The Moloch DAO: Solving the Moloch Problem
Efficient cost-sharing for ecosystem benefits
The Moloch DAO: Solving the "Moloch Problem"
Blockcast Research describes the Moloch DAO as guaranteeing absolute fairness and democracy from its code. When many people saw this, they were like seeing a flash in the dark.
The Challenge of Ethereum 2.0 Development
Ethereum is expected to enter the Ethereum 2.0 phase in early 2020, with development focused on Proof of Stake, Sharding, and eWASM. However, progress is slow due to limited funding and a small group of researchers.
The "Moloch Problem"
The Moloch Problem refers to the challenge of group coordination issues, where the benefit of solving a problem outweighs the overall cost, but if a single group bears the cost, it far outweighs the benefits. This results in suboptimal solutions being chosen, as seen in overfishing and other areas.
The Moloch DAO Solution
The Moloch DAO is an experimental autonomous organization that seeks to overcome the Moloch Problem through the use of smart contracts. Stakeholders can support the development of Ethereum with minimized individual costs by raising funds and voting on their use.
With the Moloch DAO, Ethereum 2.0 development can progress more efficiently and effectively, benefiting all Ethereum users and stakeholders.
Moloch DAO: Efficient Cost-sharing for Ecosystem Benefits
In Moloch DAO's unique form, stakeholders come together to share costs efficiently, with the aim of increasing overall ecosystem benefits. But before delving into its mechanisms, let's understand how DAOs came to be.
The Origins of DAOs
In 2016, Slock.it, a German technology company, had difficulties raising traditional venture capital due to lack of funds. To solve this problem, they created a virtual venture capital firm called The DAO. The DAO operated with a smart contract that required investors to transfer ETH into it, which was then managed according to the rules outlined in the open-source contract code. Investment proposals were made and voted on by DAO token holders, and if the proposal received enough votes, funds were released to the project.
Moloch DAO: Cost-sharing for Ecosystem Benefits
Moloch DAO follows a similar concept to The DAO. However, instead of investing in individual projects, stakeholders pool resources to fund a collective goal. The pool of funds is known as the guild bank, which is used for the overall benefit of the ecosystem. Members of Moloch DAO can propose and vote on projects that the guild bank should fund.
Here is an example of how Moloch DAO works. Let's say members want to improve the Ethereum ecosystem by funding the development of a new decentralized finance application. They can propose this idea to the other members of Moloch DAO, who will then vote on whether to fund the proposal. If the proposal receives enough votes, Moloch DAO will allocate funds from the guild bank to support the development of the new application.
Overall, Moloch DAO offers a unique and efficient way for stakeholders to share costs in order to increase the benefits of the ecosystem.
Here shows the comparison between traditional organization vs. DAO
Here is an image explaining Moloch DAO's governance structure
The DAO: The First Decentralized Autonomous Organization
The DAO is the first decentralized autonomous organization in human history. It uses smart contracts to distribute fair profits to every investor in the virtual venture capital (VC) that invests in blockchain projects.
In The DAO mechanism, you can initiate an application in your own name at any time if you disagree with a proposal and take your share of the fund pool. This is believed to be fairer than any democratic system in existence in real society. The DAO ensures absolute fairness and democracy through its code, which is difficult to achieve in human cooperation in the real world.
The establishment and operation of The DAO provide people with imaginative space similar to science fiction movies. However, many problems still exist. A game theory expert proposed 12 potential attack methods, indicating hidden worries behind The DAO's mechanism.
The DAO's failure was not due to game theory or mechanism design, but to a technical loophole that could be attacked with circular withdrawals. This was caused by two lines of code that were written by top developers. If the order of the two lines of code were reversed, The DAO would have been successful.
The Failure of The DAO and the Emergence of the Moloch DAO
In 2016, The DAO, a decentralized autonomous organization built on Ethereum, suffered a major hack that resulted in the loss of millions of dollars worth of ether. The failure was attributed to two lines of code that allowed the attacker to repeatedly withdraw funds from The DAO. This incident brought to light the potential risks and challenges of blockchain-based DAOs.
The Impact of The DAO's Failure
The failure of The DAO had three major impacts. Firstly, it led to the splitting of Ethereum into two separate chains: Ethereum (ETH) and Ethereum Classic (ETC). Secondly, it increased scrutiny of smart contract security and highlighted the importance of performing thorough code audits. Thirdly, it decreased developers' willingness to pursue complex and original projects through smart contracts, as seen by the decline in the number of DAO-related projects following The DAO incident.
The Moloch DAO as a Potential Solution
Years later, the Moloch DAO was created as a potential solution to the challenges faced by decentralized autonomous organizations. The Moloch challenge is a funding mechanism for public goods that aims to incentivize collaboration, transparency, and efficiency. It operates similarly to a traditional venture capital fund, but with a focus on funding public goods that benefit the wider community.
In summary, the failure of The DAO raised significant concerns about the viability of blockchain-based DAOs. However, the emergence of the Moloch DAO offers a potential solution to these challenges. As decentralized autonomous organizations continue to evolve, it is crucial to learn from past failures and strive towards creating secure, transparent, and sustainable platforms.
This article contains only the author's personal opinions and does not constitute investment advice. Investors must make their own decisions and assume responsibility for any resulting losses.
The headline of the hacking incident that happened to The DAO in 2016
The logo of Moloch DAO