In the previous post we discussed how DAOs are in truth neither fully decentralized nor truly autonomous. They are not fully decentralized due to the reality that unilateral action and decision-making is often necessary to get things done. They are not truly autonomous because aspects of their operations fall outside the scope of enforceable governance.
What is more important than decentralization is accountability. We can permit centralized and even hierarchal structures in pursuit of our goals so long as those structures remain accountable to the wider constituency. If DAOs can adopt a method to administer and oversee any task required of them, even off-chain, they may yet be truly autonomous.
Much ado has been made of decentralized autonomous organizations (DAOs). Broadly speaking, these projects inscribe their rules, rights and responsibilities to smart contracts which live indefinitely and immutably on the blockchain. Holders of the DAO’s corresponding crypto token may participate in votes which automatically invoke those contracts to execute functions and pass new legislation.
The prominent early experiment of this scheme was aptly named The DAO. The DAO deployed to the Ethereum blockchain in April 2016 on the back of one of the most successful crowdsourcing campaigns in history, drawing in over US$100 million and nearly 14% of the ETH in circulation.
The stated purpose of The DAO was much the same as any corporation — To create value and enrich stakeholders. Through the wisdom of the crowd, proposals would be curated and voted on to receive funds from The DAO’s treasury with the expectation that profit would flow back to the investors.