I am writing this piece thinking about two things. First, I didn’t realize just how much some people despise the very idea of web3 - part of the difficulty is the intensity of opinion by intelligent people on both sides with Musk tweeting “Web3 sounds like bs”.
Second, what’s up with the crypto utopians breaking big ideas into bite-sized initialisms - think ICOs, Defi and NFTs. Of course, the headline says it all but let’s go down the 🐇🕳 of a newly favoured three-letter code, "DAO" (short for decentralized autonomous organization).
Enter DAO
Simply put, "DAOs are internet communities with a shared bank account and ownership" — run by code on the blockchain.
internet communities: a group of people with a shared goal (could be 3 friends, 100s or even thousands of strangers online)
shared bank account: to pool funds together in a community-owned wallet that is:
- transparent (anyone can see balance and transaction history)
- require community approval to use the funds (right to vote “yay” or “nay” on any and every proposal facing the organization)
- provide members with a voice through governance
shared ownership: between its community members (governance rights)
Break DAOn
Think of DAO as an exclusive club where the price of entry is an NFT or holding a certain amount of community launched tokens. Now, think of NFTs or the token as a ticket to get access to a paywalled channel or the discord server.
The Insides
Once you become a member of the community, you'll be introduced to an exclusive chamber - let's say Discord. By entering the discord, you'll be exposed to a dozen of channels and groups contributing to their own respective vocations. You'll see someone leading the team but there is no higher reporting.
That brings me to discuss how the control in DAO is spread out rather than hierarchical.
No Centralized Leadership
Unlike traditional corporations, DAOs are managed by the members who are responsible for decision-making and community participation. If someone has management or operational idea, the process of getting it heard is much easier compared with customary corporate entities. Just share the idea with the community members for everyone to consider and vote upon in a democratized manner. Proposals that achieve some predefined level of consensus are then accepted and enforced by the rules instantiated within the smart contract.
No single individual or group of individuals owns or controls a DAO. Because DAOs use blockchain technology, they are transparent to the public. This is a fully decentralized management system.
If implemented to the traditional, we can really get rid of bad bosses once and for all. At least that’s the promise!
Why DAOs?
DAOs are the modern, tech-enabled successor to the legacy corporation with a goal-directed towards creating active discussion and community building, more than to generate a profit.
So instead of:
opaque financial statements
decisions made by a few people
board meetings that no outsider knows about
DAOs offer the opposite: everything is “on-chain” via smart contracts.
Although, I have not come close to figuring out how a DAO could potentially solve all the problems in traditional institutions. But there are a ton of reasons why DAOs can overcome the downsides of corporate.
Fourfold Interest of a DAO:
Transparency: The rules are the rules are the rules. This is because a DAO inherits from blockchain technology its ability to record all the actions being carried out.
Globalisation: Services offered are handled automatically in a decentralized manner, which eliminates borders and democratizes access that would not otherwise be available to many people.
Flat, and Fully Democratized: A DAO works without hierarchical management. Everyone who is part of the organization can contribute ideas and vote for them, thereby decentralizing the organization. Community members can create proposals about the future operations of the protocol and then come together to vote on each proposal.
Community with a Bias towards Action: DAO enable communities to come together and monetize their work while simultaneously shaping the future of web 3.0.
An unconditional bias towards action and not just endless discussion is what makes it thrive.
But if you are sceptical, I get it. The future remains to be seen. But the recent wave of the mainstream, institutional investment in DAOs directs a sign of growth for the industry.
If you are interested, welcome to the internet boardroom!