Bitsquare as Decentralized Autonomous Organization

EDIT: The term DAO has been destroyed by the TheDAO, so we will not use that anymore. I still leave that article in the original form. More descussion here:

DAO stands for Decentralized Autonomous Organization [1] [2].

It is an organisation which is defined not by the rules or laws or regulations but by code and software. It uses a decentralized network and a blockchain for holding the data and executing the rules. It aims to be autonomous in the sense that it implements mechanisms for self regulation, voting and for creating incentives for human participation in the areas which cannot be meaningful fulfilled with software only.

Bitcoin itself can be sees as such a DAO. People who invested early by buying or mining bitcoin, those who helped to build the infrastructure or simply spreading the word, they got a reward in form of the value increase of the tokens they purchased in early days.
User, miners, developers all who participate have influence with their activities in which direction Bitcoin as a whole develops.

One important element is that the incentives represented by the token value can serve as alternative funding model. If the nature of a projects needs a huge user base it is very hard to achieve the network effects to get there. With incentives it might become easier to make this happen.

Why is a DAO considered for Bitsquare?
Bitsquare is not a startup but funded by personal savings and donations. But of course such a funding model has it’s limitations.
If Bitsquare should be widely and globally used it needs a model which is able to scale.
A distributed ownership model based on participation should not only create sufficient incentives but is also needed to achieve decentralisation and censorship resistance on the organisational layer.

Bitsquare has the lucky situation that money is already present as a part of the project itself and it is common for exchanges to take fees for the trades. Furthermore fees are required as protection against several possible abuses like spam, market manipulation or data harvesting.
So the trading fees are perfectly suited as revenue source for the DAO.

The fee will go directly from the trader to one of the shareholders. Depending on the stake, each shareholder receives a stream of micro payments from the users.
The code for executing that payment is included in every client software and the fee payment gets verified by the other trader.
The tokens representing the shares will be issued as kind of colored coins on the Bitcoin blockchain.
The tokens are tradeable over Bitsquare and are as pseudonymous as bitcoin.
Tokens represent also voting rights for any important decisions like the height of the trading fee or the amount of new issuance for the next month.

Each month the board issues new tokens. The board is the group of the top 3 stakeholders.
The new tokens are used for rewarding participants like developers, designers, community managers or anyone who contributed significant value. The judgement for the value of a contribution is done by the board and is not very different like in a normal work relationship.
The incentives align that good work will get rewarded sufficiently to establish a long term work relationship. Bad management performance of the board would devalue their own stake. So they are naturally very interested to make the best decisions and not lose their best contributors. If they fail to manage the project good it might lead to a fork.
So open source serves as insurance and a can be seen as the best “consumer protection”.

The trust into the top stakeholders cannot be avoided as the task to hire and compensate developers cannot be done by machines or by voting in a meaningful way. But the incentives align to avoid abuse.

Communication and management of such an swarm-like organization is for sure a challenge but luckily there are successful real life examples like the pirate parties.
Rick Falkvinge’s book - Swarmwise [3] - is a great inspiration for that path.
Everybody who wants to contribute should have a look to that book.

The development of the DAO will be an iterative process.
We will start with the minimal basics needed but I expect that it might emerge into its own sub project, which might become a useful tool for organisation and communication for others as well.
I expect that the DAO will be implemented in about 3-4 months.
Before it is in place there are no possibilities to “invest”.
We also don’t plan to do a ICO.

People who want to contribute to Bitsquare before the DAO is in place need to be aware of the risk that there is no guarantee that it will be ever deployed and should only invest so much time and effort as they are willing to donate to the project on a pure voluntarely basis without expecting any reward.

I hope that gave a basic idea about the DAO. Many details are not defined yet and the final version might be different from that draft.
A whitepaper with all details will be published hopefully soon.

I am sure there might be many questions, but please have patience until the paper gets published.



Does anyone has suggestions for the name of the DAO token?
I was once considering SyncoNote (synergetic cooperation), but not 100% sure about that.
A name with a resference to Bitsquare might be good. Bitshares is unfortunately already used :slight_smile:

I also would love to find another term for DAO as THE DAO (what presumptuousness, not even MS called its Internet explorer THE BROWSER) has squatted that name/concept and I fear much damage will come from it once the bubble bursts.

When many DAOs exist the tokens will have names associating to the particular DAO they represent, similar to shares in normal corporations. So why not simply Bitsquare tokens, Bitsquare notes, Bitsquare shares or something to this effect. Not sexy but informative.

1 Like

Would say, informative is sexy in this case :wink:

I agree. Will stick with Bitsquare shares or Bitsquare tokens as long we don’t find anything else.

What do you think about using another term rather than DAO as “The DAO” has squatted the general term with their special use case for a decentr. investment company and the pure form (completely decentralized and trustless) of a DAO is not implemented by any project so far (and it is not the main objective of Bitsquare’s DAO model to make it completely decentralized and trustless).
I was using Synergentic Cooperation in the past. Another would be Participatory Ownership Model. What do you think?

1 Like

The only problem with calling it something like that (Synergentic Cooperation or Participatory Ownership Model) is that nobody will know what it is, lol.

If you want to avoid DAO perhaps you could use DAC (Decentralized Autonomous Corporation) which I think was the original term coined by Dan Larimer before Vitalik broadened it out to DAO in order to include things that aren’t businesses. At least then most people within the space would know what it refers to.

Yes I agree, a new term needs to be educated…
DAC might be an alteranative or simple DO (Decentralized Organisation), as the Autonomous part will not be fullfilled neither by Bitsquare, not the others soon. To get to a real autonomous model we need to find working and efficient governance models, which is the hardest part IMO. Voting is not sufficient to achieve good results for most problems. Something in the line of Liquid Democracy might be the way to go, but that will take for sure some time to have something working available.


I definitely think something like Liquid Democracy would be needed too - hopefully ‘The DAO’ will be helpful by developing open source solutions for things like that which others can use. There is also something called ‘Wings’ which is developing a platform for creating DAOs on Bitcoin or Ethereum that I think is going to include a reputation system and some kind of delegative voting mechanism.

By the way, have you thought about what protocol you are going to built this with, if it does go ahead, for example Ethereum or Rootstock or even Counterparty etc?

I met the Wings dev in tel Aviv, very smart guy.
I don’t need any DAO platform as the implementation is very simple and integration would be more effort than it will give advantage. I discussed it with many dev on my tour and I am pretty convinced about it. Will write up in a paper as soon I find time.


I think I vote for DO or DC (Decentralised Corporation). These corporations will not be autonomous until someone solves the majority attack problem and the voter apathy problem. I think Wings can solve part of these problems using some “ground rules” or “constitution” of the DO. But before this is in place the corporations will not be autonomous.

1 Like

I was thinking about token names: since the project is bitsquare, I thought of bitbit (it is bit^2) - like a bit of bitsquare. Also since it is a decentralized exchange, it can have the DEX of EX in it. dexshares? bexshares?

I like Decentralized Cooperation. Not sure if we need “Autonomous” in the middle. Cooperation sounds more Bitsquinish IMO. As for token name, how about Bitsquare Bits (BSB)?

1 Like

The “Mother of all DAOs” has turned out to be the killer of all DAOs. With using a general purpose term as their brand they destroyed the term as well (not to talk abou the damage they create for Ethereum). Very presumptuous and irresponsible attitude…

Anyway we need to adopt to the situation and to avoid any parallels to their flawed concept, I will not use DAO, DC, DAC, or any other similar term.
As I still did not find a better one I stick with the original “Synergetic Cooperation” which describes the core principles quite good IMO.
Decentralisation and trustless-ness is not and cannot be an objective for the initial version anyway. It is more about a way to work together in a cooperative way to produce synergies. As I will be for a certain time the main stake holder with the effort I put into the project, it cannot be soon fully decentralized and trustless. Also it will require powerful tools for governance, communication and decision making before that can happen (simple voting is not sufficient). Those tools do not exist yet. Liquid Democracy - which is used by the Pirate Parties might be the closest, but is not sufficient for our needs.
So it will be a work in progress for probably 2 years until we get there.

1 Like

I would definitely include the word “square” in your tokens. BitSquares? SquareTiles? SquareBricks? As in everybody owns some tiles/bricks that form the market square on which is traded :wink:

On that note, I was wondering why it was chosen to name Bitsquare “The decentralized bitcoin exchange”? Why not a broader description such as cryptocurrency exchange/digital asset exchange?

In that light, the buttons “buy btc” and “sell btc” are a bit confusing too. Not everybody is after BTC. Would buy/sell fiat/crypto be a better solution?

1 Like

Re tokens: Thanks for your suggestions! Maybe just Squares?

Re the name: Bitsquare “The decentralized bitcoin exchange” Bitcoin is always a part. You cannot trade crypto-crypto or crypto-fiat. so thats why we have btc in the title.
But it might change in the future, I ma not perfectly happy with the subtitle.
“Bitcoins native exchange” I liked more but seems that most people don’t understand that.

Re buttons:
Yes for the altcoins we need another UI for that because they are used to think I want to buy ETH or sell ETH (against BTC) and not the other way round. It is just quite a bit of effort so thats why its not impl. yet, but on the roadmap.

Squares sounds like a winner to me, nice and simple.



+1 for squares.

1 Like

How about Bitcubes?

If Bitsquare squares Bitcoin. Synergetic corp cubes it. :slight_smile:

Yes I considered Bitcubes already as well :-).