In web3, Stakeholder Governance is the practice of governing common-pool resources by coordinating potentially diverse groups of stakeholders who contribute resources to collectively-owned smart contracts.
Such groups are purpose-aligned, using their shared resources to accomplish commonly held objectives such as grantmaking, investing, stewardship of resources or culture, proliferating memes, providing social security and solidarity, activism, advocacy, etc.
The Purpose of Stakeholder Governance in web3
In web3, Stakeholder Governance is primarily used as a secure way for financial contributors to pool and cooperatively allocate funds in the form of grants. This is often performed under the banner of a single DAO but can also be part of a larger community. Stakeholder groups can also form spontaneously as a result of a crowdfund or governance decision.
In contrast with other forms of collective ownership in web3, such as Community Governance or Stakeholder Governance, Stakeholder Governance prioritizes the rights and security of the Stakeholders (in this context, those who contribute resources such as money, labor, social capital or other forms of value to the common pool) over that of other entities (such as states, grantees, speculators, fans or customers) in the administration of shared resources.
Benefits of web3 Stakeholder Governance
Web3 stakeholder governance offers a variety of features and benefits for participants which aren’t found in traditional financial systems. This allows for experimentation with novel forms of capital allocation and collective ownership not previously accessible using banks and other legacy institutions.
Because stakeholder modules use blockchain-based smart contract technology, participants are able to create trust-minimized environments with nearly instant transaction settlement and relatively low fees. These smart contracts also offer a variety of features which can be composed to form tailored solutions for highly specific use cases and experiments.
Affordances for Stakeholders
Stakeholder governance is conducted using specialized tooling, referred to here as Stakeholder Modules, which offer a variety of features to serve many different use cases. Such features include:
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Smart Contract Custody - All stakeholder modules allow participants to deposit funds and other tokens (permissionlessly or otherwise) into a cooperatively governed treasury contract. The contract tracks each depositor’s proportional share of the treasury and provides functions which can be used by the depositor to manage their funds and interact with the shared contract.
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Enhanced Security - Smart contracts provide a high degree of security, censorship resistance and continuity for stakeholders, making them especially useful for those operating in uncertain or hostile environments (such as privacy research, activism, cross-border trade and grantmaking, collaboration with anonymous entities, or any activity subject to regulatory overreach).
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On-Chain Governance - Most stakeholder modules provide a voting protocol and/or user interface for submitting and voting on governance proposals. Proposals can be used to allocate funds, interact with smart contracts and other purposes. If passed, proposals are typically executed automatically by the smart contract, reducing the risk of coordination failure and reliance on trusted parties.
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Exit (AKA: “Rage Quit”) - Most stakeholder modules allow depositors to exit by redeeming some or all of their governance rights for their proportional share of treasury funds at any time, helping to prevent capture of a depositor’s funds by malicious actors or misaligned governance decisions.
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Crowdfunding - Some stakeholder modules provide features to which allow some or all members of the public to contribute resources in exchange for some form of membership (including governance, economic or other rights). These are typically used for crowdfunding or group buying purposes, but can be useful for other cases such as grantmaking.
Advantages over traditional systems
- What inequities and financial/coordination bottlenecks are currently visible in the NFP/Philanthropy space? Which are a priority for key stakeholders and their peers? See https://app.clarity.so/superbenefit/docs/d7c1faa1-7ac8-4733-9e15-f776da01c60f
Requirements for Participation
Since web3 is a nascent and somewhat technical space, participants in stakeholder governance should be prepared to navigate a somewhat steep (but short) learning curve in order to participate effectively and safely. In addition, some human coordination is needed in order to work effectively with peers in a digital environment.
web3 Onboarding
Participants must have a web3 account (or “crypto wallet”), and should be familiar with basic blockchain/web3 interactions such as:
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Managing cryptographic secrets and using wallet applications
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Using Block Explorers to understand addresses and transactions
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Sending/receiving funds both on-chain and via centralized exchanges
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Using decentralized applications (dapps) to interact with smart contracts
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Practicing basic operational security to avoid scams, malware and unnecessary risks
Coordination
In addition to using web3 tools and practices, participants should be ready to engage with their peers to perform the following human coordination functions:
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Communicating with peers and attending periodic meetings using tools like Zoom, Discord, Huddle01, etc.
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Co-creating the purpose and intention of the stakeholder group, and defining its desired outcomes.
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Discussing and voting on proposals using tools like Discourse, Commonwealth, Snapshot and DAOhaus
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Identifying and communicating with operators, grantees, DAO service providers and other third parties using tools like Telegram, email, Zoom, etc.
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Curating the vibes and having fun together 🎉
How to Participate in Stakeholder Governance
The easiest way to get started with Stakeholder Governance in web3 is to learn by doing.
Join a DAO
Many DAO’s accept monetary contribution in exchange for membership, often using platforms like juicebox.money to sell membership NFTs and governance tokens to contributors. While these aren’t always the most values-aligned organization, they can be an accessible way for web3 citizens to gain experience in DAO participation and stakeholder governance.
Create a DAO
If you know some frens who also want to familiarize themselves with stakeholder governance, you can start a DAO or club to make collective decisions, purchase NFTs, pool money for a cause or simply have fun. Platforms like party.app are a convenient way to explore crypto and web3 in a multiplayer environment.
Partner With a DAO
Some service DAOs, such as SuperBenefit, offer facilitation to partners and outside stakeholders who seek a guided web3 experience. This offers mature organizations the opportunity to explore web3 coordination and decentralized governance without the barrier of developing these initiatives internally.