Talk:Reputation tokenomics

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Craig Calcaterra (talk) 01:03, 2 March 2023 (CST)

Treasury

Question: Without a treasury, how would a DAO be setup for acute problems? I'm not saying we need a big treasury, I just don't see how the DAO being totally illiquid is practical, vs. ideal. Especially, if the DAO gets more powerful/influential, I don't know how it would handle all of the different attacks without a treasury. Just as there is social redundancy in a decentralized organization, maybe it also needs financial redundancy/inefficiencies as well for survival?

Reference: Reputation Tokenomics, Oct 4 Version - Craig Calcaterra

Context: Reputation tokenomics tries to eliminate treasuries all together and have all incentives pushed to long-term/delayed payment/gratification. DGF focuses on values of stability and the long-term thinking, but DGF will need inevitably face unexpected situations so not investing in the build up of a treasury seems tenuous.
--Jonathan

Treasury is necessary in some contexts, suboptimal in others

Yes, I agree with that. Before a DAO achieves a measurable, stable history of a fee rate, then a treasury gives the DAO objective substance. For example a DAO with a treasury is more valuable than a clone of the same DAO with no treasury. So yes, a treasury can be necessary for some purposes. Including the need to smooth out disruptions due to black swan events in the economy. Including the need to signal to others in an obvious way that people have invested in the DAO, proving it is valuable--which may be necessary to attract members, e.g.

However, any liquid money that sits in a treasury is subject to holding costs. Money in a treasury that is not used is wasted on inflation. So a more sophisticated financial approach to funding DAO development is to issue BONDs--these tools can more efficiently raise capital. The reason the Federal Reserve is so powerful is not because they have the reserve--it's because they can print money through bonds. An even more sophisticated approach to development is available to us with DAO tools: to encourage a culture of trusting the reference mechanism in the Forum. Both of those solutions are impractical in a brand new DAO. Those mechanisms I talk about are only for the future, when there are DAOs with history and have predictable fee inertia, which becomes more predictable the deeper and more diverse the market is, which is exactly what a DAO is built to produce.

This is not all important, however. As long as the DAO is using the treasury continuously it can be a fine means of achieving its goals. If the DAO matches the rate of collection/dev fees/taxing with spending, then the size of the treasury can expand and contract in response to the market to minimize holding fees. However, that requires sophisticated governance relying on the ability to predict the future of the market.

More importantly, a treasury is an existential threat to a DAO. Cash is a zero-sum reward in game theory. So a treasury is a source of competition for DAO members. That leads to differentiation of members as some get more power over the treasury, which leads to centralization. There would need to be a complicated system of governance which would promote those who anticipated the market. (Side note: It's a fundamental assumption of economics that it's impossible to do that, so this mechanism would be promoting people arbitrarily, which subverts the point of reputation.

For those two primary reasons, holding a treasury for the long term and not having a goal of minimizing it as soon as possible are bad ideas. So I'm suspicious of people who work in this space who are focused on building treasuries.

Don't get me wrong. I'm all about getting the money. But I want lots more than a treasury can provide, continuing to accrue over a long period of time, patiently collecting it in the future by earning reputation. Craig Calcaterra (talk) 01:03, 2 March 2023 (CST)

I will add a section on treasuries analyzing what is good about one, how to optimize it in response to the measured variance of the market, how to pad it in anticipation of black swans (which is impossible, because we can't know how catastrophic a catastrophe will be) depending on the level of insurance we demand, and measure how costly it all is.