Difference between revisions of "Decentralized autonomous organization"

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The Bisq exchange network is organized as a '''decentralized autonomous organization''' (DAO). The Bisq DAO's purpose is to make the Bisq's governance model as decentralized and censorship-resistant as the Bisq network itself.
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The Bisq network is organized as a decentralized autonomous organization (DAO). The Bisq DAO's purpose is to make the Bisq's governance model as decentralized and censorship-resistant as the Bisq network itself.
  
 
The Bisq founders realized that decentralized software—no matter how technically robust—is no good if it’s still controlled by a single entity. All the software’s technical strength would be worthless if the whole project could be ruined by attacking the single entity that runs it.
 
The Bisq founders realized that decentralized software—no matter how technically robust—is no good if it’s still controlled by a single entity. All the software’s technical strength would be worthless if the whole project could be ruined by attacking the single entity that runs it.
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The Bisq project needed infrastructure to provide these functions, and the Bisq DAO is its solution.
 
The Bisq project needed infrastructure to provide these functions, and the Bisq DAO is its solution.
  
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You can see a video version of this introductory article in [https://www.youtube.com/playlist?list=PLFH5SztL5cYPAXWFz-IMB4dBZ0MEZEG_e this YouTube playlist].
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{{Admonition_Note|You do not have to participate in any aspect of the DAO or BSQ to use Bisq, but you may find it interesting. It's built entirely on Bitcoin and been operating since early 2019 without major issue.
  
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__TOC__
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This page aggregates resources to help you learn more about the Bisq DAO, what it is, and how it works!}}
  
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== General Information ==
  
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=What is a DAO?=
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* [[Introduction to the DAO]] - a plain-language introduction to the Bisq DAO.
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{{What is DAO}}
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* [https://www.youtube.com/playlist?list=PLFH5SztL5cYPAXWFz-IMB4dBZ0MEZEG_e Bisq DAO in Brief (videos)] - quick, short video series on the Bisq DAO (7 videos, 3-4 minutes each)
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* [https://www.youtube.com/playlist?list=PLFH5SztL5cYOLdYJj3nQ6-DekbjMTVhCS Bisq DAO Basics (videos)] - longer videos covering everything from the basics of bitcoin transactions and colored coins to the economic and technical roots of the BSQ token
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* [[DAO_user_reference|DAO user reference]] - high-level details on BSQ, technical workings, and voting cycles
  
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=The Bisq DAO=
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== Guides ==
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The Bisq DAO forgoes a system where governance is dictated by the rigid rules of software in favour of a self-contained economy where governance is ''guided'' by software but ultimately determined by the collective, subjective judgments([[Voting]]) of its community.
 
  
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It achieves this by introducing a unit of value called the '''[[BSQ| BSQ token]]''' that enables Bisq [[Stakeholder|stakeholders]]—[[Category:Contributor_Docs|contributors]], [[traders]], or anyone who owns [[BSQ]]—to make subjective value judgments. This token underlies all actions in the DAO.
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* [[Paying trading fees with BSQ]] - get lower trading fees and compensation Bisq contributors
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* [[Participating in a DAO voting cycle]] - see how to make a proposal, vote, and take part in Bisq governance
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* [[Making a compensation request]] - get compensated for your contributions to the Bisq network
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* [[Contributor checklist]] - resources and advice on how to get started contributing to Bisq
  
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==BSQ Token==
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== Reference Material ==
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{{:BSQ#BSQ Token}}
 
  
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==Overview==
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* [[DAO_technical_overview|DAO technical overview]] - see (1) what BSQ tokens actually are, how they’re created, and how they’re destroyed and (2) the various functions of the Bisq DAO and how BSQ enables them. The document includes several example transactions so you can explicitly see the processes.
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Here’s a graphical overview of how the DAO works at a high level:
 
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[[File:User-dao-diagram.png|thumb|User-dao-diagram]]
 
  
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Let’s observe some of the dynamics of this system:
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== Outdated documents ==
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* [[Category:Contributor Docs|Contributors]] ''maintain'' Bisq through valuable work
 
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* [[Traders]] ''use'' Bisq to buy and sell bitcoin and other cryptocurrencies
 
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* [[Category:Contributor Docs|Contributors]] ''earn'' BSQ tokens when their compensation requests are approved through voting
 
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* [[Traders]] ''buy'' BSQ tokens in order to pay lower trading fees
 
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* [[Stakeholders]] ''vote'' on compensation requests
 
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* [[Category:Contributor Docs|Contributors]] can ''lock'' a [[bond]] in BSQ to ensure integrity in high-trust [[Category:Roles]]
 
  
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Now let’s see how these dynamics enable the Bisq DAO to provide 3 core governance functions without any central points of authority.
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'''The following documents are outdated.''' They are provided here purely for those who would like to explore the ideas upon which Bisq was built, and how it has evolved through the years.
  
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==Earn and distribute revenue==
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* [https://bisq.wiki/images/e/e5/Bisq-dao-phase-zero.pdf Phase Zero] [PDF] - a thorough plan published in late 2017 covering the vision for the Bisq DAO, why it's needed, and how it would be rolled out
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Every project needs to be financially sustainable to fund ongoing operations and development. But traditional means of handling revenue and revenue distribution are necessarily centralized—any receiving address or account must be owned by one person, or a small group; determining how much a person should be paid must be determined by one person or a small group; etc.
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* [https://bisq.wiki/images/a/a1/Bisq-dao-overview-legacy.pdf Overview] [PDF] - an earlier version of the Phase Zero document
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* [https://bisq.wiki/images/2/23/Bisq-dao-techspec-legacy.pdf DAO technical spec] [PDF] - a technical overview of the Bisq DAO written about 2 years before it launched
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===Contributors produce, creating BSQ===
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* [https://bisq.wiki/images/6/6d/Bisq-white-paper.pdf White paper] [PDF] - a detailed look of Bisq's founding mission and principles, written early on (within a year of its launch)
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In the Bisq DAO, trading fees are collected from traders and distributed to contributors, but there is no central authority to do this. Here’s how it works: after a Bisq contributor does work, they file a '''[[compensation]] request''' in the DAO with a description of what they did and how much BSQ they want in return. Then, stakeholders (who are other contributors, traders, and anyone else with BSQ) vote for/against the request. If the request is approved, the contributor is issued new BSQ in the amount they requested and '''BSQ supply is increased'''.
 
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===Where does new BSQ actually come from?===
 
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Recall that a BSQ token is merely coloured bitcoin. When a contributor makes their compensation request in the DAO, they must also include the tiny amount of bitcoin to be 'coloured' as BSQ ([[Bisq_DAO_technical_overview|the spec]] requires 100 satoshis). So if a contributor requests 1,000 BSQ, they will need to include 100 * 1,000 = 100,000 satoshis with their compensation request—just about 10 USD at a rate of 10,000 USD/BTC.
 
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If their request is approved, those satoshis are 'colored' and recognized as 1,000 valid BSQ tokens on Bisq. Assuming a BSQ market value of 1 USD (exact value will fluctuate), the contributor will have been granted 1,000 USD worth of BSQ for a negligible cost of 10 USD.
 
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===Traders consume, burning BSQ===
 
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Then, a [[trader]] looking for lower trading fees can buy those BSQ tokens from a contributor. When they buy BSQ tokens for BTC, the contributor is paid for their work, and the value transfer from producer to consumer is complete! When a trader pays trading fees with BSQ, those BSQ tokens are burned or "decoloured" and '''BSQ supply is decreased'''. This process of creating and destroying BSQ tokens enables a sort of monetary policy controlled by Bisq stakeholders and traders.
 
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In this way, there is no need for a central entity to collect and distribute revenue: the BSQ token enables a transfer of value from producer to consumer without any single entity controlling any aspect of the decision-making or distribution process.
 
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* The Bisq DAO does not require traders to use BSQ for trading fees. They’re free to pay trading fees directly with BTC, but they will pay higher rates than if they bought BSQ with BTC and paid with BSQ instead.
 
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====Note on BTC revenues====
 
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In the past, before the Bisq DAO launch and before the integration of Bisq’s new trade protocol, trading fees were only collected in BTC and only went to arbitrators. There was no mechanism to distribute them to other contributors. The DAO solves this distribution problem with BSQ through the process outlined above.
 
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But since traders can still pay trading fees with BTC, where do those BTC fees go?
 
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BTC fees go to a bitcoin "donation" address held by a [[Donation_Address_Holder|bonded contributor]], who uses the BTC to buy BSQ on a regular basis to distribute the BTC fees to stakeholders, and the BSQ obtained [https://github.com/bisq-network/proposals/issues/55 is burned].
 
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==Determine strategy==
 
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Another point of centralization in traditional organizations is with strategy. How can a project determine strategy without some form of designated leadership: an executive, manager, or leader to give direction and allocate resources?
 
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The Bisq DAO beats this tradition with collective decision-making on strategy and other matters through '''weighted voting''' based on BSQ stake.
 
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Here’s how it works: any [[stakeholder]] can make a proposal in the DAO. It can be anything: a change in a [[DOA_PARAM|trading parameter]], a new bonded [[Category:Roles|role]], or even something more generic like an adjustment of the overall project strategy. [[Stakeholders]] vote on the proposal, and their voting weight is based on BSQ stake, through a combination of two metrics:
 
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* amount of BSQ committed to a particular vote
 
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* amount of BSQ earned over time through contributions
 
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Taking both metrics into account discourages deep-pocketed whales from suddenly seizing control of the project, while still valuing dedicated stakeholders with consistent contributions over time. It brings about a '''strict meritocracy''' in which people need to somehow buy in to the Bisq project in order to take part in its governance, and the more significant their stake, the stronger their voice.
 
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In this way, there is no need to rely on a single leadership team for direction: the community collectively manages itself.
 
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==Ensure honesty in high-trust roles==
 
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Despite the Bisq project’s attempts to resist concentrating control as much as possible, it’s impossible to avoid in some places. Domain name owners, social account admins, mediators, various node operators: these are all roles that must exist, but necessarily retain significant control and require a high degree of trust.
 
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Part of the benefit of a centralized team of thoroughly-vetted people reliant on a paycheck, as is the case in most companies, is that the risk of trusting people with significant responsibility is lower: they have a lot to lose if the company finds they have violated their integrity and engaged in foul play.
 
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This dynamic can be reproduced—at least partly—in a project without a central authority through bonding. The concept is simple enough: create skin in the game. Require that a person interested in taking on a high-trust role post a [[bond]] that’s high enough to discourage them from engaging in foul play.
 
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But what happens if that person goes rogue? In a project without central authority, who decides when they’ve crossed the line, and what their fate should be?
 
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As with strategy and compensation, the community decides through voting. Anyone who suspects foul play can make a case for confiscating a bond with a new proposal, and stakeholders vote to determine an outcome.
 
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* Confiscating a bond is a harsh penalty which should not be taken lightly. Therefore, the Bisq DAO makes confiscation proposals especially hard to approve: they require a quorum of at least 200,000 BSQ and 85% acceptance to pass (instead of the typical >50%).
 
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In this way, the risk that people in high-trust roles misbehave is minimized, and the community has access to a responsible mechanism for handling such a scenario in cases that warrant it.
 
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=Learn more and stay in touch=
 
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To learn more about the Bisq DAO, please see:
 
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* The [[Category:DAO| DAO Category]]
 
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* Bisq [[DAO user reference]], a doc which offers practical details on the workings of the DAO, along with high-level technical details.
 
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* Bisq [[DAO technical overview]], along with technical details of BSQ tokens, this doc shows example transactions for several DAO functions.
 
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* [[Phase Zero: A plan for bootstrapping the Bisq DAO]], a doc which offers a more comprehensive overview of Bisq and the Bisq DAO.
 
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* [https://www.youtube.com/playlist?list=PLFH5SztL5cYOLdYJj3nQ6-DekbjMTVhCS Bisq DAO Basics], a YouTube video series that covers foundational concepts underlying the DAO such as bitcoin transactions, coloured coins, etc.
 
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Feel free to get in touch with us on [https://twitter.com/bisq_network Twitter], [[Keybase]], or [https://bisq.community/ the forum].
 
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= User Guides =
 
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* [[User Guide: Bisq DAO for Traders]] — Use BSQ to get lower trading fees and compensate contributors
 
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* [[User Guide: Bisq DAO for Contributors]] — Govern Bisq through the DAO by making proposals and voting
 
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[[Category:DAO]]
 

Latest revision as of 00:00, 28 April 2021

The Bisq network is organized as a decentralized autonomous organization (DAO). The Bisq DAO's purpose is to make the Bisq's governance model as decentralized and censorship-resistant as the Bisq network itself.

The Bisq founders realized that decentralized software—no matter how technically robust—is no good if it’s still controlled by a single entity. All the software’s technical strength would be worthless if the whole project could be ruined by attacking the single entity that runs it.

Thus the need for decentralizing the resources in charge of running Bisq itself. These resources cannot be organized in the form of a company, a nonprofit, or any other traditional organization because a single entity would be a single point of failure. But what to do? How can a project do anything useful without becoming an organization with some kind of structure? How can strategy be determined? How can resources be allocated? How can work get done? How can revenue be earned, and how can it be distributed?

The Bisq project needed infrastructure to provide these functions, and the Bisq DAO is its solution.

Note
 You do not have to participate in any aspect of the DAO or BSQ to use Bisq, but you may find it interesting. It's built entirely on Bitcoin and been operating since early 2019 without major issue.

This page aggregates resources to help you learn more about the Bisq DAO, what it is, and how it works!

General Information

Guides

Reference Material

  • DAO technical overview - see (1) what BSQ tokens actually are, how they’re created, and how they’re destroyed and (2) the various functions of the Bisq DAO and how BSQ enables them. The document includes several example transactions so you can explicitly see the processes.

Outdated documents

The following documents are outdated. They are provided here purely for those who would like to explore the ideas upon which Bisq was built, and how it has evolved through the years.

  • Phase Zero [PDF] - a thorough plan published in late 2017 covering the vision for the Bisq DAO, why it's needed, and how it would be rolled out
  • Overview [PDF] - an earlier version of the Phase Zero document
  • DAO technical spec [PDF] - a technical overview of the Bisq DAO written about 2 years before it launched
  • White paper [PDF] - a detailed look of Bisq's founding mission and principles, written early on (within a year of its launch)
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