A DAO can’t be created
CRUCIBLE Insights — Paper #2
This statement is from our mission statement we mention:
“CRUCIBLE is a community driven investment organization with an aim to evolve into a Decentralized Autonomous Organization (“DAO”)…”
The phrase “aim to evolve” might not seem noteworthy. However, in this paper we argue that this phrase is a game changer as to how DAOs will look like in the future.
We argue that there is no such thing called, creating a DAO.
It is important to note that nothing in this paper should be construed as investment advice. You should not take any investment decisions based on this paper.
What is a DAO? This paper assumes that the reader has a basic understanding of a DAO concept. If not, we encourage you to check out the fundamentals online before reading this article.
Focus on governance: Whilst the merits of DAOs can be discussed from multiple angles. This paper focuses primarily on governance, which is the most relevant angle for CRUCIBLE.
Introduction
To accurately frame our argument we must outline the basics. In what follows is a break down of the concept of a DAO along its three (3) pillars (the D, A, and O) within the context of organizational governance.
D = Decentralized
Decentralization in governance will in theory enable the democratization of decision making within an organization and give way for flatter organizational structures.
A = Autonomous
An autonomous organization is a form of organization that is not influenced by external laws/ regulations and does not submit to an external court or arbitrator. An autonomous organization will only submit to its internal rules, regulations, and conflict resolution systems.
O = Organization
Any group of individuals or companies that comes together to achieve a certain common objective is in essence an organization of one form or another.
So what is the problem?
It is fairly straight forward to agree that with or without a DAO, the implications and definition of an organization will not change. As such, the issue stems from the Decentralization and Autonomy of a DAO.
Therefore, if anyone claims to have created a DAO, they will have to prove that their governance structure is decentralized and autonomous. In short, the problem is exhibited by two facts:
- Autonomy: In our highly regulated world, a DAO’s autonomy is not a factor that is solely determined by the organizers of a DAO. This statement is most apparent for DAOs that interface with the real world (i.e. go beyond the world of the internet).
- Decentralization: We believe that decentralization is a factor of time and other enabling factors, as we will discuss in detail in what follows.
Evolution vs. creation
So what are we saying? A DAO can’t be created, however it is possible for an organization to evolve into a DAO given that three conditions are met:
- Enabling regulations are passed by governments and regulators enabling the true autonomy of DAOs (or at least a larger bandwidth of autonomy),
- The community of the DAO reaches sufficient size and maturity to enable decentralization.
- The founders of the organization make sure that they have put in place processes and procedures allowing for the evolution (or at minimum, have not put in place any process or procedure that will inhibit future decentralization.
When the three conditions are met, the organization would have evolved into a DAO.
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