The Power of the DAO: Changing the Corporate Structure Forever
The conventional corporate structure has existed for hundreds of years without evolving to any significant degree. As its shortcomings have become all too apparent, forward-looking people have been looking for alternative corporate structures that are more in line with their present-day needs. One such alternative is the Decentralized Autonomous Organization (DAO). In this article, we will explore what a DAO is and how it can potentially change corporate structure forever.
What is a DAO?
A DAO is a blockchain-based organization that leverages the high degree of transparency of blockchain systems as well as the community participation typified by the way open source software developers operate. By merging those two key attributes (transparency and community participation), DAOs become collectively owned by the people holding their native tokens. The rules of the organization are written into the code running the entity and those rules are referred to as smart contracts.
How can DAOs Revolutionize Corporate Structure Forever?
First, DAOs aim to flip the top-down decision making style of corporations to a style in which decisions are made from the bottom-up. This is likely to be a huge paradigm shift for organizations since in a DAO, every member has equal voting rights (except where the DAO has smart contracts awarding more voting rights to those with more native tokens). The DAO voting system is akin to a janitor having the same voting rights in a company as the company’s accountant. This change in decision making shows how problematic the existing system has become to the extent that people who know there’s an alternative want to get rid of it almost altogether.
The second way in which DAOs can change corporate structures is by eliminating the need for the often rigid hierarchical structure of corporations. These structures have been criticized for creating opportunities for top managers to only care about the interests of large shareholders at the expense of the majority of the other stakeholders like employees and the environment. In a DAO, smart contracts run the organization autonomously and there is no need to have supervisors, line managers and top management.
DAOs can also raise the level of transparency and trust in the way organizations operate. This is because the blockchain system upon which the DAO is built allows everyone to see and verify every transaction made on the system. Cases of doctored financial records and other shady dealings are out of the question when everything is out there for all to see. In fact, the smart contracts governing these organization cannot permit anything “unethical” (contradicting the coded instructions) to be executed on the system since there are “code gatekeepers” at every stage to ensure what is being done follows the rules upon which the DAO runs.
In closing, DAOs have a lot of potential to revolutionize corporations, but since this technology is still in its early days, a number of challenges, such as regulatory issues in different jurisdictions, will have to be overcome before the world can truly embrace decentralized autonomous organizations as a superior way to own and run corporations.
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