Tune Into the Ins-and-Outs of All-Things-DAO
Article by Psalm Ogbonna Cover Art by Dippudo
TL; DR
What are DAOs?
They are fully democratic autonomous groups run by an automated generally accepted constitution (smart contracts) etched on a blockchain.
They are set to be the future of organizations.
DAOs vs traditional organizations
Structure: DAOs are democratic and egalitarian in structure as opposed to the hierarchical structure of traditional organizations.
Trust and transparency: The decentralised nature of DAOs makes them transparent and builds trust as opposed to the closed nature of traditional organizations.
We are all in this together: DAOs are participatory, and members have a sense of belonging.
Global outlook: DAOs have a global scope, attracting people from all over the world rather than the private nature of traditional organizations.
DAOs: LLC OF THE FUTURE
DAOs will replace limited liability companies, with tokens representing equity
DAOs will reduce the cost of starting up new companies.
DAOs CROWDFUNDING FOR CHANGE
DAOs can be a force for good and positive societal change.
Thinking and reading about DAOs I am somewhat inclined to say the famous words “the machines are coming!” or “the DAOs are coming in this case.” But before I get ahead of myself let’s establish the basics.
What Are DAOs?
DAOs are Decentralized Autonomous Organizations. They are what I call fully democratic autonomous groups that are built around automated generally accepted constitutions (smart contracts) etched on a blockchain.
It is a utopia of sorts for those who have dreamt and thought of a truly democratic organization where every member matters.
DAOs have been called an internet community with a bank account, which no doubt attempts to describe it as it is. But the optimist in me believes this definition to be narrow because I think it would eventually evolve beyond that.
Until now, existing DAOs have been organized around open-source blockchain-based projects and investments in NFTs [such as PleasrDAO buying the original Doge meme NFT] etc, but again I consider these to be baby steps too. I am in no way an expert but looking at the available information about DAOs, I just have a strong gut feeling that there is something more behind the curtains that will be revealed in due course.
DAOs Versus Traditional Organizations
DAOs are unique in structure, they fully embody the words decentralised, autonomous and egalitarian.
DAOs are… decentralized, autonomous and egalitarian.
What about structure?
Imagine a group of people with a common goal of, say collecting vintage music albums coming to form a community where they can pull resources together to achieve this goal and also share the proceeds among themselves. They form a DAO and decide on the structure, governance and rules of the organization and in this case, instead of this constitution sitting somewhere, collecting dust only to be consulted when there is a dispute, it is encoded into the blockchain and is regularly reviewed based on the votes of the members on the different aspects of governance when necessary. In cases where changes are needed, everybody votes, the changes are effected and handed over to the blockchain for keeping and enforcement.
The decentralization of DAOs is opposed to the hierarchical structure of traditional organizations with management and a board of directors. No single entity calls the shots in DAOs as opposed to the traditional organization where it’s a game of the employees and shareholders vs management.
This structural adjustment from organizations as we know them breeds trust and transparency.
Trust and Transparency
These two are recipes for strong and thriving organizations. Since most times DAOs are comprised of strangers who meet on the internet and the only thing they have in common is their shared goal. There needs to be a level of trust for such communities to thrive, this is what the structure previously talked about would bring.
With the issues around trust and transparency out of the way, DAOs stand a stronger chance of thriving and reaching their goal than traditional organizations.
DAOs are resistant to external influence faced by traditional organizations where one big money bag swoons and takes over the show.
The fear of a corrupt CEO serving his interest or a shady CFO manipulating the books is eliminated in DAOs.
The confidence level of members in an organization determines the amount of commitment they give to the organization. Trust in the way the organization is run inspires confidence in the members and from what we can see DAOs bring this to the table.
We Are All in This Boat Together
There is a sense of belonging that members of DAOs feel and express when their opinion matters in crucial decisions of the organization and the running of it. For example, DAOs that are built around crypto projects where every member holds a certain amount of a specific token, everyone works towards making the project work because its success or failure affects every member of the community who is invested in it.
DAOs encourage participation; from the way they are structured into sub-communities with shared interests, every member of the DAO works in his own microcosm to build the group. There are also internal jobs within the DAO. Members work for the DAO and are sometimes given tokens as a reward for their work. Such incentives induce them to put in more effort and skill for the growth of the DAO.
A Global Outlook
From the blast of the whistle, DAOs are set to conquer the world, the setup and operation are global in their outlook, unlike traditional organizations that are private and global in operation. DAOs are like the big-hearted mother with arms widespread saying “come to me, everyone.” The entry barrier to DAOs is lower than the traditional organizations attracting more potential members that share the same interests with the DAO. Recently, I came across a DAO where members share short stories, scenes or dialogues, they create NFTs out of them and are sent tokens for some tasks carried out. Joining was easy for me: I didn’t have to go through all the paperwork traditional companies may require. In a matter of minutes, I was a member and after a few hours, I was up to speed with the way the DAO runs without the hassle of the traditional organizations.
DAO: The LLC of the Future
DAOs look set to replace limited liability companies in the future, with tokens replacing equity.
Mark Cuban tweeted that, “The future of corporations could be very different as DAOs take on legacy businesses. It’s the ultimate combination of capitalism and progressivism. Entrepreneurs that enable DAOs can make $. If the community excels at governance, everyone shares in the upside. Trustless can pay.” He also said that “There are so many features and processes in any given company that can be more efficient and productive using a decentralized, trustless approach. As companies are built on this approach we will see some incredibly disruptive businesses built.”
Cuban even believes that some systems would work better as DAOs.
“Health Insurance claims will be far better handled with validators in a trustless environment than the way it’s done now. Local banking being administered by a DAO.”
DAOs [are like] taking your business public from the very first day.
The cost of starting up a new business would be reduced with DAOs and it would be like taking your business public from the very first day, attracting people with similar interests.
DAOs Crowdfunding to Achieve Change
DAOs can be a force for good and positive societal change, for example, Klima DAO accumulating $100M in carbon offset to reduce their carbon footprint and aid the fight against climate change.
Cuban tweeted,
“KLIMA has been operational for less than 1 month. And it’s a DAO. Which means its direction is controlled by those who are in the community. So the opportunity is there for all of us to set the direction.
Conclusion
DAOs are set to disrupt the way organizations are seen and run with their decentralized, democratic and transparent structure. In the future, we will see more DAOs taking up societal causes as part of their goals. It’s just a matter of time but be on the lookout because DAOs are coming.
It’s just a matter of time so be on the lookout because DAOs are coming.
Author Bio
Psalm_Ogbonna is a content writer, a technical writer and a lover of fiction.
BanklessDAO is an education and media engine dedicated to helping individuals achieve financial independence.
