The BanklessDAO Grants Committee is one of the most central and visible groups in the DAO, and it’s also one of the least understood.

During my time as the Grants Committee Lead in Season 4 and 5, I presided over some of the biggest ever changes to our grants processes.  These changes resulted in a 5.8M BANK savings/deferral in S4, increased accountability via recorded project KPIs in S4 and S5, and strong guidance for Guilds/Departments in S6. By all accounts, these changes have been successful, but I often hear feedback from contributors who understand “the rules” but don’t understand “the reasons”.

Those reasons are important. If we all understand them, we can not only ensure that our DAO’s grants process is strong, but also improve upon it every season

Rules Are So Web2

Around 16 months ago, BanklessDAO voted on a specification which instantiated a Grants Committee. This committee had a very tight scope: mid-season funding.  Seasonal project, guild, and even contributor rewards were meant to be disbursed by separate bodies. In fact, these rules continue to exist into Season 5, but the reality on the ground is that the Grants Committee is responsible for disbursing all BanklessDAO funding.

Those aren’t the only rules that were ignored. For instance, projects are responsible for reporting on KPIs every two weeks at the community call, but there is nothing compelling them to do so.  The result was that most projects didn’t report on KPIs, if they even reported anything at all. This was the environment at BanklessDAO at the end of Season 3. DAO members were clamouring for increased accountability.

This highlights a key insight: rules without enforcement aren’t worth the blocks on which they are minted. Writing down rules and hoping individuals follow them doesn’t lead to a post-scarcity nirvana, it leads to people breaking rules (often without realizing it). For rules to work, you need a central authority which is enforcing them.

This was a challenge for the Grants Committee. We had existing rules and a clear mandate from the DAO for increased accountability, but we had no enforcement mechanism and not enough resources to do a deep dive on every project and guild. Add to this that we were entering a bear market, and needed to balance these new measures while keeping contributors happy and bullish on BanklessDAO.

So if rules wouldn’t work, what would?

Carrots and Sticks

Decentralized systems don’t have rules enforced by a central authority; Vitalik isn’t signing off on new Ethereum blocks one by one. Instead they create incentives (both positive and negative) for participants to be part of the system. Validators get ETH for validating new blocks (carrots), and they lose ETH if they are inactive or not connected (sticks).

Conway’s Law says that a product’s design will mirror the organization that created it. In my experience, organizations built on top of certain technologies also end up mirroring the technology upon which they are built. When looking to build our organization at BanklessDAO, looking to blockchain not only follows our values, it gives us a path of least resistance.

This idea of building a system of carrots and sticks isn’t new. In fact, one of my favourite books on organizational design (The 4 Disciplines of Execution) describes the key to creating engaged teams: setting up winnable games. Humans are natural game-players, so turning work into a game leads to engagement.

On the Grants Committee, this means we needed a way to create a game around accountability. Our answer to that was report-based funding, which laid out two incentives:

1. Distribute seasonal project funding in two tranches: the first one immediately, and the second one after projects reported on Key Performance Indicators (KPIs)

2. Work with projects to set two KPIs per season, with the goal to help focus projects on impact and self-sovereignty

In this system, projects get additional eyes on their strategy, which helps them focus their team and create synergies with other projects (carrot). They also leave 50% of their BANK on the table if they don’t report KPIs to the DAO (stick).

Whether or not you agree with this system, you can’t really argue with the results. For the first time ever, the DAO has visibility into every project that is currently receiving funding.

KP-Why?

Report-based funding got us some results, but it also created some confusion around what a KPI actually is. I’ll often ask for KPIs and receive a goal.

KPIs can be thought of as ‘health metrics’. Just as your doctor can surmise your overall health by reading your blood pressure and pulse, the DAO can understand the health of a project based on tailored metrics for each project.

Deciding which KPIs to use for each project is the challenging (and fun!) part. If, instead of blood pressure, your doctor measured your shoe size, it would be tough to understand how healthy you are. In the same vein, we need targeted metrics to show us project health. They need to have an actual impact on how the project was doing — vanity metrics don’t help our mission. They also need to be big enough to matter, and small enough to make progress every month. They need to be measurable immediately. In a way, KPIs are encoding the strategy a project takes in any given season, and are therefore an excellent visibility mechanism.

In the original report-based funding post, I outlined two types of KPIs each project should submit:

• Impact on our mission — how is this project furthering the BanklessDAO mission?

• Self-sovereignty — how prepared is this project to stand on its own?

As an example, Bankless Academy’s KPIs in S4 were the number of lesson completions (impact), and the number of sales leads (self-sovereignty). These two numbers cut to the heart of the project’s strategy in S4: they were seeking to optimize their product and sales pipeline. On the other hand, vanity metrics like a count of Twitter followers may feel good to report, but they don’t speak to the overall strategy of the project.

Changing the Guild Game

Having added accountability to projects, guilds were next on the list. This was substantially more challenging than projects, as guilds provide the basic infrastructure of BanklessDAO, while projects are meant to eventually be self-sovereign. Guilds themselves were also very different — some guilds concentrated on attracting talent, some concentrated on building projects, and others were running the basic infrastructure of the DAO. How could the Grants Committee set up a cohesive incentive structure for such a varied group?

Luckily for the Grants Committee, this had been a topic of discussion over the previous two seasons, and the current zeitgeist was that guilds were meant to provide talent to the DAO, i.e. they needed to be incentivized to attract, retain, and upskill talent. Given this definition, I posted the idea of breaking guilds up into two kinds of teams:

• Guilds are responsible for attracting, retaining, and upskilling talent, and nothing else.

• Departments are responsible for keeping the DAO running (aka infrastructure teams).

Guilds would be funded based on the number of active members they had. More active members that the DAO can draw from, more funding (carrot).  Less active members, less funding (stick).

After some refinement and voting, member-based guild funding was implemented for the S6 Seasonal Funding Round, and the Grants Committee allowed each guild to define what “active member” meant, with a view to refine this over time to come up with a cohesive definition across BanklessDAO.

A Winnable Game for All

After six months on the Grants Committee, I am proud of the impact we have made on the grants process. We took a relatively opaque and rule-less process, and turned it into a game our contributors could play to help us achieve our mission.

When I announced that I wouldn’t seek re-election, many reached out and expressed sadness or asked me to reconsider. The truth of the matter is that being on the Grants Committee had allowed me to identify some of the holes in the Grants Committee itself — we had started to create a winnable game for our contributors, but the game of Grants Committee itself was not winnable. No matter what you do, being a member of the Grants Committee isn’t sustainable over the long-term.

There are various reasons for this, but the primary one is that the Grants Committee does not have a defined purpose, or at least not one that has been mandated by the DAO. Everyone has different expectations of the role of the Grants Committee, and those expectations are often conflicting, even to members of the committee itself. As a result, over time, no matter which actions they take, committee members are always going to be stepping on toes in an unwinnable game.

If we truly want to ensure the success of BanklessDAO, we need to make winnable games for everyone. We need to understand what success looks like for each part of our DAO, large or small, and ensure every part has the authority to follow through on their responsibilities.

Luckily, BanklessDAO is a place where ANYONE can create a winnable game through our governance processes, driven by our shared ethos. If you don’t like your situation, you can complain, or you can use your freedom and agency to improve it. To that end, perhaps you should ask yourself: which carrots and sticks do you want to create?

Cover credit: Dippudo

This article originally appeared in the BanklessDAO Weekly Rollup.