The DAO is like the US Government: A Political Economy comparison

Jillian Schwiep
3 min readJun 29, 2016

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The uninitiated can start here: “Ether is the underlying cryptocurrency token of the Ethereum blockchain and the primary payment currency of the DAO (which also has its own cryptocurrency token for voting and other operations).”

So what exactly is the DAO? The DAO can’t exactly be a corporation, because no government recognizes it as one. It’s not exactly a VC, because of its democratization of funding rules: DAO token holders (those who support the DAO in the form of Ether) can vote on DAO governance like traditional shareholders. Is it, fundamentally, a means for regulating currency and financial derivatives? It controls over $100M in assets on the Ethereum blockchain, so comparing it to a bank is tempting, but its smart contracts allow for financial derivatives that are unlike those we see from financial institutions.

From buy-ether.com

I believe that the DAO might be best compared to a governmental body. Its primary components are its bylaws written in code (which are subject to revision by vote much like US law), its currency, Ether (much like USD), its crowdfunding (which might be comparable to voting on tax initiatives to fund a new park or highway), and its users (much like US residents, some of whom are are voting citizens, and some of whom experience second-class citizenship or no citizenship at all).

What’s more, understanding the DAO as a governmental body allows for a richer understanding of its failures, too.

  1. Currency and Financial failures

In a traditional Political Economy, we have government and corporations regulated by government. Corporations might receive funding from other corporations, private equity, venture capital, or even from the government. This funding comes in the form of USD currency. We like to think of currency as regulated by the government, primarily through the tools of raising or lowering interest rates and restricting or increasing the supply of money. But as we were so painfully reminded in the 2008 financial crisis, corporations affect what currency’s worth, too. That is, government regulation is not sufficient to protect the value of the USD in your savings account. Nor will the bylaws of the DAO be sufficient, particularly in their inception, to prevent attacks (indeed, $50M feels small in comparison to 2008).

Revision to DAO fail-safe mechanisms like a split or Curator might be compared to the implementation of new US laws to prevent financial catastrophe. With some help from individual greed, the US government, too, can break its own system by repealing Dodd Frank and allowing its financial institutions to run themselves into the ground and rob ordinary citizens.

2. Voting inequities

The system of DAO voting only by those who hold tokens is comparable to US voting. The structure of the DAO aims for collective voting, but users with disproportionate numbers of tokens may influence outcomes, and a poor understanding of code may preclude some users from voting. In the way that DAO voting inequities may preclude some users from voting, in the US, we restrict access to voting for citizens in a million different ways: from closing or opening polls when the poor cannot be present to vote, to relying on delegates and superdelegates to represent citizens rather than simply aggregating their votes. And as I personally learned from knowing undocumented immigrants in Miami, you can certainly live in the US and use its currency every day without a vote.

While the DAO needs to work on simplifying its appeal to the general population, I still believe what the ex-Curator of the DAO put so well:

The DAO is “one of the most important social experiments of this decade, if not the century.”

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