DAO’s — The Human Side of Crypto
The name “DAO” comes from the abbreviation for Distributed Autonomous Organization. It is a name that is associated with groups that are organized around a mission and governed by the blockchain. DAO’s are run by a group of people that have an interest in public-private partnerships. So where do you find DAO’s and what do DAO’s do exactly?
Behind every single blockchain or cryptocurrency or crypto token, or NFT is a community. Most of those communities are DAO’s. It’s easy to dismiss those organizations as chat rooms or social clubs but one would miss the bigger picture. It would also be easy to dismiss them as a fad. But DAO’s are here to stay and they are one of the most exciting and accessible parts of the crypto community.
What makes DAO’s special?
Traditional organizations and corporate governance structures have fared well but only to the benefit of a smaller number of individuals. Unlike traditional organizations that tend to be hierarchical, DAO’s are flexible and mostly flat organizations. I say mostly because even in DAO’s there is some hierarchy but it is not rigid. Conversely, traditional organization structures carry significant hurdles and limitations. The hurdles and limitations of traditional organizations include but are not limited to (in no particular order):
- Transparency & Accountability
- Limited ability to participate, cooperate and compete on a global scale
- Expensive to maintain and operate
DAO’s on the other hand are transparent, fluid and global in nature, by default. Participation in DAO’s are restricted only by one’s motivation and initiative. There is no hire/fire process and seldom is there an onerous onboarding process. You can jump in and start contributing immediately. The result is an immediate global stage that is designed to allow for the exchange of value. It is transparent; it is permission-less and everyone that participates has a vested interest in what goes on. This fits the human paradigm more than the dominant corporate paradigm that puts the corporation at the center with its own identity and personhood. DAO’s are about meritocracy where progress and recognition is based on ability and talent rather than on class, privilege, or wealth.
When I worked at Microsoft, I remember vividly how Steve Ballmer went crazy on stage when it came to developers. He made it clear that he wanted to have the hearts and minds of developers. He put a significant amount of effort into attracting developers to the Microsoft platform. I also remember an equally significant amount of effort into resisting the open source movement. It was almost a cult-like hatred of open source. I didn’t see it at the time, but what a wonderful juxtaposition. Here is a giant (Microsoft) hiring not just developers, but hiring battalions of them and the accompanying management of them. After all, when you hire that many people, you have to manage them. In juxtaposition, there was Linus Torvalds winning the hearts and minds of developers without having to hire them and without having to pay them.
Fast forward to the present time and we can clearly see that it was Microsoft that eventually had to shift their strategy as a result of this decentralized group of developers who were contributing their time and contribution to the Linux project. They were doing it for free and in the process creating a world class project.
Even though the Linux project is not technically a DAO it shares some similar characteristics. The Linux project (and open source in general) proves to be a great example of how DAO’s benefit from the economics of an open, decentralized approach to collaboration and contribution. They make it easier for people to contribute without the overhead.
One defining characteristic of DAO’s is in the name itself and that is the decentralized nature of DAO’s. On its face, it may seem like decentralization would be a challenge to productivity and governance and not a benefit. And this would especially seem to be a challenge for the individual contributor. In fact, in traditional organizations, it has become cliche that one’s voice is drowned by the girth of the bureaucracy that develops over time. In DAO’s however, it is possible to put one’s idea(s) front and center and have a level of interaction that is flat and reaches directly to its intended audience. The governance model of the DAO is designed to allow for the members to vote on the direction of the organization. This is accomplished through a series of code contracts (also called smart contracts) that govern the organization’s operations. These code contracts are written in the same programming languages as the blockchains.
The DAO Landscape
There are literally hundreds if not thousands of DAO’s in operation and more popping up every day. In an article written last year titled DAO Landscape, Coopahtroopa.eth created a nice visual representation of how DAO’s can be grouped. The list has grown significantly and I’m sure there are new categories but it still provides a good visual of how to think about and how to categorize some of the DAO’s. As you will see from his article, there are many types of DAO’s and there are many resources available.
There are many areas that I would like to get into but will have to address in future posts. These areas include:
- ideas about how and why DAO’s come into being
- how and why DAO’s succeed or fail
- the role of leadership in a decentralized organizations
- The role of tokens for governance and ownership
- The strength of the community (how large, how engaged, etc)
Even more intriguing is to consider if and how traditional organizations can morph into decentralized DAO’s. It is still early to tell how these organizations will evolve over time but they are here now and there is no sign that they are slowing down. What do you think about DAO’s? Is there an area that you would like me to explore? Let me know in the comments.