DAO Experiments

DAOs need a new name. Either that, or we need to call them a “dao” instead of a “d.a.o.” and forget that the letters stand for anything. Otherwise, people will keep saying things like “that’s not really a DAO, it’s not decentralized enough.”

Or perhaps we can still use DAO, but need a broader catch-all term for any groups with 1) organizational structures that are programmed in, and 2) who primarily transact in crypto (large or small, oligarchy or democracy, simple or complex). For the purposes of this article, this broader term is what I mean by “DAO.” How is a DAO governed? As many ways as a programmer can dream up. How do DAOs collaborate? Whatever makes the most sense. DAOs in their current form are hundreds of experiments, each with varying degrees of decentralization and autonomy and any number of features. It’s too early to say definitively what DAOs are good for or not. Many of the current DAOs will fail, or merge with other DAOs. Some people will lose a lot of money. That’s not good. But maybe some of these experiments will succeed beyond our wildest dreams, not only financially and productively, but also for the good of society. Maybe. Just maybe.

For those newer to the space*, who want a bit more background in DAOs, check out:*

In the midst of all these experiments “what is a DAO?” is not as important a question as “what will DAOs become?” The first cars were not very useful: they were slow, couldn’t handle difficult terrain, and kept breaking down. Horses were a much better transportation choice for most people. Likewise with the early telephone, a telegraph could send messages much further and to a lot more people. For both of these, not only did technologies need to improve, but also the infrastructure needed to improve (the roads, the cables, the hardware, and most importantly the network). I’m sure some people at the time could see some potential, but surely things like cell-phones and our current freeway system would have been hard to imagine at the time.  Likewise, what a DAO can do may change, not only as we learn best practices, but also as infrastructure gets built-out (laying the “roads” or “phone lines”). For certain groups, organizing as a cooperative or LLC may still be the better choice, depending on what they want to accomplish. But if you look at the unique aspects of what a DAO could be, I think we might be moving towards a more “human” or “relational” way of working and organizing.

Some features that seem distinctly “DAO”

  1. Radical transparency verifiable by the public. All major movements of funds would be open for everyone to see from the DAO’s public wallet, as well as the governance and voting process. Could a normal NGO or cooperative do this now? Maybe. But it would be hard for it to be provable and verified without a stamp of approval from a “trusted third party,” which would undoubtedly extract some nice fees, while also being vulnerable to corruption. Transparency is important not just for openness and trust, but also so that the learning from all these experiments benefits the broader community at large.
  2. Joining and leaving. These mechanics are still in various stages of experimentation. Often there is a way to “buy-in” to join a DAO. But one also may be able to apply and/or earn your way in through showing up and contributing. But I think the biggest difference DAOs offer is in leaving: you can leave with ease, while often taking some of the value you have earned with you. Why is this beneficial? It keeps an organization from becoming entrenched. People who are there want to be there. This dynamic incentivizes the organization to keep the interests of all members in mind.
  3. Hive-mind contributions. This is not chaos for chaos’s sake (although in some Discord channels it might seem like it is…so many channels to choose from, not sure where to start).  The strength of the hive-mind is that individual contributors are guided by their personal interests, passions, and allegiances. People are free, not squeezed into narrow roles or responsibilities. This leads to a lot of great energy. In the worst cases it can become messy and counter-productive, but in the best cases the DAO leadership can harness and guide that energy to be maximally productive.
  4. Rules of the organization are encoded in software. DAOs don’t need all the rules to be encoded in software, but they can have a lot of them there. And the more that structures are encoded and not open to interpretation, the more that the members can stop thinking about them, and just operate within the rules. This could potentially lead to less need for “politicking” or navigating vague processes, being stuck operating under your one supervisor, or fulfilling your narrowly-defined job responsibilities. One could think of many downsides to the inflexibility of encoded rules, but the community would be free to change and modify them if they began feeling too restrictive.
  5. DAOs do not have to gain their legitimacy from the state. Their legitimacy comes from the trust in the programming that supports the DAO, combined with the reputation/influence of the community involved. Some DAOs will choose to incorporate in various countries for the sake of a certain type of legitimacy. But others will choose to remain free from any country's rules/regulations: they can source talent from anywhere in the world, transacting with internet-native money, governed by token holders, within the rules of the code. This is a whole new level of flexibility and globalization.
  6. Different structures for ownership, voting, and labor. This is a difference of degree, more than a difference of type, but still worth mentioning. With DAOs there is more flexibility in what the organizational structure can look like, not having to fit into the definitions of LLC, corporation, cooperative, etc. It seems there would be greater overlap between owners and workers than a typical joint stock corporation, but more ways of structuring organizations than cooperatives. Voting power could be combined with ownership or separated. All the labor can get a vote, or not. What works best is an open question, still very much in the realm of experimentation. But, going back to “Difference 1,” whatever structure is chosen, it can be out in the open and able to be verified by the group.

Will DAOs actually work?

Yeah, there’s gonna be problems. Some DAOs will get hacked. Others will be elaborate scams. Some will develop horrible cultures. Others will gather some momentum but never generate enough profits to pay their community well. Perhaps this model puts too much onus on the workers to figure out what to do? Maybe DAOs turn out to be only good at raising money to buy stuff?

Some objections and a quick response:

Will DAOs be too slow? Whenever we hear about the ideals of democracy giving power to the people, this criticism crops up: “But isn’t group decision-making too slow/clumsy? Would a true DAO ever be able to get anything done quickly?”

This is a valid question. The response, I think, goes back to the experimental nature of DAOs and the infinite options available for how one could be structured. Some will choose to be more democratic for the sake of slowly coming to the best community decision. Many will choose to delegate decision making responsibility to a small group of experts, who can be allowed to quickly build, deploy, iterate, decide, within their realm of responsibilities.

Should everything really be open and transparent?  For some use-cases, don’t you want certain things to be secret/proprietary?

Certainly, just as DAOs can delegate decision-making to certain closed groups, they can also delegate certain information and transactions to be private. DAOs don’t have to be fully open and fully hive-mind. They can still allow for the flexibility for some private information, as well as full-time employees. But for certain cases where trust/transparency and crowd-sourcing talent are important, the open and transparent will be able to out-compete the closed and secretive company. In other cases, the reverse may be true.

Will people be able to make a living working for DAOs?  Will just “showing up and adding value” pay people enough? Who will be able to make a living solely off of DAO-work? Just a few? Will it become the new under-paid gig-work?

It is hard to say for sure. But the DAOs that find profitable use-cases, and are able to pay well, will undoubtedly have the talent flocking to them. And these DAO experiments that work well will be copied and iterated on by others.

Could we be moving away from “one job” being the norm?

Just as we’ve seen the past half-century transition away from “being a lifetime employee with a pension.” I wonder if the next half century will see a transition away from only having one job at a time. I wonder if both of these are a carryover from the need for work primarily dealing with physical materials in a specific location. Maybe some people will still like to keep one job, but maybe many people will thrive a lot better by being a bit more spread-out and flexible.

Could work become a lot more “human” and “relational”?

On the one hand, I worry that “the tokenization of everything” could lead to a dystopia where all work is reduced to financial incentives and humans become even more of a cog in a machine. However, so far my experience of the blockchain world has been much more welcoming and relational than I would have thought. Why is this? I’m not sure. Perhaps because of the porousness of the communities, workplaces can be more like social relationships: people show up only when they want to be there. Nobody is stuck with “golden handcuffs.” Also, hierarchies are minimized, and people don’t seem to be power-tripping as much. There is often the “core team” but usually everyone else is just somewhere on a spectrum from more active to less active. Show up and add value. “You do you.” I wonder if, when you “encode” certain aspects of a workplace dynamic, it can free a workplace up to be more welcoming and friendly; when “how you get ahead” becomes more programmed in, there becomes less of a need for politicking, and people can connect with coworkers to get the jobs done that they want to be apart of.

Some Interesting Examples to Check Out:

DAOs Mirroring Natural Ecology

I wonder if DAOs are heading toward a form of capitalism that mirrors the ecology of the natural world (inspired by this article on “DAO Ecology”). DAOs can more easily evolve, merge and divide and duplicate, and spread gifts to all their members.  WAGMI is the rallying cry where we aim for mutual gain, since each of our greatest personal benefits comes when the whole community also benefits. Through unity, survival. Mutual flourishing. The DAOs that are set up in a generous structure, sharing benefits with the whole community, are the ones that will gather more community to it. Any DAO that starts to feel exploitative will be abandoned by the community. Even though many DAOs will choose to have employees, some of the payment for work can start to operate more like gifts: members want to contribute as they can since they share in the upside of the community as a whole, and contributions can also be rewarded by the community as a “thank you.” But the original work was done without any prior agreement for payment. This “gift culture” of mutual giving and receiving, being generous, further binds the community together relationally. Maybe this is what organizations have been striving towards with “improving company culture,” a sense of community that comes with “this is how we do things here, and this is the bond that ties us together.”

Iterating in Public

What will work best for different use-cases has yet to be seen. Compared to past organizational experiments (like “how best to run a joint-stock corporation”), these DAO experiments can be built out in the open, able to be inspected by the broader web3 community to learn from, which I think will enable much faster iteration and improvement in the space. This is all one big DAO experiment and only time will tell. I am excited to see what’s to come. I think we will all be surprised by it.

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