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Moloch DAO explained: Using self-interest to Ethereum’s advantage

Moloch DAO explained: Using self-interest to Ethereum’s advantage

What is Moloch DAO?

What the heck is all this talk is about Moloch DAO? Well for starters, this is a moloch:

Moloch DAO explained
This Thorny Devil is the Moloch horridus

Okay, that’s not the Moloch you seek. Jokes aside, Moloch DAO (DAO stands for “decentralized autonomous organization”) is a new Ethereum community funding initiative. It’s part charity and part playfully terrifying meme (Moloch is an ancient god of child sacrifice).

A contribution to Moloch DAO isn’t an investment in the traditional sense. Instead of seeking a direct financial benefit, members share in the collective benefit from improvements to public goods funded by the DAO. Moloch will initially focus on funding Ethereum 2.0 development.

Moloch whose name is the Mind!

The provocative name serves as both “a meme in and of itself” and “an ironic joke about the possible futility of attempting to solve coordination problems.” (whitepaper, p. 2). The name also draws inspiration from “Meditations on Moloch,” a 2014 blog post that talks about Moloch’s role in Allen Ginsberg’s poem “Howl.” As the founders of Moloch DAO explained, they believe Moloch symbolizes the difficulty of coordinating when self-interest conflicts with community interest. Moloch DAO’s only “sacrifice,” comes in the form of funds or labor offered as tribute toward advancing the common good.

Problem: tragedy of the commons

Communities have long struggled to fund public goods. For improvements that benefit everyone more or less equally, there’s little incentive for any one person to foot the bill. Why spend your money on something that everybody else gets to enjoy for free?

Moloch DAO for the public good

The solution? 👹 Moloch DAO: a grant-making DAO that incentivizes coordination toward the collective goal of funding Ethereum public infrastructure.

Moloch DAO explained

Moloch DAO exists as a collection of membership units (shares). A member is anyone who holds any number of shares, which represent voting interests: one share = one vote. So each member’s voting power is proportional to her percentage of overall shares. The rules prohibit members from selling or transferring their shares.

Moloch DAO’s minimal design is intentional. It lacks extensive on-chain mechanisms, leaving most operational functions to be handled off-chain. Share-weighted voting happens on-chain for one sole purpose: deciding whether to admit new members (thus, issuing new shares). If you’re looking to join Moloch DAO, you must provide a sacrifice to the Moloch. Existing members evaluate prospective members based on a membership proposal, basically an offer of payment in exchange for membership.

Membership proposals

Only a current member can submit a proposal. So a prospective member must convince an existing member to submit a proposal on her behalf.

Each proposal must specify the following: 

  1. A project the DAO can fund
  2. A tribute, i.e., a contribution of funds or a promise to perform work
  3. An amount of shares to be awarded to the prospective member in exchange for the tribute.

A member who submits a proposal must pay a deposit of 10 ETH, 9.9 ETH of which is returned no matter what the outcome. The refundable part of the deposit serves to reduce spam, and the forfeited part serves to incentivize members to call the proposal-processing smart contract function (the member who calls that function gets the 0.1 ETH).

Voting

A proposal needs a simple majority to pass. And there’s no quorum requirement, so a proposal could pass with a single yes vote (if only one member shows up to vote). One proposal may be submitted at a time, with a max of five each day (that is, one every 4.8 hours). Voting remains open for 7 days for each proposal. Once a proposal passes, an existing members calls a smart contract function, issuing shares to the new DAO member.

Moloch DAO currently only accepts ETH (in the form of WETH), and currently, one share costs 1 ETH. The protocol doesn’t define these parameters, so members could decide to change them in the future.

Ragequitting: Moloch whom I abandon!

Moloch DAO lets any member cash out her shares instead of spending money on a proposal she disagrees with. This is called Ragequitting. During a 7-day period after the close of a proposal’s voting window, any member who didn’t affirmatively vote in favor of the proposal can Ragequit. That is, she can she liquidate her shares (all or some of them) and get back the equivalent value in ETH. Of course, this results in a loss of voting power. And if a member liquidates all of her shares in a Ragequit, she ceases to be a member of the DAO and can only rejoin through the normal membership-proposal process.

If you’re wondering, there’s no such thing as Ragefiring. That is, Moloch DAO contains no formal mechanism for expelling a member. Instead, other members would need to Ragequit, fork Moloch DAO code, and start a new DAO, leaving the expelled member behind in the old Moloch DAO. Moloch in whom I sit lonely!

Disbursing funds

We had the opportunity to speak with Cassandra Shi, a founding member of Moloch DAO, about the process for disbursing funds (quotes lightly edited for length and clarity):

Funds need to be disbursed through the Ragequitting mechanism. Work contributors apply for and are granted shares if approved. When they Ragequit, they will get a part of the guild bank proportional to the weight of their voting share.

The unit of accounting for grants is shares, not their ETH or USD value, so there won’t exist a scenario where there are not enough shares to pay already-passed proposals.

When a work proposal passes, the applicant receives shares (redeemable for funding) but contributes no funds. We asked Cassandra how this might affect members’ consideration of work proposals:

By design, it forces members to carefully consider work-only tributes (grants), as existing members are getting diluted. It forces everyone to think about how to allocate resources to generate the most impactful thing. I am not really concerned about the bar on acceptance of work-only proposals being too high.

Regarding dilution: Moloch DAO protects members from extreme dilution: if the combo of a proposal and related Ragequitting would result in any one member suffering dilution of greater than 3x, the proposal automatically fails.

What attracts members to the Moloch?

Cassandra explained what might incentivize broader participation in Moloch DAO:

Social recognition probably is a big part of it. I’d also be curious to see if some projects would do targeted Airdrops to Moloch summoners.

Because Moloch DAO allows pseudonymous members, concerns of sybil attacks or capture come to mind. Cassandra of Moloch DAO explained why she’s not worried:

To become a Moloch member, you first have to convince an existing member to hard vouch for you and be your champion, and that member needs to convince other members to vote you in. So no member is truly anonymous – every member’s real identity (or at least pseudo-identity) is known to at least one member in Moloch. Although not perfect, these things do provide a certain level of safety against sybil attack. From what I’ve observed, existing members are quite selective when it comes to voting new members in and quite a few people have been turned down. Ragequitting is the ultimate safety net for malicious attacks.

Security: Moloch the incomprehensible prison!

The founders designed Moloch DAO to operate as simply as possible, choosing to optimize for security. Taking lessons from the past, Moloch DAO comes equipped with two key features not present in Ethereum’s original DAO (famously hacked in 2016): (1) Ragequitting and (2) instant withdrawal of funds upon Ragequitting.

Cassandra explained the benefits of Moloch DAO’s minimalistic design: 

When we designed Moloch, the highest priority was the security of the fund so people would feel very safe to donate without worrying about the contract being hacked or Moloch being gamed by malicious actors – we are really worried about the DAO incident repeat itself again. By adding additional on-chain features and processes, Moloch would also increase its attack surface in the code itself and from a game theoretical perspective.

There are certainly limitations with the current design, but I think the security tradeoff of adding additional on-chain features is not worth the upside and would make Moloch less appealing to prospective donors. Moloch is certainly upgradable, we can take an interactive approach to add more on-chain features as needed in the future.

What about competition and forks?

Critics may question whether the funding ecosystem might become overcrowded. Cassandra had the following to say about how Moloch DAO fits in with Gitcoin Grants, another funding program:

I don’t view Moloch DAO as a competitor to Gitcoin. Gitcoin’s focus is on broader blockchain ecosystem grants and Moloch is more focused on Ethereum, particularly on ETH 2.0. The funding mechanism is also very different. When is comes to funding the blockchain open source development, the more the merrier.

And Cassandra isn’t the only one who feels this way. As the founders of Moloch DAO explained in the whitepaper, the DAO is meant “to be forked, upgraded and iterated on rapidly.” (whitepaper, p. 6) And the community has already heeded the call: In early May 2019, MetaCartel announced its intention to fork Moloch DAO and launch a funding DAO that will focus on DApps and shared product insights and user data.

Criticism: Moloch the heavy judger of men!

Earlier this Spring, Vitalik Buterin spoke of the initiative with general praise but cautioned that Moloch DAO is “just a way of organizing charity spending.” (See Unchained Podcast, Ep. 112, at around 24:30.). Cassandra Shi politely expounded on Vitalik’s remarks:

It’s an overly simplistic view that Moloch DAO exists to only organize charity spending – although that’s certainly part of it. From what I’ve observed, the discussions among Moloch members are centered way more on what we can collectively do to make Ethereum better than how to spend the funds. There is some Moloch-led coordination effort in discussion now that does not involve issuing grants.

Cassandra also addressed Vitalik’s apparent concern about member altruism bringing in enough money to make a serious difference:

Moloch isn’t banking on member altruism for it to work – it’s actually quite the opposite. We assume everyone is driven by self-interest and we designed a mechanism hoping to “align incentives so your self-interest is the group’s self-interest.” It’s certainly an experiment and we don’t know if it is going to work as intended.

What’s next for Moloch DAO?

Moloch DAO was deployed to the Ethereum mainnet on February 14, 2019. As of May 30, 2019, the nominal value of the Guild Bank is over $1.5 million, the DAO has issued 6,015 shares, and there are 47 members. Most members hold 100 shares, but some have between 1 and 50 shares. Two proposals have faced rejection so far. Perhaps the most notable membership proposals so far include 1000-ETH tributes each from Joe Lubin and Vitalik, 1000 ETH collectively offered by Ethereum Foundation members, and 300 ETH collectively offered by people from Consensys (all of these proposals have passed). As Cassandra Shi told us when we asked about Moloch’s progress, funding has already begun, with grant proposals having passed for the State of ETH 2.0 Report, ETH 2.0 biweekly updates, and a job listing for an ETH 2.0 test runner.

Moloch! Moloch!

The community is working hard to figure out the best way to sustainably fund Ethereum now and in the future. Moloch DAO certainly looks like a step in the right direction, and we’re sure to learn a lot from this exciting new experiment in coordination.

Thanks so much to Cassandra Shi for taking the time to talk to us about Moloch DAO! We hope this post has answered your questions about Moloch DAO. If not, just find us on Twitter @ConcourseOpen or in the Concourse Discord.


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