Editing Block producer DAO (section)

=== Reference mechanism ===
The next sequence diagram illustrates the reference mechanism, which provides a means of bootstrapping governance by making proposals which cite older proposals. This gives an incentive mechanism for a community to organically improve the block producer protocols. 
[[File:RefMechanismSeqDiag2.png|center|thumb|848x848px]]  

For example, to improve the consensus mechanism WSC, the idea is to evolve the conversation in 4 phases.  

In Phase 1, people chat about improvements they would like to see.  

In Phase 2, a collection of improvement proposals are offered. Improvement proposals cite older proposals that they build on (detailed in the second sequence diagram, above). Improvement proposals are continually made, in perpetuity. 

In Phase 3, the latest favored proposal will become the active WSC, ''de facto'' because it is used by the group. The active WSC primarily rewards the worker whose ASC is selected with the newly minted REP. Secondarily the WSC sends part of this REP reward to the author of the WSC. The sub-DAG of proposals connected by references to the currently favored proposal will all be rewarded with REP and subsequently $. Proposals not connected with references are not rewarded.   

In Phase 4, a new type of REP is invented, called gREP,  to promote active, explicit, on-chain governance of the Block producer DAO. The active WSC will be changed to include a line sharing a percentage of the monetary rewards for block production as gREP salary. Owners of gREP use it for legislative governance, i.e., to make proposals (the work of the governance wing of the DAO) and to vote on which proposals are canonized by binding validation pools using gREP. The amount set aside for governance is a continual negotiation between block producers (wREP holders), and governors (gREP holders), who will typically overlap to some degree. That amount is the dev budget.  

In summary, the means by which a community creates a DAO using DGF is to engender two systems: DGF flow (for executive governance) and the reference mechanism (for legislative governance).