As the cryptocurrency industry continues to grow leaps and bounds. It seems like there is no slowing down on what is possible. I am predicting that we are just at the beginning of this wild journey. As old institutional beliefs and systems start to decay by technological advancement.
Blockchain technology will play a huge role within this sphere. A niche area that is developing rapidly within the blockchain community is the concept of decentralized autonomous organizations (DAO).
Despite the combination of various buzzwords, it’s really a simple concept to understand. Even though the concept is still quite new and there might be conflicting meanings floating around the internet within online forums and blogs. It’s basically a community of individuals who join forces in one central organization.
Even though the organization is “centralized” around the group of individuals participating within the project. There is no central owner who controls the entire operation.
Everyone participating within that group is deemed to be an owner and have a say in the operations of the organization. Decisions are not made behind closed doors locked away from the public’s eye. It is made among the members of the group and all have a voice on how things should run.
Traditionally organizations are centralized and hierarchical. This concept is very old and dates way back to when we started to organize ourselves within groups. This model was very efficient and has been around for millions of years of evolution.
Fast forward to the 21st century, this model has been abused by those who are in power and has the handle on how decisions are made. Oftentimes these decisions are not beneficial for most of the entire population. Additionally, they are often opaque and details are finite.
New Era
Even though the concept of DAO is still in its early stages, the overall vision is ambitious. The main philosophy behind DAOs is the concept of decentralization and automaticity.
DAOs are built on top of a blockchain network which promotes transparency and automatic transactions through smart contracts.
Smart contracts allow standards to be kept in place. They can be seen as a self-executing computer program or a transaction protocol that automatically executes based on a set of rules which are coded within the contract.
Once a smart contract is set, it can then be used automatically without a middle man controlling the transaction.
For example, let’s say that there is a deal between a buyer and a seller. The buyer needs to purchase something from the seller without there being a middle man managing the contract and probably even the seller being present.
If it’s coded up within a smart contract, the buyer can purchase the product or service from the seller, once the buyer understands the rules of the contract and once to expect. Once that is over the buyer can get the item and the smart contract self-executes.
Anonymity
Among a group of individuals, they don’t have to trust or know each other all they have to do is to trust the DAO code or the smart contract rules. For example, if a member purchases tokens to be a part of a group raising money for a project.
That member doesn’t necessarily have to care about others within the group. Once he or she understands the rules and what is the main aim. They can put tokens upfront, the contract self-executes, gives them membership of the group and they can become a part of that “movement”.
The interesting thing about this whole process is that this entire process is automatic. Even the outflow of the funds, it’s all coded within the contracts.
Political Philosophy
From a political perspective, there is not one central character behind a DAO. If users of a DAO need to change something, they would have to vote and see collectively where their idea stands after the voting is done.
If they succeeded, which requires other members of the group to share the same vision, their change will be automatically implemented. It’s harder to commit fraud in this case because nothing is being done in secrecy where the data can be manipulated.
This new model of politics is different from what we know in the physical world. The important question is whether this disruptive idea will be able to spill over into our current working society? Power-hungry politicians will have a hard time grasping this concept.
The idea of having self-executing rule-based decisions being made by the public without none of their input will surely bring nightmares.
Business
Decentralized autonomous organizations are already creating a buzz within online groups that have a business interest. I am assuming this will be a continuing trend. For example, recently, a group of DAO members came together to form ConstitutionDAO.
Their sole purpose at the time was to raise money to bid for a rare copy of the constitution. They managed to raise $46 million. It wasn’t enough as they lost out to billionaire Ken Griffin who is the CEO of Citadel LLC.
After that loss, they are planning to shut down the group and return the money to the members. Another group by the name of Kraus House is currently raising money to buy an NBA team. Approximately $1.7 million is raised thus far. It’s a major ambitious project and who knows where they might end up.
Despite DAO creating a media buzz, if we should look at the business implications of this technology, it’s going to be disruptive. For example, just for a thought experiment, imagine a group of individuals pooling money and resources to create to solve some of the world’s most challenging problems.
Some of these problems have been underfunded and misguided for generations. Imagine if a small upstart of individuals can get together under one common mission and gather resources toward an effort.
Future Implications
The future implications of DAOs are not quite clear as new innovations have an infinite space of possibilities to exploit. For now, expect it to grow within the crypto-verse where individuals can form niche groups and contribute towards a common goal.
This goal can be towards developing a new protocol or funding developers to create an innovative product. As we have seen though, it’s slowly having a societal impact. Don’t be surprised to see large DAO projects pop up to raise money for a real-world project.
