District Proposal Spotlight - 1Hive

An interview with Luke Duncan of Hive Commons

This article is the first in a series of blog posts interviewing members of the district0x community who have submitted district proposals. To date, we have received more than 85 submissions. Our upcoming interview series will interview the authors behind these proposals, and dive into the details of each idea in more detail.

In today’s post we interviewed Luke Duncan. Luke has been an active member of the district0x community since the start and his 1Hive proposal was recently selected as one of six proposals which DNT holders can vote for via district voting Dapp to signal for the next district they would like to see built by the district0x team.

Luke, Please tell us about yourself

I’m a relative newcomer to the crypto community, but in hindsight it seems inevitable that I would end up here. I’ve always been excited by technology and deeply fascinated by game theory and economics. These interests have served me well and shaped my career to this point, I think slowly converging on the rabbit-hole that is Ethereum.

After high school, I decided I wanted to go to college even though at the time I really didn’t have a specific career in mind. I started working part-time doing general IT support work in order to pay for tuition. After a few years of school I was forced to make up my mind a pick a major, I ended up choosing Economics because I found the subject so interesting even though I really could not see myself going into banking, finance, or law. I had by this point been spoiled by the silicon valley tech world and could not see myself ever wearing a suit to work.

The class that had the most significant impact on me related to Public Choice theory. You could say it made me a bit jaded about how our current political system works and in many cases how futile voting is in a traditional representative democracy. At the time it did not seem as though there was a better solution, or at least not a way to convince the current power structure to adopt a more public friendly — but I think that Ethereum and many of the projects including district0x could help us get there.

After college, I realized that I would make more money working in technology than actually using my Economics degree directly so I decided to do that. It’s lead me on a bit of a journey from general Systems Administration, to Business Process Automation on Saleforce.com, and eventually transitioning away from a purely technical role into Product Management.

Now I’m spending pretty much all of my free time immersing myself in the Ethereum space trying to soak up as much information and contribute as much as I can because I truly believe this technology will transform society.

How did you get involved with district0x?

I think I originally stumbled on it because I follow Joe’s industry news series The Dapp Daily. I’m very interested and passionate about DAOs and decentralized governance models in general, so I was drawn to concept of district0x really early on. I hopped on the slack as one of the first members and just sort of stuck around — Its been awesome to watch the community grow over the last few months.

What drew you to the district0x project? What excited you most about the project?

I think DAOs are going to change the world… eventually. For a DAO just to function it needs to be built on a secure and scalable blockchain that supports flexible smart-contract programming. It also needs to have a governance mechanism that makes it easy for all the members to participate. Neither of those issues are fully solved but they are definitely being worked on. However, just having a functioning DAO that doesn’t have a purpose doesn’t really have a meaningful impact on the world.

That’s where I see district0x fitting in. The vast majority of value creation on the modern web is generated by networks of users, but nearly all of that value is captured by central authorities that act as hubs and gatekeepers. By building the decentralized components to support general market functionality, district0x will make it possible for DAO-based communities to disrupt many established centralized market places. These established competitors will either need to adapt to this new reality or be replaced — regardless of how it turns out on an individual use-case basis I think the users of all of these marketplaces will benefit tremendously.

What made you want to submit a district proposal?

I think the success or failure of district0x will depend on creating a community that does not just want to use DNT to direct the efforts of the core-development team but sees the CarbonVote signaling processes as a way to bootstrap into a self-sustaining DAO entity that does not depend on the ongoing commitment and labor of a specific small group of individuals. In that spirit, I felt it was important to not only submit a district proposal, but think about how that proposal specifically would help district0x make that transition.

Can you please describe what is 1Hive?

Sure. The 1Hive Funding Platform uses the Curation Market Model that will be built into d0xInfra as part of the Meme Factory district to enable a novel approach to crowdfunding that has some unique advantages over existing crowdfunding platforms.

By using a Curation Market Model, funders have an incentive to seek out and validate projects at their earliest stages and in doing so stand to benefit either by helping others find quality projects and then moving on, or simply by getting a better deal for themselves. This curation process will naturally bubble up the most promising projects and ensure they get the attention they deserve.

When creating a project, a user would specify a minimum funding goal that is necessary to get started and also a rate at which funds in excess of that goal (the projects reserve) move into the projects discretionary fund.

For a Patreon style use case, the minimum funding goal might be 0 with a rate of disbursement of 10% this would essentially provide the creator with a salary paid by their supporters proportional to the amount of remaining funding in the reserve. The creator could offer special perks in exchange for the project specific tokens, which would decrease the supply and encourage more people to fund the project. At any time if the project creator stops working or the quality of their output goes down, contributors can exchange their project tokens back based on the curation market exchange rate, so creators are alway kept accountable to their funders.

For a Kickstarter style use case, the minimum funding goal would support the projects initial startup capital, and the reserve would be used to ensure project accountability over time. If a project hits a significant snag, delay, or otherwise acts irresponsibly, the funders can abandon the project and not lose the entire amount that they originally funded. Projects can offer specific rewards for supporters by exchanging tokens after they have launched.

However, the most relevant use-case for district0x is actually significantly more unique. Instead of the project proposer being an individual it can actually be a DAO entity — In this case it could be used to bootstrap community support for districts and the project tokens could be used directly in the districts governance. Since the Funding Platform supports funding using any ERC20 compatible token, districts could opt to receive all or part of their funding in DNT and then the district itself could vote in district0x governance using the DNT in its reserves.

Ultimately, its this last mechanism that I think makes the 1Hive Funding Platform such a critical first step for district0x — because it makes it easier for the community to start to direct progress on districts and d0xInfra without dependence on ongoing efforts of the core team.

How can crowdfunding benefit from being decentralized?

I think a big benefit is transparency, but I also think the curation market approach which would not be possible without the innovation of trustless, provably-rare digital tokens makes for a more compelling and flexible crowdfunding platform than would be possible with a centralized approach.

Can you tell us about 1Hive and Hive Commons?

Hive Commons is a grass-roots social movement using decentralized governance to give the public a more significant voice in industry and politics. Ideally, all of the decentralized governance infrastructure needed to make Hive Commons a reality would already exist and the project could focus on building a community of activists — unfortunately the technical state of decentralized governance isn’t sufficiently developed to support our use-case so we are actively trying to improve the technology. We’ve already started working on our implementation of Liquid Democracy and you can track our progress on GitHub.

These challenges are not unique to Hive Commons, at this point there is not a good decentralized governance solution suitable for large public or semi-public DAO organizations including district0x, Aragon, Status, Maker, and many others. These projects are all working to solve these challenges and move away from using a community multi-sig as the final authority and instead turn control completely over to their respective networks.

The 1Hive project, which the funding platform district is one piece, would provide a community governance portal where users could fund projects, discuss topics, and participate in voting and arbitration — the interface will look a bit like reddit. 1Hive is how Hive Commons aims to solve this governance problem but its not exactly an easy task for an unfunded grass-roots social movement — so I’m hoping that the greater DAO community can join forces in a sort of Decentralized Governance Alliance to rapidly improve on the state of DAO governance infrastructure.

Why is this an ideal business model/service to be set up as a district?

I would love to see the funding platform used for all sorts of creative projects. I’ve had great discussions on Github and Slack with people interested in using the funding platform to work on open source projects or to fund artistic ventures. However, I think those would be side-benefits as the real reason for the district0x community to develop the funding platform is to make it easier for the community to fund, build, and deploy novel districts and improved d0xInfra components.

I think at least initially the focus of the district0x community should be on creating districts and d0xInfra components that enable symbiotic relationships between districts or make it easier for the community to build their own districts. If we can accomplish that then growth of the network will accelerate exponentially rather than linearly.

Early on the majority of activity on the district will be related to district0x itself. Community members could create projects which improve on specific district0x components. In the case of developing individual components there is a lot of utility for the community, but there is no reason for that to need its own token or ICO — this type of project could be funded using DNT that is slowly released to the community member over time essentially functioning as crowdsourced salary which can be taken away if the project leader doesn’t perform.

I expect that initially the funding platform will be most popular within the community, and serve as an incubator for other districts, however as crypto becomes more mainstream I could see this model ultimately replacing established crowdfunding platforms like Kickstarter, Patreon, and GoFundMe.

Once Aragon is live on the main net I could see this being used to bootstrap completely new districts where the project being funded is the district itself and the tokens given to funders are integrated into the Aragon entity using the “BYOT” model. Beyond that, I’ve had several great conversations about people exploring how they could use the platform to fund smaller open source projects or more artistic endeavors like recording an album.

I think 1Hive could serve as a district0x incubator, there is clearly a ton of enthusiasm and creativity within the community and in the last two weeks alone there have been about ~30 new district proposal submissions from community members. It would be great if instead of just a Github issue those proposal could instead be submitted as projects in the funding district. I envision a community of developers who become experts at using d0xInfra to launch districts searching through those projects finding ones they are interested and becoming the first funders — then they could start working on the project and as people see the progress they could buy into the district and the district creator and early contributors would be rewarded for their innovation and contribution to the network.

How did you come up with the idea for 1Hive?

Crowdfunding has amazing potential, and particularly when combined with tokens it offers an interesting way to build projects and return value back to investors. Unfortunately, there is generally very little accountability since the tokens received do not represent any legal ownership in the project. Instead of ownership, tokens generally are imbued with some sort of utility within the project being built. In the case of district0x that is currently its ability to signal the development priorities of the core-team, and to stake into various districts on the network. Other projects like Augur use their token as a critical part of the protocol (activated REP tokens are used in the formation of prediction markets).

This approach works okay for some projects, but does not generalize well — not every project benefits from its own governance token or have a compelling use case for a utility token within their dApp. This was particularly important for Hive Commons which needs a easy way to fund traditional “centralized” open source projects that would never need their own token, but generalizes very well to many other use-cases. After reading Simon de la Rouviere’s post on curation markets, things just clicked.

The funding platform uses curation market concept to imbue project tokens with basic level of utility regardless of the project that is being funded. Projects creators can offer additional utility on top of this, like using it for governance, however this is not strictly necessary since funders have the potential to make money simply by finding and funding popular projects before they are widely discovered and also provides an accountability mechanism by not releasing all the funds to the project all at once.

How do you plan to generate revenue with 1Hive?

I’m not sure what the best way to monetize this is, and I expect that will be a common challenge for many of these districts due to the nature of decentralized marketplaces. If a fee is applied to transactions or funding in general, it would be relatively easy for someone to fork the code and redeploy the market without the fee, therefore whatever fee is charged has to be small enough that there is not too much expected value in doing that, since all else being equal users will typically choose the platform with the lowest fees. A few possibilities I’ve considered:

A fee could be charged for project creators to list their projects — this could be seen as a way to reduce spam and wouldn’t extract rent from funders so should not have a negative impact on network effects.

A fee could be charged based on the percentage of funds raised — this might be okay after the network is well established but seems like it would drive people away and introduce significant risk of a fork.

A sponsored listing section could be added that would allow projects which are looking for funding to receive additional attention

Ultimately how the district is monetized will depend largely on the how the DNT holders decide to monetize it, but I expect there will need to be a fair bit of experimentation to find the right balance. It could be that no monetization is necessary for this specific district because making it completely free for funders and project creators results in more overall utility to the network.

What are some of the governance customizations you will plan to implement?

I expect that initially the district would, like other districts, simply rely on Aragon for governance. However, there is a lot of overlap between what I feel is needed for general district governance and what I envision for 1Hive and Hive Commons. I’m hopeful that much of what is built for that project is made available to all districts through a combination of d0xInfra components and Aragon entity modules. A quick summary is as follows:

Curation Market/Funding Platform is used to organize a large community into many sub-communities, in the context of district0x the district0x/DNT would represent the large community, and individual districts would represent sub-communities. Community and Sub-community tokens are used as stake to participate in a “consensus prediction market” — the purpose of which is for a small subset of community members who are actively engaged to earn rewards by attempting to bet on what they think the general consensus of the community will be. This will be used to ensure that important or interesting topics, disputes, and votes are bubble up to less engaged members of the community. Liquid Democracy will be used to settle disputes and for voting when necessary.

I’m planning on doing a longer write up on the larger 1Hive community governance portal, so be sure to follow the Hive Commons blog to stay up to date.

Can you talk about the governance structure that 1Hive will use in conjunction with Aragon?

The Funding Platform district would likely function the same as any other native district on the district0x Network and use Aragon for governance decisions like how to monetize or who can make upgrades to the code. The funding platform would also be integrated into the 1Hive community governance portal that will be used to power Hive Commons governance, I expect this portal would be extremely useful to any DAO based project and by building it using d0xInfra and ensuring it works with the Aragon Module system I think it or some variation of it could be made available to any District or Aragon entity at their discretion.

Can you expand on the following concept described in your blog post: The 1Hive solution for this is to use the Project tokens generated through the funding platform to enable owners to participate in a consensus prediction market.

A significant challenge with any Direct Democracy, including less rigid variations like a Liquid Democracy, is the challenge of ensuring that all the voters who want to participate are made aware of issues and can make an informed decision about how to vote — in the case of a Liquid Democracy it’s often the case that voters have preselected a number of delegates based on different topics that they trust to make decisions for them when they do not have the will or attention to do so themselves, but the expectation is that they don’t check out completely and when issues are of particular significance or controversy arise they should step in and override their delegate if they disagree with their decision. The result is that mundane decisions are made with less community attention and more important or controversial decisions are handled more directly.

The consensus prediction market incentivizes more engaged users to bubble up significant or controversial issues and ensures they receive more attention from the less engaged members of the community. If less engaged users are unhappy with community decisions they can become more involved by either participating in the prediction market directly or as an oracle.

Predictions Markets and Democratic Decisions generally work better when there is “skin in the game” and the funding platform tokens provide that.

Can you sketch out how liquid democracy would work in 1Hive?

I think this question is in reference to my recent post Liquid Democracy, Ethereum, and the slow path to revolution. which I think is a good place to start for readers who are interested in how we are thinking about Liquid Democracy in the context of 1Hive and Hive Commons.

In regards to the Funding Platform district proposal, the standalone funding platform piece being proposed does not require Liquid Democracy to work and could just use the standard Aragon governance. However, my hope is for the entire 1Hive Community Governance Portal which includes funding, discussion, curation (curation market + consensus prediction market), and voting (liquid democracy) could be optionally adopted by any DAO project including district0x (as a whole) as well as individual districts or Aragon entities.

Districts including the funding platform will be governed by DNT holders, so I won’t have much of a say whether it adopts the full governance portal or not, but I don’t see any reason why it shouldn’t.

Thanks Luke for taking the time to answer our questions, and good luck on 1Hive and Hive Commons!