Era of the Onchain Organization

Lately I've been pondering the nature of onchain organizations. This theme came up when discussing Protocol Guild, and is also relevant to Splits' nascent smart account project, as we think about reaching the teams who need it. How do groups use blockchains to form themselves?

You could argue that Ethereum — the network and everything that depends on it — is itself an emergent onchain organization, one with many constituent entities under its umbrella. As @six put it:

1. markets are decentralized autonomous organization
2. it's all markets

thus,
3. it's all decentralized autonomous organization

QED

This insight notwithstanding, "onchain organization" is not merely another way to say DAO, though DAOs certainly count as onchain orgs. "Decentralized" and "autonomous" carry too much conceptual cruft. Besides, most groups shouldn't be decentralized — neither consensus nor democracy is the best decision-making model unless you can't use anything else (as famously noted by Winston Churchill).

Refreshingly, "onchain organization" sidesteps these debates. Instead we can focus on the concrete realm — the actual implementation and logistics of group coordination. This blog post reviews two examples, one more established and one up-and-coming.

Nounishly Onchain#

Of course, no team or collective lives fully onchain, simply because that isn't practical. There's still email and Discord and GitHub and social media and video chats… many ways to stay in touch and manage information.

Nouns DAO has spread itself across various internet venues. The bones of the project are onchain — the treasury, members' noun ownership, and noun artwork. But Nouns also comprises the stewarding Nouns Foundation (presumably a legal entity), the main homepage, the governance forum, the docs, the GitHub repository, the ever-ubiquitous Discord, Farcaster channel, multiple grants programs of differing scopes, a million community projects, an esports division, a film festival… this list is non-exhaustive. Nouns may even be getting its own token (backed by nouns, naturally) and already has a nounish memecoin, Noggles ($NOGS).

Just as the human skeleton provides scaffolding for the rest of the body, an organization's onchain "spine" is there to structure the growth and movement of its nervous system, its organs, its muscles. We said it a different way in the Splits anniversary post, describing our product philosophy: "If Ethereum is the fruitful soil of this big garden, then Splits is building trellises to support each plant that reaches for the sun." That's the point of onchain — it facilitates what happens offchain, and sometimes vice versa. Symbiotic interplay.

In fact, the way Nouns has used Splits illustrates this pattern. Nouns DAO leverages Splits to share the NFT revenue from Nouns-funded creations. For example, the premiere of The Wizard's Hat earned a little over $421,000, split 50-50 between the artists and the Nouns treasury. Onchain transactions cemented the offchain collaboration, anchoring the short film in economic spacetime. The proceeds that flowed back into the Nouns treasury will feed the group's ongoing cultural activities.

More recently Nouns funded Delivery at Dawn, an animated short that "celebrates EIP-4844, core dev stewardship, & every L2," and dropped it as an NFT to fundraise for Protocol Guild. Once again the proceeds were split, with 80% going to Protocol Guild and 20% to the Nouns treasury. Protocol Guild funds the people who work on Ethereum core development, which enables the existence of Nouns.

Upsides, Downsides#

I wanted to talk to a creator who'd gone through the Nouns grant funding process, to hear their thoughts on working with an onchain organization. I reached out to multidisciplinary artist and developer diid, whose tool Efficax makes it radically cheaper to deploy and store artwork onchain. This cause is naturally simpatico with Nouns; diid requested and received 10 ETH to expand Efficax.

"I think in general as a web3 community we desire to share this tech with everyone. We're all a bunch of nerds in that way," diid reflected. (Fact-check: super true.) "I was originally nervous about the prop because a LOT of props are about nouns events, nouns content, etc. which this was decidedly not." Diid continued:

DAOs have a lot of problems in general, but Nouns is a notable exception just because their community is very active and involved. I think in general there are more efficient ways to organize but I was very happy with my experience!

In a broader sense accessibility matters so much more than we care to admit. Lowering barriers to entry is huge and I think CC0 can be a huge part of that. [CC0 = Creative Commons Zero, the license that Nouns and diid both use by default.]

I asked diid to elaborate on the efficiency issues they encountered during the process:

Even in a well run DAO with active members it takes so much time to get votes, timelock things safely, ensure time for vetos, etc.

To put that in a greater perspective: ETH doubled from the time I started writing my prop to the time the ETH cleared. That was good for me, but it just represents how much faster the space has to move vs. how fast distributed organizations move.

I think distributed grants like Prop House runs are a better way, but even that could use some speed. Use the DAO to govern resource distribution but leave the people receiving that to do things themselves.

Only that which must be onchain should be onchain, to keep things as nimble as possible: minimum viable decentralization. Granted, dealing with collectives is inherently more cumbersome due to the multiplicity of stakeholders (wow, that was a mouthful).

In the case of Nouns DAO, the tradeoff is worth making. Nouns can only exist via onchain coordination mechanisms, and is perhaps the best example of turning NFT hype into something more durable.

Higher Onchain#

Speaking of hype... Higher is a new group buzzing with that FOMO-inducing frisson of, ahem, higher potential. Like its predecessor Degen, Higher is a memecoin born on Farcaster and built on Base, now rapidly bootstrapping its own ecosystem.

Higher sounds like a remix of the "number go up" / "up only" ethos of Crypto Twitter, which is no coincidence. If Farcaster can be considered a fork of Crypto Twitter's culture, morphed into something with a different flavor, then Higher does the same for this dominant meme. The movement "is a rallying call for pre-rich degens and ancient whales alike," LGHT wrote. "For our gambles to exceed our expectations."

LGHT elaborated on the mechanism behind this sentiment:

I had a realization that memecoins themselves (when attached to a brand ie. nouns, higher, etc) are proxies to a more organic form of daos potentially

decentralized autonomous 'organization' as in organizing not necessarily an organization

you buy 1 unit of a memecoin and are exposed to financial upside of decentralized groups building around the core meme

in this manner, memecoins may be the purest alignment mechanism for daos

buy memecoin in dao you want to work on —> work on permless products and protocols for that dao —> value of your shares in the dao increase

so instead of one party dao, there should be many. the party isn't the 'dao' — the token is the dao and the parties are how we organize around specific parts we are interested in

[...]

The token acts as:

1. Dao membership (skin in the game)
2. speculative proxy for the brand (memecoin, 'stock' trade, etc)
3. ecosystem reward (grants, mint rewards)
4. brand identifier

@six summed up how it's played out so far (links added for convenience):

/higher is a channel about the concept of "going higher". This has different interpretations, all of which are valid. For some people this relates to prices going higher, and for others it relates to a model for living with optimism and agency. For many it relates to both.

↑higher is an ERC-20 token, which was airdropped to members and hosts of the original /higher channel, with a 5% fee to Tokepad, the platform that the token was deployed with. The token has a fully circulating supply of 1 billion.

The Higher Collective is a treasury that was formed via crowdfunding on Party, to streamline the distribution of ↑higher funds towards higherligned initiatives. So far, the funds in the treasury has been used to buy back ↑higher on the market, contribute to the liquidity pool, and will also be used to create NFTs, distribute grants, and any other relevant onchain initiatives.

↑ is the memetic icon that represents higher.

At the moment Party membership costs approximately 0.08 ETH ($240-ish). There is also a section on Zora (for NFTs that can be minted with $higher), a community website, a meme generator, and higher.click for easy use of the ↑ Unicode symbol. Highlight just added support for minting with $higher. A ↑themed collection of 444 pfps called Optimists minted out quickly and now has a 0.088 ETH floor price. A Notion dashboard was compiled to help orient new contributors. Higher Sessions @ Venice Skatepark is a Farcon side event with 130 RSVPs at the time of writing. This litany is not yet on the level of Nouns, but you can tell that the energy is building.

I chatted with @six about Higher as an emergent onchain organization. "There's kind of a norm people have of splitting mint revenues to the Higher Collective (the DAOish entity that does grants and such, contributes to LP etc.)," he pointed out.

I think there's two implications there: One is that Splits enables people to signal alignment via an economic link (i.e. onchain attribution). And then the other is that Splits enables a sort of engine of revenue streams — if the community is constantly minting stuff and using Splits to direct revenue back to the collective, that's a flywheel of sorts. The biggest success example is Zora and Base did a mint with 60% directed to Higher Collective.

Higher Collective received 24.5 ETH from that mint.

Higher State of Mind#

Higher has existed for barely two months, but in crypto, when a meme hits, it hits hard. Higher is driven by the community's penchant for participatory optimism, as articulated by Agrimony in a collaborative zine:

Higher is a headless brand. There are no guides here; the only rule is to go higher, together. Every creation — artwork, meme, song, dance, poem, musing adds to the oeuvre of higher.

As a collective, every failure is diluted, every success amplified. Higher art forms amplify each other; a perpetual loop of building and growing and building and growing and building and growing.

Martin, one of the initial organizers, elaborated:

A traditional brand controls how people use it, its "official" logos, licenses, etc. You cannot make a Nike t-shirt: they'll sue you for using their logo. Meanwhile, Higher is built in the spirit of CC0. It's freely available for anyone to use, just like flags or brands like Bitcoin. You can use them however you want: no one can sue you for using the American flag or using an "unofficial" Bitcoin logo. Everything is official and unofficial.

"Higher represents more than just a digital art project with a token; it symbolizes a paradigm shift in how we perceive and participate in the aspirational economy," James Beck contends. "Value in the contemporary art world is increasingly defined by spreadability rather than traditional notions of rarity or originality. Increasingly, crypto won’t just be about ownership, but about participation and circulation within a decentralized community."

Or, to quote Splits cofounder Abram: "the future of trust is bottoms up"

Pet3rpan (MetaCartel cofounder and partner at 1kx) described the win state, which Nouns has achieved and Higher is aiming for:

Slowly, as the asset gains appreciation for its underlying intrinsic value, there's a critical mass in holdership that blooms into a vibrant community and slowly the asset itself emerges as a symbol of an overarching movement bigger than just a stand alone asset.

As the symbolic representation around the asset forms wider consensus, both insiders and outsiders start to invest further into the asset with the expectation that more will purchase the asset over time.

Arise a new store of digital value.

It then becomes a unit of speculative value. And as this asset is traded and speculated on throughout market cycles, it gains economic lindy in its representation in its symbol and store of value.

Embrace the hype cycle, become the hype cycle, transcend the hype cycle. In other words, go higher. The idea machine is in motion.

Where to next?#

Conclusions:

• Onchain organizations are actually… mostly offchain. But the onchain skeleton is critical to hold everything else together.
• Onchain and offchain activities intertwine in dependent loops.
• Collective decision-making is rarely worth the coordination cost.
• Minimum viable onchain org = token and holders thereof. The rest will emerge spontaneously from holder incentives.
• Culture, vision, and brand are load-bearing. As always.

So, how does the onchain organization continue to evolve?

Well, the biggest problems in crypto remain the same as ever: 1) Get the primitives right. 2) Smooth out the UX.

Watch this space.