The traditional economy has always been an aspirational destination for people globally. They seek higher education & orient their career to possess a position that represents a level of stability, career & salary growth. However the 2008 crisis & the consequent technological disruptions (on demand applications like Uber, Ola etc, COVID, instant gratification mindset) has seen a shift in that trend leading to the rise of the gig economy.
Prized values like loyalty & stability were slowly being lost towards market driven execution of emergent work.
People looked to the gig & freelance economy as a way to supplement their incomes, however a lot of aspects about the gig economy did not align with the best interests of these gig workers. The lack of jurisdictional protection for gig workers especially across borders, the inability to be considered as a stakeholder for the projects they devote their time towards & an inability to receive employee benefits that were primary needs for these people.
Somehow the gig and freelance community were working at the frontier of technological coordination and yet they were just alienated into a second class group of people.
The incentives & ownership opportunities that arose as a fruit of the network effects of these applications completely evaded them
Until DAOs & the Contributor Economy..
DAOs have offered a new way of self governance for communities on the Internet. Bureaucratic, jurisdictional silos have been bypassed by the web3 community towards a highly collaborative, on-chain network of innovative communities in areas such as DeFi, NFTs & social clubs. DAOs also benefit highly from the ethos & values that pervades the web3 space towards an inclusive, positive & sustainable community first approach.
The beauty of the DAO infrastructure being built is that it shuns community pain points of centralization and bureaucracy towards a KPI driven, bottom up approach which highly favors collaborative work & a growing pool of multi disciplinary, innovative ideas
We are witnessing a revolution in the future of work, the contributor economy, where a contributor will easily be able to participate, own & control a piece of community first internet native economic systems driven by portable contributor credentials.
How will the contributor economy dominate the future of work ? We explore a couple of those game changing differentiators starting off with one that really makes DAOs unique:
Ownership has been a value that’s understood & coveted deeply by people. Reinforcing a sense of personal possession has always empowered communities & inspired a great deal of social capital among participants.
A globally distributed base of freelancers who contributed to a project found it difficult to accrue ownership of that project. Equity issuance was bound by jurisdiction, complex & extremely expensive. Companies that relied on such people also found it very difficult to incentivize for a long term vision until DAOs.
DAOs enable seamless distribution of equity ownership for people across the globe irrespective of jurisdictional laws. Equity issuance in a DAO has less friction than that of traditional companies and the token dynamics allows it to serve stakeholders of multiple categories smoothly. Communities who operate globally now have the power to operate economic systems seamlessly incentivizing long term loyalty, contribution & execution of responsibilities towards its community values & vision.
Proof of contribution > Proof of capital
Consequently tokenomics of a DAO’ll be designed to ensure accrued ownership as a reward to the contributor for value addition to the ecosystem. Incentivizing active ownership granularly & dynamically among contributors is a massive paradigm shift in the way work will be rewarded.
With ownership comes responsibilities. As DAOs are bottom up organizations, these contributors will have a proportional say in how the protocol is governed.
However the current state of DAO tokenomics aligns with rewarding native tokens to contributors as compensation. Problem is, it has historically failed the governance utility for DAOs as contributors seek to sell it for immediate expenses (plus fear of a massive price drop) and the community has to deal with a lot of voter apathy due to misaligned incentive structures. This causes the governance status quo to lean back towards whales and the core team rather than the contributors themselves.
Customized Ownership Mechanics
The contributor economy will lean towards innovative ways of balancing/delineating a spectrum of governance & other key ownership responsibilities from core compensation & credentialing in its incentive design according to community dynamics
As an example, what if a contributor receives benefits for vesting his compensation such as more native tokens, however that tokens vested will be for a different governance NFT or token. This token or NFT may be ecosystem native only and probably illiquid a’la Coordinape tokens. That token allows for proportional voting power optimized by reputation systems to guide the DAO direction. The reputation system for voting may be built on the basis of previous voting KPIs, contributor score, circle of competence, how the voting proposal impacts your team etc. Governance on the democratic front requires a KPI based benefit tier just like a CEO at a company or the decision makers at a collective. The score of how you perform on the governance may entitle you to a proportional, performance based tier of benefits. In this manner, effective & non-dilutable governance can be achieved without core compensation being sold for basic contributor needs. A lot of other methods like inflationary governance tokens are being explored to achieve that balance.
A DAO community is extremely fluid, so unlocking customized ownership based on a dynamic & deep understanding of its community will ensure that governance stays fluid & effective across the active set of eligible contributors ensuring decentralization and at the same time escape participant apathy that arises from a mismatch of eligibility or impact. DAOs get resilient & dynamic to market changes in a KPI & community driven manner compared to its trad peers.
The contributor economy will be an expression of rapid, constantly iterating, global networks of ownership towards its self assigned goals.
As they scale up, DAOs will have to deal with contributors moving in & out of their communities. A global, remote contributor base presents a lot of challenges & immense possibilities. They are a fan of a value which the contributor economy will really unlock:
The contributor base of today prefers a lot of flexibility to contribute across DAOs. The rise of gigs & bounties have ensured a greater fractionalization of work. DAOs in the contributor economy will tinker with ways to ensure the contributor is given a lot of autonomy to determine terms of contribution in accordance with his on-chain reputation.
Example, contributors can have a lot of say in payment schedule or payment frequency. A contributor can have a lot of life circumstances pop due to which payment demand will vary a lot. However a lot of the traditional payment systems have always stuck to a fixed payment schedule.
DAOs with their flexible token mechanisms can offer customized payment frequency beyond monthly & 45 day schedules to their contributors. It can be used as a perk or as a way to enhance the contributor experience & loyalty by solving for their variable financial needs. DAOs can also provide access to income, offering contributors access to compensation advances to be drawn from an upcoming payment. Fluid payment modes allow contributors to have better control over their personal cash flow.
This will add flexibility to a genuine requirement making the contributor economy far more community first than its peers.
Parcel offers tools that provide collaborative flexibility in community payouts & enhance convenience & autonomy for contributors. There are real time payment streaming tools that allow for payment by the second like Superfluid. DAO tooling platforms that provide similar convenience & access to flexible solutions will emerge as the backbone of loyalty & retention within the contributor economy. DAOs that allow for a fluid organisational construct in tune with its community, work values and vision can be a role model for the future of work.
Flexible & Community set KPI Culture
Unfair news about CEOs taking home massive compensations even when they fail badly is not a shocking phenomenon today.
There is a lot of disparity in how incentives are distributed out to employees & how it’s aligned with the overall goals of the company. Employees work hard to achieve targets set by their leads or those at the executive level. Sometimes they’re not even entitled to the additional benefits that come with achieving over & above their targets. There’s no transparency across teams on how those targets are defined. This generates cynicism, discontent & promotes cronyism over performance within the employee base creating wedges in the organizational hierarchy
Why would any honest person compel himself to give his best for a team in a broken system like this?
This is where DAOs can really change the game.
DAOs can rework the way incentives are aligned with goals in a flexible & community centric manner. KPI options are instruments that unlock token payouts for contributors when certain KPI targets are met or even partially met according to the parameters set by the community.
The community can decide the parameters for success & the payout amount according to what’s beneficial for the vision & healthy for the contributor as well if aligned with the right reputation systems. This can be beneficial for the community to have a say in these targets as they’re on the front lines & can adapt to market dynamics. This creates a transparent, highly adaptable & collaborative structure that empowers contributors & rewards proactivity & commitment towards the DAO mission.
As DAOs are at the frontier of coordination & a growing niche, the contributor class is going to scale up massively to benefit from this emerging tech cycle. DAOs will look to curate & retain the best contributors in order to maintain cultural fit & community ethos.
Reimagining reputation systems for accrued contribution, meaningful participation & other criteria that suit community health will be the heart of the contributor economy. We see a lot of work being done with the praise system by TEC, token gated systems like collab.land & collaborative tools like Clarity & Dework, however flexible tools that allow for customizing reputation to fit various aspects of a DAO like governance, compensation will be a gamechanger.
Community apathy that results from misaligned proof of capital incentives, a byproduct of traditional economies, can be solved with a reputation system that rewards proof of accrued work. It can be a easy way to align a contributor with DAO culture if customized sensibly
Unlocking Financial inclusion using DAO reputation systems
DAOs who prioritize their community should look to ensure financial inclusion for their community. A financially empowered community will care more about taking decisions that matter for the DAO. They’ll be more aligned with a sense of belonging, mission & contribution impact
DAOs will be looking to solve that challenge by interfacing with local economies that have jurisdictional compatibility and seek insurance options for its members. Probably partner with DeFi protocols for said services and protect its community
However the contributor economy has a greater opportunity to rework the broken, data guzzling credit system with DeFi compatible token mechanics or reputation systems that have on-chain meritocracy & consequent reward distribution values underpinning it.
Visualize the DAO incentive representing a composable reputation good enough to get loans at cheaper rates or lower collateral from DeFi protocols. DAO contributor scores integrating with credit scores as a better guide than personal data profiles to determine your creditworthiness
DAO reputation systems can be a good substitute over personal data profiles as they provide proof of adherence to community first values & also provides a data sovereign record of contribution. They can help unlock financial inclusion for their community and promote financial well being creating a greater sense of loyalty & cohesion within the contributor base. The beauty of a DAO reputation system is the transparency of its criteria & the community control over it, which is unimaginable in other financial systems.
The contributor economy offers an optimistic alternative to the bleak, no attribution, no ownership rights, surveillance panopticon culture of WFH seen within the traditional corporation & the gig economy.
By empowering contribution with ownership incentives, by unlocking & promoting community first values (& vibes, of course) . All coordinated around measurable on-chain economic interests & reputation systems.
The golden opportunity, however, is to ensure sovereignty of the aspiring contributor who seeks the best for himself & his community in a globally connected hub of innovation & ownership
With an eye on this vision of work as well as prioritising our partner’s feature wishlist, Parcel is at the forefront of payment tooling for the contributor first movement. Parcel will soon be coming up with financial primitives where incentives are no longer a mystery black box siloed within teams but are transparent with mutual collaborative assent of both contributors & teams.
Where loyalty & accrued ownership of the sovereign contributor is incentivized for the greater good of the community without attracting the dreaded big red candle, a nightmare of the DAO token treasury chest.
And most importantly the gateway to this prized system will soon be open to building for any contributor first community that requires the mana of seamless community payout tooling.