DAO Culture
In the past couple of months, the acronym “DAO” has come up repeatedly in social media and the news. To many, the concept of a Decentralized Autonomous Organization (DAO) is a foreign one and has raised questions as the world struggles to define and understand its utility.
Inspired by @JonShapeShift from his Twitter post “10 Lessons from DAO land for the new year (a thread)”, this document is an attempt to answer these questions about DAOs and their culture straight from the horses — well, fox’s — mouth:
- What does a DAO mean?
- How could an organization be fully functioning without a group of people running it?
- Are DAO’s here to stay?
“10 Lessons from DAO land for the new year (a thread) — by @JonShapeShift on Twitter” (View the original Tweet here ):
- A decentralized org does not have to mean a lack of structure or leaders; instead, it means more fluid structures and many leaders instead of a few leaders.
- DAOs should continue to rapidly iterate and learn from other DAOs to find the best structures that work for their particular community yet remain flexible for rapid changes as the needs arise.
- Hopefully, this should force healthy discussion and debate on such topics in DAOs with strong culture and alignment but can be quite toxic in those without that. (One of the harder aspects for a DAO to manage is conflict resolution. When there are no permanent authority figures, it is up to the community and those in conflict themselves to figure out how to solve issues directly.)
The DAO community is quite diverse, and people from all over the globe with different ethnicities, cultures, political views and upbringing are joining in. DAOs use tokens to align each participant’s personal and financial interests that work together for the benefit of the DAO. The ShapeShift DAO uses the FOX token in this manner. Imagine a way of organizing with other people worldwide, without knowing each other and establishing your own rules, and making your own decisions autonomously all encoded on a Blockchain? Well, DAOs are making this a reality.
A DAO’s financial transactions are recorded on a blockchain. Since blockchains are transparent records of all events and can instantiate smart contract functionality, this eliminates the need to involve a third party in a financial transaction. No one can surreptitiously edit the rules because DAOs live on the transparent and public blockchain.
(1) As noted above, one of the main characteristics of a DAO is the “D,” which stands for Decentralized. How could an organization fully function without a centralized group of people running it? A lack of government does not mean a lack of governance — this holds true for DAOs. In traditional companies, all power is generally in the hands of the head of this particular company — its CEO, President, or Board of Directors. If a customer is unsatisfied with the service, an employee detects an internal flaw or has feedback on a process; they have to file a complaint through a long chain of managers. Then wait and see if corporate leaders will, first of all, acknowledge the issue/feedback, and secondly, take actions to resolve it. This causes a tremendous amount of lag in the decision-making process as well as the implementation of that process which hinders the company’s ability to remain agile in policy and action.
In the case of a DAO, every token holder has a say (in proportion to their token holdings) in policy and activity throughout the organization. This includes voting on various governance-related matters, including budget and how it is allocated. In the Shapeshift DAO, token holders are encouraged to provide feedback, suggestions, and amendments to the proposal. Anyone in the community is welcome to make a public proposal in the ShapeShift forum, where interested parties can discuss, build upon, and refine ideas. Once the proposal passes in its ideation phase, it moves to the boardroom for official voting, where FOX token holders (holding 100 or more FOX) can cast their vote. DAO members have direct agency over the environment they work in through the open governance model. This gives contributors the ability to optimize for a productive, efficient, and effective workflow that is agile enough to make challenging pivots to respond to market and labor demands. This nimble responsiveness is a hallmark advantage of DAOs over traditional workplaces.
(2) Collective ownership has rapidly gained popularity since Trebor Scholz articulated the concept in 2014. However, the idea of a decentralized organization is not as innovative and new as some might think. There have been a few examples of beneficial and fully self-sufficient collective organizations throughout the course of history. However, there are a plethora of bad actors and groups that have claimed collective organization and largely misappropriated the term. The ability to abuse collectivization is reduced drastically with the blockchain’s open and decentralized multi-validation capacity. As collective ownership models continue to develop, it is important to look at examples of smaller and older cooperative models, especially studying the failed co-op cases, in order to avoid similar blunders.
Some history on beneficial collective ownership include the following:
- Economic coordinations formed in the 19th century in the US, the prime orientation was pooling money to free enslaved individuals’ freedom and forming intentional committees and mutual aid societies.
- British consumer cooperative formed in 1844 to support those who were forced out of their workplaces by mechanization.
The thing that the aforementioned co-ops have in common is the sober rejection of capitalist realism and fighting inequity. They share the same grounding base principles — we are members of one whole community, although our fields of specialties may vary.
(3) The expansive range of nationalities and mindsets in a DAO makes ample space for ideas, opinions, and community but also leaves lots of room for conflict and misunderstanding. It’s important to note that conflict is a natural process that — when fostered healthily — can lead to great strides in productivity and community at an even greater rate than if there was only kumbaya. A DAO, being a global organization with members from all corners of the world, naturally experiences conflict like one would assume in any international organization. The glue that holds these energetic and diverse groups together is one powerful word: Culture.
Some of the most successful and everlasting “traditional” global organizations have shown the strongest workplace culture over the course of time(example?). The importance of workplace culture is magnified to even greater heights when one removes the centrality of leadership. The community members’ values align with those of the DAO using the aligning mechanism of the token to assist in creating a great workplace culture. Token holders’ interests align as the nature of a DAO incentivizes them not to be malicious. Since they have a stake in the network, they will want to see it succeed. Acting against it would be acting against their self-interests. As internet-native organizations, DAOs have the potential to change the way corporate governance works completely.
Summary
The DAO structure is a fresh take on an old idea that is powered and kept in check through the immutability of the blockchain. A lack of government does not mean a lack of governance. DAO’s are working, and they are here to stay.
Additional Resources
