The DAO Transparency Index: Measuring an Organization's Transparency & Trust

The DAO revolution may seem extreme, but the same was thought about electricity, automobiles and the Internet.

Talk about President Biden’s Executive Order on the “Responsible Development of Digital Assets,” and Senator Elizabeth Warren’s new proposed bill, while well-intentioned on the surface, would require the invasion of privacy of US taxpayers and mandatory self-reporting, which would be hard to enforce.

Most people think the SEC would regulate blockchain. The SEC is the most influential regulatory body in the United States when it comes to crypto, but have been very quiet as it has become obvious that they can't tame this worldwide movement.

SEC Commissioner Caroline Crenshaw released a statement titled “Statement on DeFi Risks, Regulations, and Opportunities” on Nov. 9, 2021. Important points are:

• decentralized projects can continue as long as no existing laws are broken;
• the SEC is willing to take a passive approach and allow the industry to experiment and grow.
• more transparency is needed.

Now is a good time for the community to start discussions on improving transparency and raising trust in the DAOs. We won't need regulators to set their own terms. Instead, we must be:

• taking ownership of the responsibilities,
• setting open standards to bring unity in web3,
• self-regulate

We need to set some boundaries and definitions for a DAO transparency dashboard to give the DAO value.

We got this far with innovation and experimentation. There could be criminal organizations that take the form of a DAO, but web2 has shown the world the power of angry communities and their ability in taking entire organizations down.

The ideal outcome is to use the power of data to make it evident whether a DAO is trustworthy.

DAOs will be defined under similar frameworks to:

• Assign a transparency index score
• Show areas in which the DAO could improve
• Show the areas where the DAO is excelling.

Transparency could consist of three principles:

• Metric A: Finance (i.e., financial health, token liquidity, revenue streams and debts, etc.)
• Metric B: Governance (i.e., degree of decentralization, token holder participation, consolidation of power, smart contract execution, etc.)
• Metric C: Communication (i.e., financial disclosures, internal communications, social and press/media presence, etc.).

The DAO Transparency Index is a WIP.

The World Wide Web Consortium, or W3C, was founded in 1994. Thirty years later, D3C is established to assist in the new era of information. Finally, the infrastructure projects of 2017-2021 are beginning to take shape and become more usable.

The three D’s represent the core components that power web3 are

• Decentralized Finance
• Decentralized Organizations
• Decentralized Data