CHORUS:

As the world continues to transition to a digital age, new innovations are emerging that promise to transform the way we work and interact with one another. One such area is Web3, which encompasses decentralized technologies such as blockchains, smart contracts, and decentralized autonomous organizations (DAOs). In this post, I suggest how the Web3-enabled future of work could lead to the emergence of Prime Protocols.

Verses:

Prime DAOs

Prime DAO, DAO of DAOs, coalition, association, DAO… Imagine if many different organizations of different sizes and structures (including web2 and web3 companies, small projects, ephemeral partnerships, solo-preneurs, marketplace participants, and more) all summoned a DAO whose goal was to help with the coordination towards a more perfect Web3 in their area of focus (for example in the freelance market). Ironically, although permissionless innovation is a guiding light for Web3, Web3 is necessarily more siloed than Web2. Smart contracts are hard to integrate especially when they live on wholly different infrastructure. Still, there are estimates that greater than forty trillion dollars of freelance transactions occur annually. A Prime DAO could drive these real-world assets to power a bull market the likes of which crypto has never seen.

Fat Cat NFTs

Non-fungible tokens (NFTs) are unique digital assets that can represent anything from art to in-game items. NFTs can have a role in Community Management within the context of DAOs. Let’s say the Prime DAO will be worth “one trillion dollars” (cue the Dr. Evil clip) if it works out. To summon the DAO, a RegD offering could be made and priced at $1,000 per unit. A Fat Cat NFT could be paired with each unit. These NFTs can eventually be shared with other organizations, they can optimize community access, they can organize memes that develop the community, they can be fractionalized, and new versions can be created by different organizations (with or without an associated security). In the case of the original Fat Cat, if you sell the NFT, the associated unit would be null and void. But would it be illegal for the Prime DAO to offer a unit-level token distribution to the new NFT owner (of course of course only if they were accredited investors)? Would this bend the security laws enough to break them? If there were an abundance of disclosures would the SEC consider this brokering even more problematic? Well, we wouldn’t promise to sell the unit to anyone – just accredited investor fat cats. That’s better, right?

How Fat Are Those Cats?

A very wide array of Web3 solutions could play a key role in shaping the future of work. DIDs, social network solutions, storage, autonomous AI agents, and so on. The Prime DAO could set an obvious place for fees – say transaction costs upon payment – extract the fees and share them back within the DAO. This is where governance comes in. This is where new economic games can emerge. This is where decentralization evolves capitalism. For example, the DAO could be petitioned by a software team that wanted to create a social network generated from your on-chain work history. The DAO funds the development and offers a $10M-100M bonus if the solution increases usage across certain metrics. This is just a quick example of a new kind of innovation engine that can emerge when entrepreneurship can more fluidly mix with intrapreneurship. A core weakness of Web2 is that every unique solution needs to generate its own revenue. It leads to stealth development, trade secrets, planned obsolescence, etc. A Prime DAO can allow solutions to be built without consideration of a revenue model. The focus can be entirely on value creation. What’s the best way to do this if we were all friends?

CODA

DAOs and NFTs offer exciting possibilities for more effective collaboration and community management. DAOs may have been overhyped and have clearly had some early challenges, but they will continue to experiment with new tools for coordination. An important idea DAOs need to accept is that decentralization is not the point. Decentralization is an overused and confusing term that while initially galvanizing, threatens to obfuscate the big opportunity a value-enabled internet makes possible – new forms of centralization. Maybe it would be better to say differently centralized than decentralized.

In a world of telephones and memos, a Prime DAO is nothing more than the national association of Dentists. But we have evolved. With programmable digital value, it’s possible to generate a trustless protocol with a predictable stream of revenue and to create a DAO that governs fees, disbursements, and development. Let’s say for example that there was a general bounty contract running on its own Arbitrum layer 3. Buyers and sellers of freelance labor could use this general bounty contract to do business in a fee-minimized environment. A DAO could manage the general bounty contract and set a target take rate of 0.1%. Just gut a market where Web2 companies charge 20% and more. Basically free. Of course, the DAO could then coordinate with value-added services to be integrated into the user experience and tax the providers to further fill up the DAO coffers. Anything that builds on this Layer 3 and integrates before or after the transaction would be able to petition the DAO for a share of the revenue. With increasing network effects, anything deemed to be charging rents could be forked. This frees innovation from having to create novel business models. Imagine a solution gets built that offers workers payday advances. Instead of being a rip-off, it could be offered at cost. But the team that came up with the idea and built it could be rewarded well beyond the cost to develop the software such that innovation was incentivized. The nice thing here is you build the solution, and you aren’t left with this hungry corporate entity that needs to squeeze and squeeze and squeeze for growth. We have one planet. The goal shouldn’t be to grow beyond the size of a star.

This holds for the Prime DAO as well. Why does shareholder price have to go up (ignoring inflation for now)? If the DAO aims to minimize fees at every turn. If the DAO distributes a fair dividend. If it aims to become a non-extractive regenerative public good. If the users acknowledge the value of innovation and administration within that mission. These are the ingredients for the discovery of a PRIME PROTOCOL. Verticals from healthcare to energy, and some work functions like labor and services will benefit from the emergence of their own prime protocols. This is how Web3 will ultimately interface with our economy. People understand this subconsciously. It is the reason Web3 took off. It is also the reason Web3 is struggling. We must summon and design/discover the prime protocols otherwise Web3 is just Web2 with more owners. Prime DAOs can be created to help manage these prime protocols to the maximum benefit of society. It’s not communist – because they will invite extreme competition to earn shares of DAO revenue. It’s not capitalist because you can imagine the optimal deployment of anti-competitive behavior like granting monopoly rights to a storage protocol. Not sure you would do this, but maybe it could free up resources to work on other problems. Maybe it could streamline integration across the entire emergent solution. Do we like that we must actively try to not use Microsoft One Drive? Is it possible that capitalism has to add inefficiencies in the deflationary world of software? The Prime DAO is the way.