The Company of the Future: the History of the DAO

Just to remind, DAO stands for Decentralized Autonomous Organization. As you may know, nothing new can be built without the understanding of its history. So, this time we’ll dig into the history of the term. If you have missed our previous articles, you may find them here and here.

The origin of the idea of the “decentralized organization” can’t be clearly defined. What can be said for sure is that decentralized applications were deployed far earlier the invention of the blockchain and Bitcoin. As an example goes BitTorrent deployed in the 2000s. Actually, it employs the principles of a decentralized application. People share files with each other without any centralization.

When related to the blockchain, the first mentions of the DAO belong to Daniel Larimer in fall 2013. It made a huge resonance that even Vitalik Buterin posted the series about this concept. A year later D. Larimer managed to provide a wide explanation of the term. Originally, it was DAC — a Decentralized Autonomous Corporation. According to legal issues, it was relabeled into DAO. However, D. Larimer didn’t limit the variations of the DAC abbreviation because it could bring additional clarity and value. Now, he uses Distributed Automated Company, Community, Coop, Country, or Currency depending on the situation. Terms “distributed” and “decentralized” seem to be different explanations, still, the modern crypto community is more habitual to the term decentralized rather than distributed.

So, how the concept of the DAO is defined by D. Larimer? How to identify whether a company is a DAO or not? He proposes the most obvious parameter of recognizing a DAO — it must have its own blockchain in shares (= tokens/coins) of a DAO that are exchanged. Only with equity an organization can become decentralized and distribute profits automatically. All corporations have equity and DAOs are no different.

A second feature is that a DAO must not rely on any single individual or company to have value. In other words, you cannot just take a traditional hierarchical organization and transform its shares into a cryptocurrency. This organization would be still centralized.

The third feature of a DAO that it cannot control any private keys because it must be transparent and reveal the secrets. A DAO must operate entirely independent. Finally, a DAO must not rely on any legal contracts such as copyrights and patents.

Any systems that don’t meet the criteria above cannot be called a DAO. D. Larimer adds that there could be hybrid companies in the future in order to adapt to the fast-changing environment and gain a competitive advantage over competitors. These companies would exploit the decentralized voting system and dividends distribution. However, D. Larimer doubts that fully anonymous organizations would occur worldwide because there aren’t many countries who allowed anonymous ownership of corporations.

Two years later V. Buterin went further. The creation of Ethereum helped the decentralization to happen easier. Now, the key element — smart contracts on Ethereum are able to speed the global decentralization. Developers can create such a smart contract that will deploy another smart contract according to several rules. V. Buterin shares an example of the decentralized Uber. How would it work? The idea is that everything would be coded in smart contracts. People would request a cab. Drivers would set their preferences about distance and price. Other smart contracts would check payments and rating. The point is that this task can be executed by different parties. For example, a developer from Brazil creates a native mobile app for drivers based on smart contracts. And a developer from Slovakia can create a user-friendly rating system. These tasks will be executed collaboratively. Moreover, if we imagine, that Uber cars are driven automatically and not by humans this would create a fully decentralized platform.

Nowadays, many startups on the blockchain are positioning themselves as DAOs. The truth is that not every startup on the blockchain is a DAO. Yes, they are decentralized but not autonomous. But we can’t but mention that these startups are at least automated by smart contracts.

What about Rocket ICO? We’re developing our platform as fully decentralized and autonomous. At the early stage, it’ll be a kind of a hybrid system. As soon as the platform gathers enough experts, investors, and teams it will be operating fully autonomous through smart contracts. Rocket ICO platform creates the bridge between participants. Blockchain startups can launch their projects, experts can get rewards for their expertise, and investors can get rid of scams and save much time and money.