Lessons from Experiments in Decentralized Autonomous Organizations (DAO)
Understanding human dynamics — cultural software — to achieve the vision for decentralized governance and leaderless organizations
For those who managed to follow the travails of the Decentralized Autonomous Organization (DAO) vision and then demise of the Ethereum DAO project that lead to the Ethereum protocol fork, this series of articles explores the opportunity for cryptocurrency professionals and developers to take into consideration research and expertise from domains such as social sciences, for example anthropology, behavioural economics, psychology and neurosciences in the creation of their platforms and coded governance to achieve the full vision of the potential of democratic autonomous organizations.
The importance of establishing credible case studies and trust in decentralized organizations and governance
The rapid speed and volatile properties of the current emerging blockchain eco-system makes for a charged atmosphere. Participants experience disrupter technology pressures, such as continued accusations of not following the law, publicity on hack attacks, while also having to build use case studies and gain trust for winning over the mass market, governments, and investor communities.
This new technology and its community are under rigorous scrutiny — some may say even more than the established incumbents. According to Coindesk, a recent Gartner report cautions and recommends firms understand issues surrounding blockchain governance, an issue it highlighted as a “critical factor” for adoption.
For digital currencies and blockchain technologies to continue to gain ground and trust, it is imperative that we pay more attention to the evolution of the people elements as these impact the technology development, which in turns creates the people dynamics and culture.
Neglecting human dynamics in a hyper connected world can multiply poor decisions like a chain reaction
As everyone interested in the blockchain networks have discovered by now — relying on technology alone cannot dissolve the hard problem of people issues in, for example, governance and decision-making.
In a hyper-connected world where poor decisions can multiply like a chain reaction, understanding human behavior has never been more urgent or important. Exponential technologies demonstrate how experimental technology escalate “people” issues and dynamics towards unexpected random and non-linear events.
In such turbulent environments we have already witnessed black swan events. “The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The term is based on an ancient saying which presumed black swans did not exist, but the saying was rewritten after black swans were discovered in the wild.” (Wikipedia — August 23, 2016)
The vision of distributed and/or decentralized organizations
The promise of decentralization is to move us from a “my way” or “your way” to “our way” where we were able to tap the full potential of the group (or hive). These goals include mitigating the limitations of bias outside conscious awareness, approaching solutions from multiple perspectives and increasing diversity of thought.
Decentralizes aims to also enable the principals of inclusivity and vitality, based on worldview that the whole is greater than the sum of the parts. The theory is that it would result in superior solutions, better decision-making, processes, increased commitment to implement decisions made, or a combination of two or more of these and therefore establish a better future.
“Decentralization is often linked to concepts of participation in decision-making, democracy, equality and liberty from higher authority. Decentralization enhances the democratic voice. Theorists believe that local representative authorities with actual discretionary powers are the basis of decentralization that can lead to local efficiency, equity and development.” Columbia University’s Earth Institute identified one of three major trends relating to decentralization as: “increased involvement of local jurisdictions and civil society in the management of their affairs, with new forms of participation, consultation, and partnerships.” https://en.wikipedia.org/wiki/Decentralization
“Decentralized governance, refers to the restructuring or reorganization of authority so that there is a system of co-responsibility.”
Decentralized technologies are not just economic but social sciences experiments that look chaotic and possibly too disruptive to outsiders
Decentralized platforms are conceptualized and developed testing different ideas of not only of autonomous decentralized organizations, but also new decentralized governance for decision making, reward and business models for participation to achieve more fair, transparent and trust-worthy organizations.
Establishing decentralized governance and decision making for autonomous decentralized organizations is, as with the technologies itself, highly experimental.
Many people not in the thick of decentralized experiments are not always aware that these technologies are also social experiments captured and deployed as software code. Usually published as a white paper, such as Satoshi’s paper on Bitcoin which was designed to enable decentralized autonomous organizations — upon securing sufficient funding and resourcing the technologies are then developed, deployed and evolve.
This social sciences experiment is in the public domain, which results in further innovation and experimentation as new philosophies, platforms and apps are developed.
For outsiders not so deeply involved, this might look like chaos. Critics describe what they perceive as too disruptive, or assign what they observe happening in the public domain as lack of experience and real insight into how organizations should be managed.
This then becomes a feedback loop that self-reinforces the paradigm that decentralized systems are inherently inefficient, result in poor decision making and outcomes, have no governance and therefore limited trust, too complex and uncontrollable. In other words, maybe not worth the effort.
The most important consequence for the decentralized community is that first adopters become discouraged to further investigate, experiment and experience what decentralization really means and what the underlying untapped potential of it is.
And no amount of praise singing from credible experts will sway them, especially if they feel burnt through some investment, be it a use case development in their organization or as a direct investor. At the end people will naturally flock to experts and technologies developed by traditional and familiar incumbents.
Turning crisis into a positive learning opportunity will change the narrative in the public domain
Cryptocurrrency and blockchain experts have an opportunity to examine cognitive bias and pay more attention to the human dynamics inherent in the conceptualization, design and deployment of decentralized autonomous organizations and governance.
It is proposed that social sciences offer a currently untapped value to improve decentralized technologies. Examples include developing mechanisms for voting on funds disbursements, crisis management and critical decision making, such as the recent Ethereum decision to hard fork which unfortunately has resulted in a very public exposure of deep rifts within the blockchain community.
This includes decentralized networks having “crucial conversations” based on social sciences to “nourish community relationships and develop tools, skills and enhanced capacity to find better and new solutions to our problems”. (Crucial Conversations: Tools for Talking When Stakes Are High — Kerry Patterson, Joseph Grenny, Ron McMillan and Ai Switzler.)
Human resources domains also offer frameworks such as crisis leadership to deal with organizational crisis, such as recently experienced with the Ethereum DAO project’s hack.
Code it not only Law, but Code is also “Culture — the knowledge, beliefs, art, morals, customs, and material expression which, over time, expresses the continuities and discontinuities of social meaning of a life held in common” (Wikipedia)
The next article will explore the impact of leadership styles on decision making, and how it can result in unexpected resistance.
About this article
The purpose of this article is to support the cultivation of meaningful thought processes and encourage action based research to learn from real events during the we development of decentralized systems, technologies and organizations.