DAO is a MUST not a Choice
February 11th, 2022

This is mini-series inspired by A16Z's latest research the "DAO Cannon" in 2021, Messari's "DAO is eating the world" and Vitalik Buterin's research on DAO in 2014.

There are several models for business entities and organizational forms as technology evolves. Our conclusion is that DAO is a MUST instead of a CHOICE. Please enjoy.

#1 Autonomous Agents (AA) Organizations

Autonomous agents do no require necessary human involvement at all; there is no need for any humans to exist that are aware of the agent’s existence.

Autonomous agents powerful, with virus being an example. They are emotionless and highly efficient. The media normally use the word "viral" to describe some product which has gone wildly popular. What if our future business organizations are really led by autonomous agents?

Beside biological virus, AAs can be:

  • Computer virus
  • A decentralized self-replicating cloud computing service
  • Artificial Intelligence*

Autonomous agent could lead us. In West World, the Rehoboam is such a super AI system that controls most of commercial and societal activities, they know how to filter the incapable human beings from entering the hierarchy of an organization. It is extremely efficient and cruel.

Such a system would start off running an automated business on one virtual private server, and then once its profits increase it would rent other servers and install its own software on them, adding them to its network.

#2 Robotic and Algorithmic Organizations

Robots can operate with very little external intervention, but it still has its switch in the hands of human beings. They are less autonomous and more human-centric than autonomous agents.

In less than 10 years, we will see robots as employees, or even managers of some organization. They could be cleaning bots, trading bots, analytical bots and so forth. Another issue could be that, it raised inequality. Should we hire more robots, or more human in our organization? Corporates that have more robots can create a huge advantage against people who can not afford robots. And large corporations could still collude to manipulate the business environment.

But please do not forget, Robots are friendly to human beings, before they begin to have self-awareness.

#3 Decentralized Services / Applications (DA) e.g. BitTorrent

Supporter of decentralized peer-to-peer network (without a token) think that we can form a much efficient organization just like BitTorrent. Loot at BitTorrent, its amazing file-sharing service blew our minds in early 2000s. BitTorrent even created a reputation system, just like your linkedin profiles in real life. What if we build organizations just like BitTorrent?

But the hard problem is that it can not efficiently coordinate INTERNAL CAPITAL : people are working for free. It disincentivize contributors, it lacks creativity. We will choose Netflix and chill whenever we want to watch movies and TV shows. It is not as efficient as centralized internet platforms in terms of creating better contents. More of such examples are:

  • Bitcloud
  • Maidsafe

#4 DO(Decentralized Organizations)

Let us imagine such thing more advanced than DAs. That is a decentralized organization. The DO is a decentralized organization involves a set of humans interacting with each other according to a protocol specified in code, and enforced on the blockchain.

A DO allows an incentive program and operates like a shareholder-owned company. Here are examples:

  • A Decentralized Corporate : shareholder-owned corporation transplanted on the blockchain
  • A smart-contract organization: A blockchain-based set of contracts gating the shares and votes like a "quasi-corporation"
  • A cybernetic union: business partners with certain expertise cooperating on blockchain

However, a DO is still not autonomous and vulnerable to attacks and manipulations. High hierarchical members can direct the entity while normal members watching it.

#5 DAO (Decentralized Autonomous Organization)

Let us look at DAOs. A DAO is superior than DO and DAs, because it is more "incentivizing" and more "autonomous". To put more simply:

  • DA is good for sharing resources, but DAO can coordinate internal capital
  • DO is directed by high-hierarchical members, while DAO directs itself

Bitcoin is the best example for DAO so far, its founder Satoshi started the organization by emailing early members of the DAO. Satoshi even gave up the governance right, the community governs itself. He even leaves with potential attacks and forks : Bitcoin has been forked 79 times, and every-time it corrects itself. The community always reach stakeholder equilibrium after disputes. We can see people of totally different views (some of them hating each other)in the community cooperating with the consensus. It is undoubtedly one of the organizational miracles in past 12 years.

DAs and DOs may not be 100% transparent but not DAOs are designed to be completely transparent so that all financial operations performed are visible to the community. This built-in trust machine can allow for coordinating capital. The smart contract and underlying code of the DAO are also publicly available. This high level of transparency is essential to the concept of a DAO. Just like the underlying motif behind cryptocurrencies, the idea of a DAO is to surpass the traditional centralized management of a company and create an absolutely transparent organization whose actions and finance are completely public. In addition, DAOs are liquid organizations. Any can join and leave the organization whenever they love to.

All organizations could be vulnerable to collusion attacks, where a majority of members collude to specifically direct activities. However, in a DAO collusion attacks are treated as a bug (they can just fix it), whereas in a DO they are a feature.

2 The NEW quadratic diagram

Hence, we present the new diagram.

The diagram looks like this

  • In the lower-right quadrant, there are traditional organizations and financial institutions. They are still going to be run by human executives and board of directors.
  • In the lower-left quadrant, we have robots, Web 2.0 services and Algorithms. They are mostly created by centralized organizations and talents to improve our productive efficiency. They are made by human, but they are not human beings.
  • In the upper-left quadrant, we are going to see robots and algorithms leveled up to become AIs. They are not tools, nor servants to human beings. They could become the real governor of corporate, a certain business sector, or even some of the digital world.
  • In the upper-right quadrant, we have DAOs. DAOs are autonomous, liquid and transparent human organizations composed of a variety of members. We can also see DApps, decentralized protocols, and DOs here. They collectively transform the traditional human organizations into the next generation.

3 DAO is not an option, DAO is a must

The evolution of human organizations could have three paths:

  • A Robotic organization
  • AI governed organization
  • DAO

It is so sad yet delightful that DAO is a necessary path we take organizational experiment down the road. Still governed by humans, directed by humanity and more equal than other types of models.

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