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Governance Ideology Part 1: Introduction

Governance Ideology Part 1: Introduction
Learn more about how you can use governance to advance your NFT community

Table of Contents

Governance Ideology Part 1: Introduction

This new digital and decentralized ecosystem presents an opportunity to rewrite the playbook on how effective and successful businesses use democratic governance structures to advance their brand. By giving community members, large capital investors, and team members joint leadership and decision making power all parties become aligned towards one mutual goal: community success.

Online communities, especially those united and brought together through shared interests and digital assets (NFTs, cryptocurrencies, etc.), present a unique opportunity to create more true and effective democratic governance structures than traditional businesses.

As both investors (who supply the community with funds for use, to the stash), and members (who constantly work to connect with others and bring utility to their community) — each community participant takes on a dual role.

On the one hand, they’re all financially motivated to bring value to the project, as their ‘shareholder value’ increases as more people want to join. On the other, they’re all intrinsically motivated to draw good people into the community that make it a more welcoming and active environment.

These different roles have lots of overlap, as shareholder value generally increases as the demand to join these communities increases, and as demand increases you may attract new members that pride themselves on active building and participation. The overlap here is very important, and explains why these individuals should have an active role/voice in community governance and direction.

Fundamentally, democratic representation and governance is a natural right to all. Communities and their members need structures that respect the quest for democracy that fuels equitable group dynamics. This was the main reason for the American Revolution — “no taxation without representation.” Couldn’t have said it better myself.

If I’m involved with any sort of group, I’d like to have my voice heard and represented at the decision maker’s table. Whether I’m an athlete, musician, or worker, it’s crucial to my experience that my concerns/ideas are heard and taken seriously when deciding how to move forward.

Without voice, I become a cog in the wheel — blindly following directions from my superiors. This is not advantageous for anyone other than the power hungry superior that thrives on unquestionable authority.

To solve this, communities should consider a board of representatives, or council, made up of community members, leaders, and significant capital investors. Fortunately, many members of the community will wear all three of these hats. These are the perfect people to occupy representative positions, and will often be the perfect combination of member and investor to reason with both sides.

Governance Boards vs. DAOs

This framework stands in contrast to DAOs, or decentralized autonomous organizations, that have emerged as the leading governance framework. The problem with DAOs is that participation is low, and there are too many cooks in the kitchen. If everyone has power, then no one does.

Widespread decentralization and true democracy are on paper a tremendous idea — however in practice there is breakdown. Low participation is the primary inhibiting factor as the DAO ends up being the voice of the few, where true community sentiment can be drowned out.

Fragmented communication channels make it hard to share ideas amongst members, and disincentivize contributions — again, not having a voice makes it difficult to want to participate. This allows a handful of people who spend significant time online to dominate conversation/idea direction: bad for business.

The Next Generation of Representation: Governance Boards

A council that represents the community consciousness provides a structured framework of representation that allows for flexibility and widespread participation in a controlled and effective way. Not all consciousnesses will be the same; some will be mostly community members, some will have more large capital investors. The common theme is that the council is made up of people representing different groups that shape the community’s direction.

This new type of governance structure, and the reasoning behind it, comes from extensive work and literature on effective business organization. Most corporations are set up so only shareholders are given decision making power — muting the voices of the workers that bring to life the board’s initiatives. Often these parties are misaligned in terms of intention and execution.

A board of representatives made up of both members and investors satisfies both parties by aligning each of their core desires: democratic representation and economic profitability, respectfully.

As members invest their time, energy, and creativity into the success of the community, they should be given the representation, equality, and freedom to express their interests and ideas. This is solved by a democratic council aimed at carrying out community driven initiatives.

This piece draws on literature from Isabelle Ferreras and her work on Economic Bicameralism. She spent many years studying the dynamics of traditional US corporations, and postulates that businesses with fair representation will run much more effectively and satisfy the desires of both involved parties (investors and workers) looking for economic profitability and democratic representation.

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