I built an on-chain game that can only be played by two DAOs. I can’t predict nor influence what will happen next, but it gives me insight into how DAO governance works (and how to make it better).

Imagine a tic-tac-toe game on a very large field. To win, you must get 5 in a row, column, or diagonally before your opponent does.

But there’s a twist: the players are PartyBid parties.

This means each move you see on this board relies on the governance process. Someone makes a proposal, party members vote, and when the proposal gets a majority it can be executed.

To make the game more interesting, there’s some ETH at stake. Each party raised 1Ξ each by bidding on the ✕ and ○ NFT tokens. John Palmer contributed 1Ξ on behalf of PartyDAO. Another 0.25Ξ was raised by minting the XO Checks derivative NFT.

The winning party will get 3.25Ξ that they can re-distribute to its members. 325% ROI on the initial contribution.

I think this game is interesting on two levels.

Level 1: Coordination

Strangers need to collaborate together to play the game. This means selecting leaders, picking strategy, and casting a vote in time.

DAO participation is a big problem with distributed organizations. I’ve set the passing threshold to 50%, which is really high for casual communities like this one.

Fortunately, PartyBid parties contracts support delegation, and both “players” took advantage of that. Within a week of formation, each party had a few leaders that collectively holds > 50% of the voting power.

Participation conforms to the power law: each party has 2-3 people who are actively submitting proposals and voting. Then there are 3-4 more people who participate in discussions. The rest of the 30+ wallets are dormant. Some of them didn’t even delegate their votes or join Discord.

There’s a massive asymmetry in the holder/leader relationship. Most leaders have 2.5% ownership of a party, the same as everyone else. This means that when they win, they only get 2.5% of the prize pool when the ETH is distributed. However, they hold double-digit percentages of voting power and spend their time and ETH on discussions, voting, gas fees, etc.

Level 2: Liquid Ownership

Each party's ownership is represented as a liquid NFT token. This creates an interesting game theory plot where someone can purchase tokens from the opponent party and sabotage their voting process. With the expected ROI of 325% and the holder/leader asymmetry, this strategy can be very viable.

The game happens on-chain, so this plot can be encoded in a totally trustless way. For example, a smart contract that holds the bribe will only pay it out if the specific party wins the game.

Unfortunately, the players haven’t engaged in this level of play yet. I feel like to be viable it requires higher stakes: either 10-100x of the prize pool or 10-100x the publicity of the game.

Double Agents and the Unexpected Social Value

Early on I configured Discord to mark people with both ✕ and ○ tokens “double agents”. I thought it was just a funny little detail, but it actually spawned a lot of discussions on each party’s channel.

Eventually, I decided to revoke double agents’ access to private party channels. This caused most of the double agents to sell half of their party tokens and pick a side. It was surprising to me because at that time the expected outcome of holding both party tokens was already ROI-positive.

On-chain Governance is still in its infancy

Finance people like to joke that crypto is repeating every banking mistake. I think the same is true for governance.

• Coordination is hard and expensive

• Participation is low

• Hard to get everyone together, the communication channels are too distributed

• Leaders are not fairly compensated (based on their contribution/upside ratio)

• Delegation rules are very limited

XOGame Smart Contract

Here’s the source code of the smart contract that underpins the game. I wrote a little thread about optimizing the storage layout.

Commemoration NFT

If you loved the concept of the game and want to show your support, feel free to mint this open edition on mint.fun. The designs are made by 0xHab and inspired by VV Checks. The minting will be closed once one of the parties wins the game. The price is 0.005Ξ and all proceeds will directly go to the game prize pool.

Conclusions

XO Game became the top PartyBid protocol user by the number of party proposals.

As of 2023-02-05, the game is still going on! You can join either party by purchasing their governance tokens from the existing members.

What I really love about on-chain experiences is that they really transcend the creator. Once I deployed the smart contract and deposited the prize funds, the game is being played without my involvement. I have no authority over what’s going to happen.

Disclaimer: This game was not sponsored by PartyDAO (except the 1Ξ prize pool contribution from JP) or any other entities. Follow w1nt3r_eth for more.