The "rage-quit" mechanism in DAO: Rights protection and governance challenges

The concept of "rage-quit" is gradually gaining attention in the DAO field. With the development of decentralized autonomous organizations, situations such as forks, founders leaving, and even liquidation are becoming increasingly common, leading to the frequent appearance of this term in related reports. However, there are often misunderstandings regarding the understanding of "rage-quit," and even some professional media frequently misuse it.

Origin

At the 2019 Ethereum Denver Conference, a protocol for creating donation-based DAOs called Moloch v1 was introduced. Compared to other complex DAO operating systems, Moloch v1 stands out for its simplicity and elegance, achieving core functionality with just over 400 lines of code, greatly simplifying the process of managing and coordinating collective funds.

In DAO governance, the existence of minority opinions is unavoidable. The principle of "the minority obeys the majority" is usually adopted for decision-making and execution. However, this can also lead to the majority abusing their power, harming the interests of the minority. To address this risk, the Moloch protocol introduced the "rage-quit" mechanism.

How "rage-quit" Works

When a member opposes a proposal but fails to prevent its passage, the Moloch protocol provides a 7-day buffer period. During this time, the opposer can choose to "rage-quit" and reclaim their remaining rights in the contract before the proposal is executed.

The "rage-quit" mechanism has several key features:

1. Enforced by smart contracts.
2. Limited to members who voted against in the previous round of voting.
3. Can only be done during the buffer period after the proposal is approved but not yet executed.
4. Only the remaining shares in the contract can be retrieved upon exit.

It is worth noting that the premise of "rage-quit" is that members have direct and traceable contributions to the DAO treasury. This ensures the fairness and enforceability of exit rights.

Interestingly, in the Moloch V1 protocol, "rage-quit" is the only way to withdraw funds, and even the funded project parties need to go through this mechanism to obtain funds.

Evolution

The success of Moloch v1 has driven the development of version v2. Version v2 expands functionality, supports co-investment, and paves the way for broader commercial applications. This has sparked a wave of investment-type DAOs, with some well-known projects like The LAO, Flamingo, and MetaCartel standing out.

The "rage-quit" mechanism in version 2 has become more complex. Due to the involvement of investments rather than simple donations, considerations for the confirmation and splitting of equity in invested projects are required upon exit. Different protocols and variations differ in specific details, but the core concept remains unchanged.

Common Misunderstandings

It is important to recognize that "rage-quit" does not apply to all DAOs. Many members of DAOs have not directly contributed to the treasury, so their membership is not directly linked to the treasury balance. This limits the applicability of "rage-quit".

Similarly, when employees resign from the company, they usually do not have the right to withdraw company funds, even if they hold stock options or shares. Shareholders also cannot demand that the company return cash proportionally.

The so-called "rage-quit" that occurs in certain DAOs is often the result of negotiations among various parties, rather than an automated mechanism as originally conceived. Unless there is a clear corresponding relationship between the founders' rights and the DAO treasury, they do not have the right to withdraw funds upon their exit.

Nouns DAO is a special case, as its new contract after the fork supports features similar to "rage-quit". This is mainly because the operational model of Nouns is closer to a donation-based DAO, where each NFT auction brings traceable funds to the treasury.

Conclusion

The evolution of the concept of "rage-quit" reflects the innovations and challenges in the field of DAO. It is not only a technical function but also represents the exploration of freedom, fairness, and collective interests. As the DAO model develops, the definitions and applications of mechanisms such as "rage-quit" will continue to evolve, providing new ideas and solutions for the governance of future digital societies.