A Story of Decentralized Governance

OpenAI, Sam Altman, and Why We Need Open Governance

Author

Forefront
November 20, 2023

Happy Monday!

Welcome to edition 167th edition of the Forefront Newsletter. If you’re new here, we give you a weekly roundup of the best news and insights at the intersection of crypto, culture, and community.

This week we’re covering:

Let’s get into it…

Week’s Highlight

Unless you were under a rock this weekend, you know that Sam Altman got ousted by the board as CEO of OpenAI to then joining Microsoft. We won’t get into details here, but these events opened up some interesting conversations around OpenAI’s governance, the adverse incentives between the non-profit and for-profit arms of the organization, and the future of AI governance.

During the 2022 DAO frenzy – which feels like ages ago – there were conversations surrounding how DAOs may be used to govern AI models for various communities. Organizations like the Collective Intelligence Project, while not DAO-specific, pushed forward these conversations of governance for new and world-changing tech.

While the major players will likely continue to be governed in more traditional corporate fashion, what might a world where open source AI models governed by decentralized organizations using blockchains look like? Would this be better or worse for the world? Would technology continue to progress at a meaningful pace? Would better decisions be made?

In the wake of Altman’s ousting, it’s clear that major players are putting lots of weight behind AI developments, with various incentives and motives in place. For the rest of us, what does the world of AI governance look like? Blockchains may have a role…

What’s Poppin’

From the fund that coined “progressive decentralization,” this essay on "Progressive Ownership" from Variant Fund discusses the evolution of token distribution in crypto networks and introduces a novel approach to tokenization aimed at fostering user loyalty and long-term network growth. It critiques previous models like Proof of Work mining, ICOs, and airdrops, noting their limitations in achieving sustained user engagement and network growth. The proposed "progressive ownership" model builds on the idea of progressive decentralization and incentivizes users with revenue share income, allowing them to trade this income for tokens representing a stake in the community's revenue. The team argues that this model is suitable for projects with early product-market fit and some revenue. It shifts token distribution from an opt-out to an opt-in model, fostering stronger loyalty and network effects by aligning users' economic interests with the success of the network, akin to how stock options work for startup employees​​.

This essay from Katie Chou explores the potential of blockchains in revolutionizing social platforms and creator tools, particularly in the music industry. It argues for the transformative power of 'onchain' platforms, emphasizing their permissionless and composable nature, which allows for open participation and the building of apps on top of existing data and protocols without central authority approval. The essay also addresses the importance of verifiable provenance in a digital world where remixing and sampling are common, ensuring seamless content transfer and preserving authorship and authenticity​​.

The Privy team has one of the best views from the ground of consumer crypto developments, and this essay from the team discusses the evolution of consumer-facing crypto applications. It highlights a new wave of developers creating user-friendly apps on decentralized infrastructure, emphasizing seamless onboarding, account funding, and user activation. This approach caters to mainstream audiences, requiring no technical knowledge and employing familiar login and payment methods. The biggest challenge identified by consumer crypto builders is the transaction experience, which includes simplifying actions like wallet interactions and gas payments. The activation funnel, vital for mainstream adoption, involves user acquisition, wallet sign in, account funding, and activation, each step presenting its own challenges​​.

The future of NFTs, despite a current downturn, looks promising with the market expected to grow significantly by 2027. The key appeal of NFTs lies in their ability to provide proof of ownership and ensure provenance, crucial in areas like art, gaming, and customer engagement. A major trend for 2024 is the integration of NFTs with Real-World Assets (RWAs), transforming physical assets into liquid on-chain tokens, thus facilitating cross-border investments and enabling fractional ownership in sectors like real estate and art. Another significant aspect is the need for regulatory clarity to protect consumers and investors, which is essential for the NFT market's maturity and growth. Additionally, the market is shifting towards value-based NFTs that offer real utility, such as preventing counterfeiting in various industries, and this shift is expected to lead to a more sustainable and value-oriented NFT market.

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