passions and feelings, decides on goals to pursue, the types of people to be admired, the language to be used, and ultimately, the character of the participants it contains.

While this may seem like a tall order at first glance, it is not an impossible task for an NFT community with an economic value based on cultural capital. The key task here is to get the right narrative right, to build the right backstory.

In fact, this is only possible with the advent of NFT, DAO governance, and DeFi. In a world of complete anonymity and encryption, NFT DAOs are able to provide individuals with a concrete sense of social identity. Given the individual's ability to judge which one he prefers, it provides him with subjective personal freedom and a variety of atmospheres to choose from.

However, the NFT DAO must provide a recognized way of life, a tribe that is systematically integrated into the unity of differentiation of the metaverse, rather than all wacky experiments ending in hypernihilism. This identity must be known to provide a potential sense of accomplishment. As a Nouner, the nameless must be helped to attain a recognized status (prompted by its icon), lest they be isolated from others, alienated from civil society, and measure their self-worth only through the selfish pursuit of investment gains and losses.

Stories have inherent moral power; This is why Tolstoy believed that the value of literature lies in its capacity for moral improvement and reform. Thus, perhaps the biggest task ahead for an NFT community like a Secret DAO is to participate in a painstaking world-building process that puts meaning and symbolism behind these JPEgs so that it can cultivate a sense of unity, identity, and democratic responsibility. Philosophical truth does not need universal validity, only universal communicability.

As a well-known and successful program, a Secret DAO's experiment with democracy must ultimately serve as an inspiring model: a model source of inspiration for the countless small, local DAOs that follow its image, all with their own collective sense of identity. Like a hundred flowers blooming, these tiny anonymous communities will emerge with their own specific and defined principles. In their awareness of this reality and concern for their own self-interest, they simultaneously become unconscious tools of this inner activity, in which the shape of their own undertaking disappears while the new cyber civil society struggles to transition to its next higher stage. Only in this way can democracy and decentralization survive in the age of encryption.

So let's build a world around our JPEG.

About the author

0xBobatea is a junior at Harvard University, studying philosophy and economics. Like Karl Marx before him, Boba is committed to changing the world with his armchair philosophy as a Dragonfly Capital research analyst. He bought Dogecoin before Cryptokitties and began trading NFT in 2020, when he served as a community ambassador for Axie Infinity. At Harvard, Boba helped create the Harvard Blockchain Club's research initiative. He is a KOL for many NFT communities, including Azuki, Doodles, and Nouns.