The Daofication of Work: Smart Contracts all the way Down

Blockchain technology brought with it a host of new business models and developments to the Internet. The promise of tokenization revealed how incentivization could coordinate disparate groups around a singular objective. Smart contracts removed costly intermediaries from numerous sectors. And now, whole corporate structures are under threat of decentralization thanks to stacks of these smart contracts, otherwise known as decentralized autonomous organizations (DAOs).

Take me to Your Leaders

In a seminal essay on the building blocks of modern society, mathematician, cryptographer, and legal scholar, Nick Szabo, explained how we are surrounded by contracts. He writes that whether this is in the realm of business, marriage, or private property, “the contract is the basic building block of a free market economy.” Without these rather complex mechanisms, society itself would be at risk.

Even in 1996, when Szabo wrote that essay, technologists and entrepreneurs alike dreamt wildly about the potential of the Internet. It appeared the final frontier to perfect connection and would help local culture become global. There would be no hierarchical structures, gatekeepers, or arbiters in the emerging digital realm. John Perry Barlow, a political activist and proponent of the early Internet experience, even told world governments at that time that they would not be welcome to cyberspace.

If we skip ahead another two decades, Barlow’s words ring a bit differently.

Not only have governments entered cyberspace, but oligarchic companies have cornered the technology even further so that the Internet is sharply mediated between three or four websites. What was once the Wild Wild West has now become nothing more than a series of interchangeable corporate structures.

Technology has also given capitalist societies all the tools they need to survey, analyze, and repackage our data to sell us even more products. Surveillance capitalism, a term coined by professor Emerita at the Harvard Business School Shoshana Zuboff, is so rampant that even more liberal governments have begun stepping in to break up companies. Any politician worth their salt these days has dedicated a portion of their platform to this very subject.

And while regulators work from a top-down approach, crypto technologies offer a grassroots solution from below. Like the Internet in 1996, however, many of these solutions are still taking shape.

Scaling the likes of Ethereum, Bitcoin and many others to speeds capable of catering to a global economy are still decades down the road. Still, the progress is tangible. The very smart contracts that Szabo wrote about, those that have bound society since the dawn of government, are finally taking shape.

Flattening Hierarchies

To better understand how smart contracts and crypto technologies could help soothe some of society’s most pressing issues, consider how businesses are formed in the modern era. Consider the way a company forms in particular. From ideation to funding, to governance and beyond. At each step of the way, a select few, sometimes only one individual, is responsible for the success of the enterprise.

Recognize too the legacy that these companies have left behind. Not only has Amazon, Facebook, and Google revolutionized commerce, encyclopedias, and staying connected with friends and family, they have made a number of specific individuals very, very rich and famous. Jeff Bezos, Mark Zuckerberg, Larry Page, and Sergey Brin loom almost as large as many of the world’s most powerful politicians. This is indeed problematic for a number of reasons.

But back to smart contracts, and their big brother technology, decentralized autonomous organizations (DAOs). Because in the end, DAOs are merely stacks and stacks of contracts and code all bundled together to reach certain ends. It’s not dissimilar to how any company works today in fact.

Employees are offered contracts for different roles which, when fulfilled, are rewarded in a salary and benefits. Managers of employees similarly operate under a contract and are held accountable for the productivity of the employees they oversee. As this hierarchy moves up, it gets narrower until there is only a single individual responsible for the entire operation.

Stepping back, placing the fate of an entire company in the hands of a single person seems ludicrous. And yet, this is the current climate of business. Society celebrates the ability of a single entrepreneur to crush competition, grow the company, and ensure the longevity of a company for as many years as possible.

This is a problem. Not only has this model incentivized a centralization of services, but it has also led to the grave predicament outlined by thinkers like Zuboff. Instead, imagine every member of a business was simultaneously a CEO, middle manager, and employee. Each member is responsible for the success of the venture and some members may never meet in real life. Other members may remain fully anonymous throughout the entire process.

Consider the Ballpoint Pen

Let’s say a handful of software programmers decide that there is space in the ballpoint pen industry to launch a business. First, they place an announcement online looking for someone to help design a cutting edge pen. The announcement is open to any designer and comes with a bounty locked up in a smart contract for the best design.

Quickly, because the bounty is rather high, a slew of designs come pouring in. The programmers then display these designs on a variety of other sites. Anyone can vote on which design they like the best, not just the programmers. To cast a vote, interested parties need only to stake a small amount of ether, Ethereum’s native token. This additional cost prevents one of the designers from hijacking the voting process. It would be very expensive to purchase enough votes to win a majority.

A winner is eventually declared and the smart contract first established by the programmers pays out the winning designer. Now, they have a popular design that has already been market-tested. Next up is production. To do that, the entrepreneurs need to raise funds to produce their high-quality pens, so they launch an Initial Coin Offering (ICO) for a native token.

The token (“PEN”) also offers buyers voting rights once the ICO is concluded. Thus, the more PEN tokens one buys, the greater say one would have in the direction of the emerging company. More on why this is important shortly.

For now, the programmers set a funding goal to produce the pens and launch the business. Like the design competition, another smart contract is established so that if the goal isn’t met, all participants will be refunded.

As the entrepreneurs have been in the crypto space for some time, they are also aware of the poor connotation the ICOs have earned. So, they set up another smart contract that controls all the funds being collected. This way no one is able to run off with the funds without creating a product that holders are happy with.

Interested parties are convinced that the ICO is indeed sincere, and the funding goal is quickly met.

The programmers have also established a road map for their business with multiple checkpoints that PEN holders can use to keep them accountable. Each checkpoint, according to the white paper, is tied to a line of code in the smart contract-controlled treasury which when reached, executes a call to vote.

If a majority of the PEN token community agrees that the checkpoint has indeed been reached, then more funds from the ICO are released to continue progress.

The community continues to grow even after the ICO. Proposals are made for research into cheaper, high-quality inks, supply chain improvements, general business development, and there is even a proposal to enter the luxury watch market.

Each proposal engenders conversation and interaction from what has expanded far beyond the original founders to a community of hundreds of PEN token holders. The discussions then engender votes on the most pertinent and promising proposals. Those that win the majority of votes release yet more funds from the treasury for another group to execute the proposal. For their work, they earn more PEN tokens which they can convert to bitcoin, ether, fiat, or hold on to for later voting purposes.

After five years, a line of premium ballpoint pens and luxury watches, and no one remembers who the original founders were. The company’s products are sold in stores all over the world as the community, which boasts more members than Google has employees, is made up of over 75 different nationalities. The revenue earned is recycled back into the original smart contract-based treasury and the community draws from it in order to execute continued operations.

Soon, even these operations are automated by smart contracts. The pen manufacturer in Bangladesh receives orders for more pens from a line code. This same line of code fulfills the subsequent invoice and draws from the treasury to pay the manufacturer. The process accelerates and automates even further; programmers can perform short contract-based work to make this even smoother.

In the end, the company looks nothing like the Googles of yesteryear. Instead, it is an online entity that produces high-quality products, employs thousands of individuals all over the world, and, more importantly, is fully decentralized.

This is the future of work. Platforms like Aragon, for instance, are building out products to do exactly this too. DAOstack, Rocket DAO, Colony, Moloch, and so many other blockchain-based startups also believe in this future. While there exist several obstacles in the way, progress is being made every day to actualize this vision.

It also poses problems for current Internet arbiters. Fortunately, it’s high time for a change.