DAO’s, an opportunity to challenge the status quo!
As many anthropologists would agree, the survival and success of the human species have, since the times of hunter-gatherer societies, centered around social organizing. Our prehistoric ancestors formed complex social networks that allowed them to not just survive but thrive in harsh and hostile environments¹. These networks and the social values inherent in these networks created a sense of trust among group members. which allowed them to collaborate and transact with each other in the name of survival.
Even in present times, the complexity of our social (economic) network prevails and has manifested itself as global (trust) markets, represented by international trade, transnational corporations, and international institutions.² Our increased interconnected world along with a multitude of innovative technological advancements have paved the way for the creation of wealth never witnessed in the history of the human race.
However, it seems that this wealth has become consolidated in the hands of a small number of corporations and institutions who yield the most economic power.³ Furthermore, because these entities are independent, they consider their own individual interests rather than broader social interests. Which is also a detriment to institutional cooperation.
Shortcomings in centralized economic organizing
While there have been many technological developments and innovations with regard to industry, until recently, we haven’t witnessed any development at the fundamental level of economic organizing. Economic organizing, for many of us as we understand it today, revolves around the concept of centralized organization.
Centralized organization pertains to the idea of the organization of individuals, around a specific goal, utilizing a system of hierarchy in which (decision making) power is centralized at the top (e.g. board, directors, shareholders, CEO’s). The responsibility for carrying out these decisions is transferred (vertically) from top to bottom (e.g. HR, managers and workers). Institutions like these also serve the purpose of providing trust, thus creating an environment where transactions can take place between agents within different organizations.
As a result of the unequal distribution of power, some tend to benefit disproportionately from the rest of the value created by the organization. Furthermore, values of transparency, accountability, and cooperation are not always respected and thus tend to be enforced or facilitated by (neutral) third parties (e.g. accountancy firms, auditing firms, the judiciary system and other governmental institutions) in order to ensure some level of accountability and to reduce the potential for coercive and corruptive behavior. Thus securing and conserving a level of trust that is part and parcel to the integrity of the system.
However, third parties typically organize themselves through a centralized method of organizing. Thus, they suffer from the same shortcomings as the institutions they are trying to “keep in check”. Therefore, the risks of coercive and corruptive behavior continue nevertheless, with its consequences being witnessed on all levels of industry, business, society and also the environment. Consequences include, social misrepresentation, bribery, money laundering, destruction of the environment, exploitation and the list goes on.
As the Caribbean blockchain network, we argue that the shortcomings as mentioned in the section above are of a structural nature. While the intent of creating third parties, with the goal of ensuring the integrity of the system, through the application of a “moral code” — i.e. punishment for “bad behavior” by the state or by any institutions tasked to do so - seems to be reasonable and logical, it only serves as a short-term solution.
In the long term, however, coercive and corruptive behavior continues regardless, since punishment does not tackle the problem at its root. Instead, it leads to an overall system that desperately seeks to maintain its integrity, as a means of, an ever-expanding economic system. What ensues is an unnecessarily complex system that becomes not only, increasingly expensive to manage as it grows, but also less trustworthy as its integrity continues to deteriorate. This problem is also coined the “trust paradox” by blockchain specialist Paul Bessems⁴.
DAO much?
How could we potentially mitigate this cycle of distrust? It is understood by many that a structural solution is required in order to tackle the problem at its root. One that brings change at the fundamental level of organizing, the first building blocks of an organization so to speak, and this is at the level of transactions between people. This is where the concept of a decentralized autonomous organization (DAO) comes in.
So what is a DAO?
A DAO is defined as a non-hierarchical organization in which decisions and tasks are performed on a peer to peer cryptographically secure distributed network (blockchain). A DAO can be fully automated in the sense that there is no human involved in the decision-making process, instead rules and operations are encoded in so-called smart contracts — computer programs that execute once specific conditions have been met. On the other hand, a DAO can also be human-oriented, which means that decisions and tasks are still performed by humans themselves.
Compared to centralized organizing, in a DAO there are no shareholders, board of directors and CEO’s. Also, the DAO does not have a physical building, it could have if that is the wish of its members, but generally the organization is just digitally represented by a blockchain itself (e.x bitcoin, ethereum), or as a community on a blockchain (e.x Genesis DAO). Furthermore, DAOs tend to have certain organizational tools that facilitate a form of decentralized governance. These include voting mechanisms, reputation systems, and social currencies/tokens that facilitate democracy, cooperation, and social inclusion.
And because the DAO itself rests on a blockchain, values of transparency and thus accountability are incorporated by design, without the need of any third party. Thus, potentially reducing organizational costs and also reducing the risks of corruptive and coercive behavior, since every actor within the DAO can be held accountable for their actions.
Create your own DAO
It is becoming increasingly easier for individuals to build DAO’s. This is because there is a lot of development going on with regard to the creation of DAO’s e.g. the development of what are so-called frameworks for building
DAO’s.
Generally, these frameworks consist of prewritten chunks of code (e.g. smart contracts) that have a particular function within a DAO. These frameworks can also be compared to the multitude of libraries and frameworks utilized by developers for purposes of developing different products and services (e.g. apps, websites, software) on and off the web.
With this new approach of using fundamentally decentralized programmable protocols with the ability to design and create efficient, decentralized, transparent and frictionless human organizations, it is possible
now to create any type of organization with any (desired) form of governance. The number of smart contract frameworks is increasing by the day, to mention a few: Culture, Aragon, Daostack’s Arc and colony.
Get involved
Much is currently going on in the DAO space if you want to experience what it is like to take part in decentralized governance of a DAO, consider becoming a member of the GenesisDAO the first DAO realized through the DAOstack ecosystem. Or create your own DAO, underpinned by the DAOstack framework by utilizing the tool created by dOrg (note however that it is still in alpha). Or you can also create your own DAO and launch it on the mainnet of Aragon.
The Caribbean Blockchain Network is also in the process of testing out the first ever Caribbean island oriented DAO, CURADAO. You can also join the conversation on Facebook.
“Join the experiment, change is in everyones hand”
