Differences in Mechanism Between Company and Crypto Community (Part 3)

Discussion on Core Team of the Chainless Project

Community Core Team vs. Project Core Team:

In the previous section “Design Concepts of Profitable Crypto Community ‘Chainless’,” the concept of the “community core team” was mentioned, but this topic was not fully expanded. In fact, core teams exist not only in communities but also in projects. A project’s core team typically includes departments for R&D, operations, backend support, and other functions. In the early stages of a project’s development, the community core team is just part of the project’s operational department. However, as the project develops, the community may gradually rise to become the decision-making body.

Comparison: Bitcoin’s Community Structure and Governance Mechanism

Taking Bitcoin as an example, its governance structure can serve as a reference. We suggested in a previous article that the Bitcoin community can be divided into three sub-communities:

1. User Community: 50% voting power.
2. Mining Community: 25% voting power.
3. Developer Community: 25% voting power.

In Bitcoin’s early development, decision-making power was concentrated in the hands of Satoshi Nakamoto. As the project evolved, Bitcoin gradually transitioned from a highly centralized decision-making system to a decentralized community governance mechanism. This process took 13 years and involved the replacement of three leaders. Throughout this period of time, the decentralized mechanism was continuously improved, gradually achieving reasonable power distribution and community autonomy.

Decentralization Plan of “Chainless”

For the “Chainless” project, its white paper plans to complete the transition from a centralized to a decentralized decision-making mechanism within 6 years. In the early stages of the project, the community’s main responsibility is promotion, while decision-making power remains with the project team. This model helps reduce high risks in the early stages of entrepreneurship and ensures orderly project advancement.

Necessity of Transitioning from Centralization to Decentralization

In the early stages of a startup, centralized decision-making is correct and necessary:

• Without a core team, a white paper, and a clear startup roadmap, the project will lack direction and execution.
• If entrepreneurs do not communicate with the community and customers and claim their project is “decentralized,” it is either ignorance or deception.

Current State of Core Teams in Cryptocurrencies

Cryptocurrency projects represented by Bitcoin and Ethereum show two different core team operating models, reflecting their respective product goals and governance philosophies.

Bitcoin: A “Maintenance-Free” System without a Core Team

The Bitcoin system is essentially a “maintenance-free” automated system, so it does not have a traditional concept of core team. This design aligns with Bitcoin’s product goal—achieving decentralization and autonomous operation.

Although the Bitcoin system lacks a core team, it has a developer community called “Bitcoin Core.” Currently, this community has only four core members:

• Roles and Responsibilities: Their main responsibility is to implement community decisions and upload code to the Bitcoin system.
• Compensation Mechanism: These core members do not receive fixed salaries and rely solely on community donations to sustain their work.

This design ensures a high level of decentralization but also requires strict process and procedures to ensure the long-term stable operation of the entire system.

Ethereum: Core Team and Ecosystem Foundation

Unlike Bitcoin, Ethereum has a distinct core team, which serves as the governing body of the Ethereum ecosystem – the Ethereum Foundation.

• Financial Operations: According to Ethereum’s 2021 annual report, the total expenditure for the year was US$48 million, with approximately US$5.1 million used to support the Foundation’s daily operations.
• Personnel Expenses: Estimated at a 1:2 cost ratio, around US$1.7 million was spent on personnel costs, covering the core team’s expenses. However, this does not include team members who do not receive salaries, making it difficult to count the exact number of core team members.
• Funding Allocation Models: The Ethereum Foundation adopts two ways to distribute ecosystem funds:
  • Delegating some funding allocation tasks to experienced, outsourced teams.
  • Directly providing financial support to external groups to foster innovative projects.

Comparison and Summary

• Bitcoin’s Advantages: Highly decentralized, with a “maintenance-free” system ensuring long-term stability.
• Bitcoin’s Limitations: Lacks flexible financial support and innovation mechanisms.
• Ethereum’s Advantages: Promotes ecosystem development through deep collaboration between the core team and the community, and performs well in innovative projects.
• Ethereum’s Shortcomings: Lack of clear division of responsibilities, transparency needs improvement, and there is room to improve operational efficiency and community engagement mechanisms.

Reasonable Scale of the Core Team

When discussing the scale of the core team, typical cases of different types of enterprises and models can be compared to analyze the relationship between the core team scale and the business model, providing targeted reference and suggestions.

Core Team Scale of Platform Models: Netflix and YouTube

• Netflix
  • Market Value and Model: As of May 2, 2022, Netflix’s market value was US$88.6 billion. As a user platform, all content is organized or produced by an internal team.
  • Team Scale: Netflix has about 10,000 employees to support content production and platform operations.
• YouTube
  • Market Value and Model: YouTube, with an estimated market value of US$400 billion, operates as an ecosystem and user platform.
  • Team Scale: Although the platform manages around 50 million content creators, the core team has fewer than 1,000 members.
  • Model Characteristics: YouTube exemplifies the typical Web 2.0 model, managing the ecosystem instead of creating all content in-house, thereby significantly reducing the core team’s scale.

Comparison of the two reveals the contrast between Web 1.0 and Web 2.0 Models:

• Web 1.0 (Netflix): Operates on a self-owned content model with a large team.
• Web 2.0 (YouTube): Focuses on ecosystem management with a small core team but a broader management scope.

Core Team Scale of Investment Management Model: Berkshire Hathaway

• Market Value and Model: Berkshire Hathaway’s market value is around US$700 billion, with an investment management business model.
• Team Scale: Regardless of the change in the scale of assets under management, the core team size remains around 30 people.
• Characteristics of Management: Berkshire focuses on assessing investment targets rather than direct management, allowing the core team to remain streamlined in the long run.

Core Team Scale of Cryptocurrency: Ethereum

• Core Team Size: Based on Ethereum’s salary data, the core team size is estimated to be less than 10 people, and at most, not more than 15 people.
• Efficiency Issues: Despite the small core team size, Ethereum’s development efficiency is low, characterized by:
  • Severe project delays.
  • Frequent adjustments to goals.
• Analysis of causes:
  • Unlike Bitcoin, Ethereum’s ecosystem requires active management, which goes far beyond the investment model of Berkshire Hathaway, making it difficult for a small team to effectively address the complex ecosystem demands.

Core Team and Its Incentive Mechanism of the Chainless Community

Fundamental Goals of the Core Team

The fundamental goal of the core team of the Chainless Community is to tightly connect “users, employees, and shareholders” through the bonding role of the token (CLY), forming a community of shared destiny. The ultimate goal is to drive the long-term rise in coin prices and make the project a sustainable “effortlessly earning project.”

Three Major Tasks of the Core Team

1. Development of the Chainless System Ecosystem
2. Organization and operation of the Ecological Community
3. Organization and operation of the User Community

Development and Operation of the Chainless Ecosystem

• During the early stages of the project, the development of the Chainless ecosystem is led by the Chainless project team. As the project matures, the operating work will gradually be handed over to the community team.
• For the operation of the ecological community, we will refer to the experience of Ethereum and continuously adjust and develop according to practice.
• It is expected that the core team will be controlled to within 15 people.

Management of the User Community

• The Ethereum Foundation does not manage the user community, but Chainless believes that the management of the user community is crucial.
• Reasons:
  • Without effective user community management, it will not be possible to form a community core team, nor will it be possible to smoothly transition from centralized decision-making to decentralized decision-making.
  • Only by achieving community governance can the project become the most important infrastructure in the cryptocurrency ecosystem.
• Clearly, the Ethereum Foundation has not yet formed an effective transition mechanism, and Chainless will strive to resolve this problem.

Structure of the Chainless Ecosystem

• The Chainless ecosystem includes the Chainless ecological community, which is the largest part of the project’s investment, accounting for 30% of the total CLY tokens.
• Through this ecosystem design, Chainless can provide continuous resource support and promote the long-term healthy development of the projects.

Incentive Mechanism of the Core Team

• Overall Incentive: The incentive for the core team accounts for 6% of the total amount of CLY tokens, which comes from the 30% share of the ecosystem.
  • Since the goal of the core team is to serve the ecosystem, its incentive comes directly from the contribution of the ecological community.
• Similarities and Differences with the Ethereum Model: The Chainless core team adopts a multi-task team development model, similar to Ethereum; it still maintains a unified management structure, which is a centralized development structure.
  • The current development team has grown to 40 people to meet the development needs of the Chainless ecosystem.
• Community Management: The user community is served by volunteers, who are not paid, but small rewards will be provided to encourage volunteer participation.

Formation of the Core Community Team

Governance Model of the Core Team

The formation of the core team in the Chainless community will adopt the governance approach mentioned in Chapter 3, transitioning gradually from centralized management in the early stages to decentralized governance to suit the different stages of community development.

Compensation Mechanism for the Core Team

In the early stages of the project, core team members will receive a fixed salary. Referencing the experience of Ethereum, the salary level during this stage will not be very high, driven mainly by enthusiasm and belief in the project.

Formation Methods for the Core Team

The formation of the core team is divided into two main stages:

1. Early Stage: Relying on Natural Growth of the Community

The formation of a cryptocurrency community has the characteristic of “natural growth.” The early community typically belongs to the marketing department of the project’s core team.

• Logic of Natural Growth:
  • The positions mentioned in the early white paper, such as in marketing centers in North America and Europe, are not filled through recruitment but rather through the natural development of the community.
  • Community members are attracted by the three elements of interest, benefits, and belief, and grow into believers and evangelists through long-term participation, gradually gaining community recognition.
• Advantages of Community Screening:
  • Wide Range: Community members come from all over the world, providing a large pool of choices.
  • Long Cycle: The performance and ability of members can be observed over a long period of time.
  • High Flexibility: There are many candidates, and the cost of replacement is relatively low.

2. Development Stage: Global Recruitment of High-Potential Talent

As the project develops, the source of core team members will expand globally, adopting a more proactive recruitment model.

• Standards for High-Potential Talent:
  • Possess top-tier skills or abilities in the industry.
  • Bring their own audience, attracting more attention and resources to the project.
  • Have clear performance goals, with rewards tied to these goals.
• Community Acknowledgement Mechanism: Even external high-potential talents need to be acknowledged by the community to ensure they align with the community’s culture and goals.

Relationship Between Core Team and Company

Core Team and New Generative Relations

Satoshi Nakamoto established a new production relationship through Bitcoin, integrating computing power, programmers, and users. This structure is considered the “Watt Steam Engine” of the information age, breaking the boundaries of traditional companies and giving rise to social organization forms that adapt to new production relationships.

Building on this foundation, the Chainless System further develops by exploring more efficient governance models through the collaborative operations of user communities and ecological communities. Compared to the Ethereum Foundation, the Chainless System adds management to the user community, making it not only a bond of community mutual aid but also an important support for transitioning the project from centralization to decentralization.

Role and Governance Model of the Core Team

1. Role of the Core Team
   • The Chainless Core Team is equivalent to a non-equity company structure, similar to the Ethereum Foundation.
   • The Core Team does not hold equity, only the right to operate the project, and is ultimately responsible for the operation of the Chainless System.
   • Ideally, the size of the Core Team will gradually shrink, eventually achieving the goal of complete community self-governance.
2. Governance Logic of the Core Team
   • The Core Team, community, and project founders form a group of shared destiny, while also maintaining mutual checks and balances:
     • Community: Holds the final decision-making power.
     • Core Team: Responsible for daily management, similar to a “property management” organization.
     • Project founders: Bear cornerstone responsibilities and form a check on the Core Team.
   • Exiting members the Core Team are to be replaced through community democratic elections, and the complete exit of founding members marks the realization of community self-governance.

Community Management Model Surpassing the Company

1. Characteristics and Advantages of the Community
   • The community surpasses the organizational structure of traditional companies, with no separation of equity and management rights:
     • Users are shareholders, employees, and supervisors.
     • Management rights are concentrated among community members, making management more transparent and efficient.
   • The management method of the community is closer to “democratic practice,” with group owners reflecting community intentions through delegated voting.
2. Learning and Innovation
   • Learning from YouTube: YouTube manages its 50 million creators and 2 billion users through metric-based management, setting a benchmark for community management. The early management of the community by the Chainless Core Team is similar to YouTube’s management of creators, executing operations and governance through intelligent metrics.
   • Overcoming Ethereum’s Limitations: Ethereum has not achieved complete decentralization in fund allocation and governance. Chainless pushes for the automation of fund allocation through smart contracts and artificial intelligence, further enhancing community management efficiency.
3. Technological Support and Automation
   • Artificial Intelligence and Smart Contracts: Utilizing artificial intelligence to reduce operational costs and implementing automated benefit distribution through smart contracts.
   • Market Competition and Token Issuance Mechanisms: Globally selecting talent and projects to promote community self-governance and intelligent operation.

Scale and Operating Standards of the Community Core Team

1. Scale Optimization
   • The smaller the Core Team, the better; the larger the community, the better.
   • The efficient operation of a small-scale Core Team is a key indicator of the competitiveness of Web3 projects.
2. Standards and Evaluation
   • The quality of a Web3 project can be simply judged by the size of the Core Team and the level of community operation.
   • A project that can generate significant distributable benefits and achieve “effortless earning” for participants is a sign of success.

Checks and Balances and Long-term Goals of the Core Team

1. Mechanism of Checks and Balances
   • In the Chainless System, project founders allocate part of the tokens to third parties, forming an effective check on the Core Team.
   • Preventing the Core Team from abusing power due to lack of supervision is a lesson learned from the Ethereum system.
2. Long-term Goals
   • Achieving complete community self-governance with founding members gradually exiting.
   • Completing the transition from centralization to decentralization within 3-6 years.
   • Promoting Web3 communities to become the most advanced management mechanism through automated operation and intelligent management.