DAOs
Blockchain companies
DAE is a guided self-organization. It aims to be collective, but without waiving the central role of the teacher.
DAE is a DAO in the long-term limit, since eventually, a decentralized classroom will learn how to learn in autonomy.
So, what's a DAO? A DAO is an organization in which:
decisions are governed by collective proposals and voting - decentralization
voting power is proportional to the amount of governance tokens owned - governance
participants collectively manage a treasury denominated in cryptocurrency - treasury
rules of operation are encoded in a smart contract deployed on a blockchain - autonomy
Some concise definitions of a DAO I've found are the following (some are taken from David Phelps' post on Twitter):
A collectively-owned, blockchain-governed organization working towards a shared mission
A community-led entity with no central authority that is governed by computer code
An internet-native business that's collectively owned and managed by its members
A group chat with a bank account
A crypto co-op, giving a wider group of people the opportunity to own a piece, participate in management and share in the potential upside
A financial flash mob, often organizing seemingly overnight in pursuit of an idea
A powerful term that captures many of the hopes and dreams that people have put into the crypto space to build more democratic, resilient and efficient forms of governance
A state, with governance systems, autonomous currencies, and treasuries to manage monetary policy
A commune, where friends support friends
A game, with incentive models for gaining power through contributions with opportunities for continual failure. You win by collaborating and coordinating with those around you through positive-sum reinforcement
A jam band. An improvisational creation protocol. Everyone in a DAO is a creator, and their creation is what draws community
A sports team. Some DAOs will use treasuries to recruit top talent to play on their team. Others will use classes to develop talent over time. DAOs mint stars
A cell. The building blocks for new planets
DAO and traditional companies
DAOs differ from traditional companies in many ways.
A DAO can be defined as a crypto co-op. Indeed, DAOs and co-ops are in principle quite overlapping. The following Rochdale Principles define the identity of a co-operative:
Voluntary open membership
Democratic member control
Member economic participation
Autonomy and independence
Education, training, and information
Cooperation among cooperatives
Concern for community
At this principle level, the only discrepancy between a co-op and a DAO is about democratic member control, the second Rochdale axiom. The voting method in a DAO is rarely democratic (one person one vote); it is instead a function of the amount of owned governance tokens (one token one vote or more elaborated voting methods like quadratic voting).
Limitations of DAOs
DAOs have also a number of drawbacks:
Legal. The regulatory environment surrounding DAOs is still very uncertain as most jurisdictions haven’t yet defined their approach to this novel type of entities. A continuously uncertain legal status could become a significant barrier to the adoption of DAOs
Coordinated attacks. The desirable properties of DAOs (decentralization, immutability, trustlessness) inherently carry some performance and security risks. The example of The DAO demonstrated that this new organizational form can introduce novel risks that are not present in traditional entities
Efficiency. It can be argued that decentralization isn’t a state, but rather a range, in which each level is suitable for a different type of use case. In some cases, full autonomy or decentralization might not even be possible or make sense. Centralized organizations can operate at a much higher efficiency – but abandon the benefits of open participation
Education. Similar to the issue of efficiency, a DAO has the responsibility of educating a lot more people. A single CEO is much easier to keep comprised of company developments, while token holders of a DAO may have ranging educational backgrounds. A common challenge of DAOs is that while they bring a diverse set of people together, that diverse set of people must learn how to grow, strategize, and communicate as a single unit
Voter apathy and lobbying. Not all members will want to vote or are even best qualified to vote on all changes. In this case there will likely be voters delegating to members that can be more informed and active. We might have the emergence of protocol delegated lobbying groups that try to influence the decisions
Build a DAO
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