How DAOs and blockchain can improve the way we organize ourselves

  • Decentralized autonomous organizations are changing the way we think about how organizations work and how they might work in the future.
  • Due to their unique structure, DAOs offer the promise of enabling a focus on community, rather than just profit, and could offer a more socially conscious structure.
  • Achieving real-world DAOs will require overcoming significant hurdles, but the motivation to organize businesses differently is there and the potential benefits are undeniable.

Last year, a blockchain-based organization called ConstitutionDAO untraditionally raised $40 million worth of ethereum (ETH) in an effort to bid on a copy of the US Constitution in a very hot auction. traditional from Sotheby’s.

Even though the organization ultimately lost the bid, it caught the world’s attention. And for good reason. DAOs, or Decentralized Autonomous Organizations, are changing the way we think about how organizations work and how they might work in the future.

If you’re not familiar with the concept yet, DAOs are self-governing organizations that are defined by a transparent set of rules coded like a computer program. The unique aspect of a DAO is that it reduces the need for managers or traditional hierarchies because the rules are built into the code, allowing the organization to operate independently of the members of the organization.

They can therefore make organizational decisions collectively and autonomously through a process of decentralized governance, different from traditional centralized organizations where managers and large shareholders can often hold a disproportionate degree of control.

The Potential Benefits of DAOs

Because of their unique structure, DAOs offer the promise of enabling a focus on community, rather than profit alone, and could offer a more socially conscious structure; one designed to help people everywhere prosper instead of just focusing on the desires of a few big shareholders. This could have ramifications not just for business, but also for how we address causes that are important to us today as a society.

Although DAOs are not without their own challenges, they have the potential to enhance a style of business organization that has not changed significantly in hundreds of years. In fact, most American corporations today are structured primarily the same way they were in the 1600s: companies accept funds from investors in return for the responsibility of maximizing shareholder value as their primary (and sometimes sole) mission.

It is this profit-driven directive that has been the fuel of capitalism – both good and bad. The good has led to significant improvements in business efficiency, while the bad has often manifested itself in the pursuit of profits above all else; even at the cost of employee benefits and quality of life, increasing income inequality and damage to our environment.

The shortcomings of this shareholder approach have led, in part, to the emergence of alternative structures, such as B corporations, which attempt to take into account more than just the most powerful shareholders. But despite these efforts, we are still moving too slowly on behalf of important issues that companies could do more to address, such as a planet that continues to warm, and many workers are without health care and decent wages.

Why DAOs Could Be The Answer

When developing blockchain technologies and cryptocurrencies, their creators focused on the potential benefits of transparency and decentralized cooperation. These aspects were essential to ensure that a certain level of independence and neutrality was maintained and that the interests of the group as a whole were given priority, rather than those of a small group of powerful interests. The format also helped prevent manipulation and allowed action to be taken in real time, rather than the slower pace of traditional business.

But if you can manage a global financial platform through a collective, why not an organization? The perspective is both interesting and innovative; and just like blockchain and decentralized systems, the notion of decentralized independent organization can help us rethink the way we organize ourselves to better achieve impactful results.

Finally, an example. We have observed, benefited from and even participated in sharing economy platforms since 1995 with eBay, and more recently in carpooling and accommodation with Uber, Lyft and Airbnb. These services activate individuals to sell, drive and host, but these relationships with buyers, passengers and guests are mediated: centralized via a platform host who is only slightly responsible (see section 230 of Title 47 of the United States Code) but happy to make substantial profits for the benefit of connecting this bilateral market. And even worse, even manipulating an opaque platform to maximize profits for shareholders who are different from the sellers, buyers, drivers, passengers, hosts and guests who bring the connected commerce experience to life.

It is possible to have a rich, connected experience without a central operator: allowing markets to set price and quality, and allowing participants whose work and choices support the experience to benefit directly. This is one of the advantages of a DAO.

While DAOs are incredibly promising and present a real opportunity to move businesses towards a better future, we are still a long way from DAO nirvana. Although many important structural decisions may be placed in the code of a DAO, and token holders in a DAO may have certain voting and participation rights, the structure of the DAO will still need to consider important ties to the real-world activity that haven’t been fully addressed yet. And while we can leverage technology to operationalize many interactions, our real lives don’t just take place in the metaverse. We are still very much in the physical world.

DAOs will therefore need to establish a method for dealing with a number of real-world issues and responsibilities. If a DAO is alleged to have caused injury (whether through a code vulnerability or a malicious actor), participants will need to have a means to legally pursue remedies for such injury. If the DAO purchases a physical asset (such as a copy of the Constitution), that physical asset will need a custodian, insurance, and a tax accountant. A DAO in code does not provide the online organization with the protections and benefits of the real world. The very aspect of its structure that makes a DAO nimble and autonomous also creates challenges that will need to be overcome for DAOs to realize their full power in affecting the real world. Because even with coded processes and protections, the unexpected can still happen.

DAOs are, in many ways, uncharted territory. And realizing their potential benefits in the real world will require overcoming some significant hurdles. But the motivation to organize businesses differently is there, and the potential benefits are undeniable. By considering these new structures now rather than simply adopting a wait-and-see attitude, we will begin to ensure that our businesses reflect the full range of desires of those involved, rather than just making money for a select group.

With so many pressing societal needs that need to be met ASAP, now is the time to start heeding the call to organize differently. If we embrace this innovation and put in place the legal structures that will make it viable, we can use this revolutionary technology to evolve a mysterious system that doesn’t meet everyone’s needs into a new system that can.

This blog is part of an Agenda series led by the World Economic Forum’s Crypto Impact and Sustainability Accelerator (CISA). For more information, please contact [email protected]