At Golem Foundation we believe that decentralization should go beyond the tech stack that an organization uses. Voting on a blockchain does not make an organization decentralized (vide part 1 for explanation). When evaluating projects’ governance models and placing them on the centralization-decentralization axis we should not be concerned with what peer-to-peer technologies they are utilizing but how they are distributing power among participants, how they are aligning incentives between different stakeholders, and ultimately who is in control of the project itself. Architectural decentralization should support political decentralization and not simply be a substitute for it.
If web3 is to deliver a real alternative to the current model of the internet where power accrues to investors and users are treated as bits in a revenue stream, then the governance modes of decentralized platforms should prioritize the users’ interest and provide them with effective “voice and exit” opportunities. The User-Defined Organization, or UDO for short, is Golem Foundation’s attempt at giving users actionable control over the protocols, software, and platforms they rely on.
The central assumption behind UDO is that there should be a strict tie between the platform’s governance and its usage. Only those who actually use the platform should have decision-making authority over it, and their influence should reflect the level of their commitment to the project. This means that if a platform is to utilize governance tokens, these tokens: A) should first and foremost attest that someone has completed a certain action within the platform, and B) should not be tradable.
By tying governance with usage and making the governance token non-speculative we are ensuring that the UDO will be controlled by people with a skin-in-the-game interest in its future, and reducing the surface of economic attacks which can be successfully launched against it.
With UDO we are also trying to solve the problem of sustainable financing for user-facing projects. All projects need a long-term development model that secures a steady stream of funding for their future development and continuous adoption. Most currently operating web3 projects rely on funds acquired through ICOs or NFT token auctions. While many of them are able to acquire substantial capital this way, this is not a sustainable financing model. It is also not a model that prioritizes the users’ needs. It’s quite the opposite: such a financing model heavily favors investors’ needs over users’ needs and ultimately may lead to outcomes that are harmful to the latter.
UDO deals with this problem by creating a permanent Build Fund, supported with fees subtracted from every payment made for using services bought on the marketplace set up by the organization. Users who pay will receive a non-tradable proof of usage token attesting that they have spent money on the marketplace. This token will enable them in turn to vote on how the funds from the Build Fund should be spent to further enhance the UDO-controlled platform and services. We believe that such a setup is much more sustainable and should make the organization more responsive to users’ needs.
UDO’s planned Wildland implementation
UDO will be first implemented in Wildland, an open source data management platform that empowers users by allowing them to break free from corporate data silos.
The project is currently at the “power-user-only” phase of development, but we hope to have a user-friendly macOS app ready next year (iOS, Linux, Windows, and Android versions are also in the works).
During the app onboarding process, new users will be asked to prove their unique identity (without revealing any personal data) using an unobtrusive and privacy-respecting proof of uniqueness solution. This way we will defend Wildland’s governance against Sybil attacks while allowing users to maintain their pseudonymity. Most importantly, the proof of uniqueness will enable us to distribute the UDO governance tokens in a manner that reflects Wildland’s actual usage.
Every unique Wildland user will receive a free cloud storage “starter pack” provided by Golem Foundation. Together with this free tier those users who will have confirmed the uniqueness of their Wildland account will be awarded a non-tradable Proof-of-Usage (PoU) token, which will give them decision rights within Wildland’s User-Defined Organization.
Users with storage needs that exceed the free tier provided by the Foundation will be able to buy additional space at an open, multi-party, competitive Wildland marketplace. Each payment made on this marketplace will be divided into three parts: the service fee, the Proof-of-Usage fee, and the build fee.
The service fee, constituting the largest part of the whole payment, will go to the provider from whom the user has bought the storage.
The Proof-of-Usage fee will be converted, through a GLM-burning mechanism, into PoU tokens. GLM is a native ERC-20 token of the Golem network. As a part of every Wildland transaction a certain amount of GLM tokens will be bought on the open market (this process will be automatic and seamless to the user), and then converted at a 1:1 ratio into PoU tokens. By burning GLMs to create PoU tokens we will ensure the PoU’s scarcity, and thus increase the robustness of the system. Once created the PoU token will be assigned to the user who initialized the transaction.
The rest of the payment - the build fee - will be allocated to the Build Fund from which the future development and promotion of Wildland will be financed. All spending from the Build Fund will require community authorization through polls conducted among the PoU token holders. (Initially, the Fund will be subsidized by the Golem Foundation through matching funding. Ultimately, however, we would like to make the Fund self-financing).
Teams and individuals wishing to contribute to Wildland’s development will be able to submit proposals to the UDO, and the PoU token holders will vote on the submissions using their tokens. Quadratic voting will be utilized to disincentivize voters who don’t care deeply about certain issues from casting several votes for them and protect the interest of small groups with large stakes at certain governance outcomes.
As stated above, Proof-of-Usage tokens will not be tradable. Only actual Wildland users will be able to acquire them, and thus participate in the project’s governance. The principal way in which a person or other entity will be able to get PoU tokens is by making payments on the Wildland marketplace. However, we are also looking into ways in which PoU tokens can be awarded to community members who contribute to the growth of the Wildland ecosystem by providing help to other users, contributing to the project’s documentation, moderating community forums, etc.
By extracting a PoU fee and a build fee from the payment, and making the UDO governance token non-tradable, we are hoping to achieve three main goals. Firstly, we want to ensure that Wildland will be governed by its users, and not some kind of outside entities, who have a purely financial interest in the project. We believe that people who have everyday, practical experience with what works and what doesn’t work as a part of a software or a service, are in the best position to make decisions regarding the project’s development priorities by choosing new integrations and rewarding teams who enhance or optimize it with bounties.
Secondly, we want to ensure that the users’ governance power over Wildland reflects their commitment to the project. Higher usage should result in more decision-making power. Users who buy services on the Wildland marketplace, or contribute significant amounts of their time and skills to the community, signal their interest in the project by committing actual resources to it, and consequently should have more say on how the service should evolve than those who just use the free tier.
Thirdly, with the Build Fund, we want to ensure the long-term sustainability of Wildland, by making it independent from its original founders. Projects that rely primarily on the resources of their funders are dependent on their ongoing commitment to their further development. Relying on a single source of funding can also result in a development process that reflects only the needs and ideas of the seed investors.
By securing a steady stream of independent funds, subtracted from payments made on the Wildland marketplace, we are capturing a part of the value generated by the platform and giving users the authority to decide how the accumulated resources should be used to further enhance the underlying technology, according to their expressed preferences, and changing opinions. Such a setup should make Wildland highly responsive to the users’ needs, and help secure its long-term growth in terms of feature-set and adoption.
UDO is a work in progress
The concept of User-Defined Organization was developed initially to provide Wildland with a robust, sustainable, attack-resistant mode of governance that reflects the project’s goal of empowering individual users by freeing them from the dependency on uncountable corporate entities that dominate the current internet landscape.
This being said, we strongly believe that UDO has the potential of being much more broadly adopted in a variety of different projects which could benefit from building their governance model around the actual usage of a particular protocol or software.
There are still some questions that need to be answered before UDO can be let loose into the wild, e.g.:
- What should be the scope of the PoU-token holders’ agency (i.e. what issues are to be voted on besides the Build Fund management: the parameters of the PoU token generation process, the organization, and the inner workings of the UDO itself?)
- How do we ensure high PoU-token-holders turnout during polls? (DAOs, like most polities, experience low voter engagement, can we incentivize UDO participants to be more active in this regard?)
- What’s the volume of market transactions which is necessary for the creation of a self-sustaining Build Fund?
- How should payments made on Wildland’s marketplace be divided (i.e. what percentage of the payment should go to the provider, the Build Fund, and the PoU fee, respectively)?
- What are the vectors of possible economic attacks against the UDO?
If you are excited by the idea of user-controlled projects and would like to help us answer these questions to the benefit of the wider decentralized community, come join us at Wildland. The web3 space needs more diversity of ideas, and Golem Foundation can provide you with funding for contributions which would enhance or build on top of the concept of the User-Defined Organization.
To find out more about the User-Defined Organization and Wildland’s economic framework read section 3.3. of the original Wildland paper.