Traxa.io
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Traxa.io

To DAO or not DAO, why Traxa chose DAO

Chris had a problem. Actually he could see a problem but could not find a solution. As CEO of a company that brings technology into the supply chain industry, he understands how it works…and how it doesn’t work. One of the biggest, if not the biggest problem, is tracking shipping containers. He regularly speaks with truckers, logistics companies, insurance companies, shipping companies and many others in the industry and they’ve all asked him to solve this problem — they are desperate for a way to track a shipping container through its journey of moving its payload Why does this matter? Many reasons. The contents of the container may be hazardous and therefore tracking its route is important. Insurance companies want to ensure they can track containers to prevent fraud. Efficiencies can be gained by understanding route patterns and optimizing them.

If this is such a big problem why hasn’t anyone tried to solve it? Organizations have been trying. There have been a number of attempts including one by big industry players like IBM, TradeLens. The issue isn’t technology. As stated by Andre Simha, Global Chief Digital and Information Officer of Mediterranean Shipping Company, “The biggest challenge is mindset..convincing people and bringing trust”. This leads to the issue that all of them are centralized solutions. One organization maintains and controls the data and the solution. The carrier industry is a fragmented, low-margin industry. No single carrier has more than 2% of the industry. Collaboration and centralization don’t work in that environment as there is no trust in sharing their data and if they did they would want to be compensated. Even aside from the data, in a fragmented environment filled with business and political distrust, it is difficult to get involvement from the participants in setting the direction of the solution.

At the same time, Chris was struggling with the problem of tracking shipping containers, Chris was exploring the crypto space. Specifically the area of decentralized finance (Defi). Just like most people’s first experience with Defi, it was a bit overwhelming and took 3–6 months to really understand what it was. That led to being exposed to governance tokens and DAOs.

….then the light bulb (or more like a strike of lighting) happened.

He realized a DAO could be used to solve the problem of tracking shipping containers. This article provides a good overview of DAOs and let’s review some specific descriptions from the article. Decentralized Autonomous Organizations (DAOs) are digitally native communities that center around a shared mission. For the purpose of this article, what you need to know is DAOs are:

Decentralized, because they’re community-owned, grassroots-driven, and loosely organized (in contrast to a hierarchical, tightly-structured centralized org like a bureaucratic agency or company).

Autonomous, because their shared rules and shared treasuries are encoded and automatically enforced on the Ethereum blockchain.

Organizations, because they’re groups of people that associate and coordinate around specific purposes.

DAOs allow for the rapid concentration of Human capital (labor), Financial capital (money), Social capital (culture).

Now, let’s step back and consider the requirements of solving the problem of tracking shipping containers and how a DAO can provide unique solutions.

Highly fragmented industry

By nature of the industry the participants are decentralized. A DAO is a mechanism to connect decentralized resources. With a DAO you can build a community of people with an aligned interest.

Lack of trust and desire to be rewarded for participation

With leveraging blockchain technology, smart contracts encode the rules making operations of the system transparent and fair for participants. It also enables a powerful reward mechanism for participation.

Organizations

All participants are focused on solving one problem, the tracking of shipping containers. There is an opportunity to have each member participate in the collective direction of the organization.

Because the needs of the problem of tracking shipping containers were well aligned with how a DAO operated, Chris felt he was onto something….and he wanted to make sure he wasn’t crazy. The first step was to validate it with others in the industry and build enough participation to create the founding of the Traxa DAO. He discovered industry vets (in the fresh world of DAOs, that’s someone who has been involved in one for more than 6 months) online in existing DAOs and in person at crypto conferences in both Miami and Las Vegas. Not only did he get confirmation that his vision of using a DAO to solve the shipping tracking problem is legit, but he also picked up some experienced crypto vets to join the DAO.

To recap, using a DAO can make sense if the problem being solved involves the following characteristics:

  • The problem being solved involves fragmented resources. Are there individual participants that when connected, can make a significant impact?
  • Is there a reward mechanism possible to encourage participation?
  • Is there a clearly defined mission or objective to be addressed?

Deciding that a DAO can be used to solve a problem is just the first step. The journey continued for Traxa including:

  • Should Traxa incorporate?
  • How to get community members?
  • What tools should be used to manage the DAO?
  • What should the reward mechanism (tokenomics) be?

Stay tuned for future articles on understanding these issues a DAO faces and how Traxa addressed them.

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Traxa.io is an early stage Decentralized Autonomous Organization (DAO) solving the problem of tracking of shipping containers across ships, trucks and trains.

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Craig McQueen

Craig McQueen

Lifelong exploration and teaching of Leadership, Technology and Finance.

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