It’s Going DAO’wn – Corporate Takeover

Okay, not really

“If you want to go fast, go alone, if you want to go far, go together”

source: A. Shuraeva

A dream always starts first with one person. As an individual unit, the advantage is speed, but they can only take that dream so far without a team. As the business grows, so will the team – but not everyone will be treated equally. It will be efficiently hierarchal – executives, managers, staff, interns… a top-down approach, and the wealth will be distributed accordingly. The owner gets most of the profits because, after all, it’s his/her mission being executed. The workers, in return, get compensated for their specialized skills and time.

What inevitably happens to workers (especially those at the bottom) is they get burned-out, uninspired or unmotivated.

source: pixabay

The greatest disruption to the workforce happened during the COVID-19 pandemic. Whether people were laid off or chose to quit – it broke up our autopilot routines, and forced us to take a step back and reflect on our lives and careers. This most assuredly led to the Great Resignation, Big Quit or Great Reshuffle of 2021 (and a spike in divorces/breaks-ups, but I digress).

Individuals care just as much about growth, flexibility, autonomy and meaning in their work, as much as compensation. Most companies know this and have invested a lot on improving work culture, work-life balance, and opportunities for growth within their organizations. But what may be really missing are a lack of autonomy and ownership (sure there’s stock options, but let’s be real – it’s just not the same).

DAOs (decentralized autonomous organization) attempt to solve just this. It proposes to flip the entire corporate structure on its head – a bottom up approach.

This one was hard to write about and keep light. Most articles out there really got into the economics and (unbuilt) technology of it. There’s so much to be said for something that’s theoretical and experimental. But that’s the beauty of it all – we don’t really know for sure how DAOs will look like in the years to come.

What I know for certain is it can turn off a lot of non-techie people (like myself) in trying to get to the heart of how it can be an absolute game changer. I will narrow this discussion down to its parts at a bird’s-eye view. If you want a deeper dive, I recommend this comprehensive article from The Generalist as a starting point.

Decentralized 

There is no CEO. A group of people agree to a set of rules which are written in the code of smart contracts. The self-executing contract can rid of unnecessary meetings and administrative tasks, as actions can be programmed to run when a condition is met.

For example, a DAO is in the business of investing in NFTs (eg., PleasrDAO). Tokenholders can vote on which NFT will be their next investment. Once a majority vote is casted (condition is met), the smart contract can automatically move forward and make the purchase (action executed) with the DAO’s crypto wallet. For this to happen within a traditional company, meetings may have to be held and tasks to be delegated. In this hypothetical, an actual person doesn’t need to go into the OpenSea NFT marketplace – it’s all built into the smart contracts. In theory, the DAO can run itself and eliminate self-interested leaders.

Autonomous 

Freedom to govern itself. Individuals can choose to contribute in ways they think best.

Access to DAOs can be achieved via social tokens. As the DAO grows, so does the value of the tokens. This provides a financial incentive for individuals to be invested in its success in the long term. Everyone is an owner.

“Essentially, DAOs are owned by the people who create value in them…DAOs empower a broad ecosystem to take action and create value on its behalf.”

-The Generalist

Organization

A group of people come together to collaborate on a shared purpose and mission they care about.

source: K. Subiyanto

The biggest question is how you can even begin to trust strangers over the internet. It also doesn’t help that members can join with pseudonyms. It may level the playing field, especially if they’re a public figure, but some people can take advantage of that anonymity when personal reputation isn’t on the line.

Full transparency on the blockchain would be a start to build this trust. Every action taken is recorded and open for everyone to see. Most importantly, it cannot be tampered with (it’s immutable). Ideally this encourages individuals to act accordingly and follow the rules. If anyone violates the rules, the smart contract might be triggered to lock the individual out of the DAO.

I would say a successful example of trusting strangers to execute on a shared mission, currently in the Web2 world, is Wikipedia – anonymous volunteers collaborate to create a living digital encyclopedia for everyone – for free.

source: Wikipedia

Anyone can go in and edit (within community guidelines) and a consensus must be reached, because there can only be one article on such topic. It’s self-policing and relies on its community for fact-checking. This should in theory reduce issues user-generated platforms face (like Facebook and YouTube) with misinformation, fake news or conspiracy theories. If anything is ever made by the people for the people (and actually works) – it’s this.

A problem it does face, is it runs on non-profit grants and donations. We’ve all at some point seen the red block pinned to the top of every article asking for donations or Wikipedia is in danger of being shut down. An interesting question to pose is how Wikipedia would look like as a DAO 🤔

What can go wrong with DAOs?

Probably everything – and it did with the first DAO that entered the scene – TheDAO (I know, so original). Launching in April 2016 as a venture capital fund, it became “one of the largest crowdfunding campaigns in history.” By May, it had 11,000 investors and 12.7 million ETH or $150 million (today it would be valued in the billions).

In June it was hacked with 3.6 million ETH sent to a holding account. Fortunately, Ethereum founder Vitalik Buterin stepped in and was able to put a “hard fork” in the Ethereum network – which basically splits the entire blockchain at that moment in time, with the new version entirely wiping out the hack event – the one we all know today. Nonetheless, that left behind a bad rep for DAOs, followed by a long “DAO winter.“ People are finally slowly building in the space and gaining some traction.

A popular one today is the Friends With Benefits (FWB) DAO, as described in the NY Times – “a group that has been compared to a “decentralized Soho House” and a V.I.P. lounge for crypto’s creative class — is succeeding at generating hype and making money.” Basically a decentralized, digital world of what Anna Delvey wanted for ADF. IYKYK.

source: Netflix

Launching in 2020 and raising $10 million, FWB now has around 6,000 members. Among other creative projects, FWB is currently developing their first physical product – a yerba maté drink. I know, so millennial, but I kinda love it.

TAKEAWAY

There’s still a lot of experimentation and infrastructure that needs to be built out in this space. It all sounds fascinating in theory, but there are lots of holes to patch up and work to be done to make this vision a reality.

Corporations have issues of their own, and DAOs may attempt to solve some of them – but that introduces a whole set of problems of their own. How DAOs evolve in the future might be entirely different than what the Ethereum Whitepapers envisioned in 2014 – it might even be somewhere in between the spectrum of centralized vs decentralized, autonomous vs dependent. A hybrid that we can all get comfortable with.

With that, I’ll leave you with this interesting excerpt from BanklessDAO:

“We’re leaning toward a more fluid way of working, where individuals will follow their interests, collaborate on multiple projects simultaneously, and not have the constraints of working at a single company. At the same time, these individuals often need to collaborate with others to achieve their goals and don’t want to work independently for the rest of their lives….

The next generation of workers might start their professional career in a DAO, starting by simply vibing into these tokenized communities, helping to grow the projects they love, getting paid for having fun, and ending up never working for traditional companies.”

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