Why decentralized autonomous organizations (DAOs) are important and how they improve coordination among parties
Blockchain, transparent as it is, is not a substitute for human decision-making. It can keep trustable records and, through smart contracts, execute decisions that have been made. These are amazing feats to pull off without a middleman or arbiter. But they are not the same as running an organization. Governance protocols are needed in order to receive input from the human participants and produce output in the form of decisions. Which means that humans are required both for choosing the protocols, like for example whether they want a majority-rules system or something different, and also for actually providing their input on a decision-to-decision basis.
We could think of a decentralized autonomous organization (DAO), then, as the combination of a group of human participants with the blockchain-based protocols they agree to adopt.
DAOstack improves coordination among parties. It allows crowds to collaborate effectively by coordinating a lot of their decision-making indirectly, which is really the only way to coordinate when you’re talking about thousands or millions of people collaborating without centralized leadership.
How DAOstack improves on previous DAO systems
First, DAOstack offers building blocks for governance systems that can scale up infinitely, such that large numbers of (good) decisions can be made in a small period of time, while also remaining resilient, which is to say non-corruptible by bad acting, bad influence, or bad judgment. To that end, DAOstack has innovated a system of governance it refers to as holographic, which means that decisions can be effectively made by a minority of reputation holders, with that minority virtually guaranteed to act in alignment with the interests of the greater majority. The word ‘hologaphic’ is an analogy to how each fragment of a hologram contains the entirety of the image, when isolated from the whole.
Second, and very importantly, the premise of DAOstack is not to try to engineer the right governance protocol ahead of time. Previous systems have for the most part been fairly rigid: they’ve been designed with most of the decision-making protocols prescribed in detail for the organizations that will use them. DAOstack takes a different approach, which is not to build the castle, but rather to build building blocks that can be easily configured to architect the governance system for any given organization. The idea is that there is no one-size-fits-all, and more importantly that the best solutions will only emerge over time, though rapid, market-driven evolution. DAOstack essentially represents a framework for governance experimentation, like a sandbox, or a lego set, or a WordPress.
Finally, DAOstack is a system designed for a high degree of accessibility. You don’t need to be a blockchain governance programmer to interact with it, although if you are, you can get in there and tinker with the modules, the mix-and-match smart-contract building blocks, without needing to reinvent the wheel each time. But there’s also an application layer, including a user interface called Alchemy that allows any non-technical person to participate in decentralized decision-making, or even set up a decentralized organization, with a few clicks. You can also be a front-end developer with no familiarity with blockchain or smart contracts, and there’s a JavaScript API that lets you build dApps (decentralized applications) on DAOstack’s back end.
Arc and how make it easier for other companies to construct their own DAOs
DAOstack’s protocol layer consists of a smart contract framework called Arc, a library of modules which each represent bits and pieces of governance machinery that can be easily mixed, matched, and modified to create the complete governance protocol for any given DAO. Similar to how WordPress allows businesses and individuals to make quick, flexible, functional websites, DAOstack is designed to make the same possible for decentralized organizations.
How DAOs will help blockchain become more mainstream
One of the biggest questions within the blockchain community is what will be the killer app, the application of blockchain that will get mass adoption. In great likelihood, DAO is that killer app. There are several good reasons to believe this: DAOs solve a major problem. They improve the status of the current system in a big way by producing organizational systems much more efficient and resilient than existing structures, and therefore more capable of addressing some of the greatest global challenges. Blockchain is a necessary component of DAOs. Without blockchain, DAOs are not actually scalable. DAOs are flexible enough to touch a wide variety of types of organizations. They have the capability to become ubiquitous very quickly, particularly in the digital sphere, and then in the analog sphere. DAOs are one application of blockchain that actually does not depend on true scalability of the blockchain itself, since DAO governance requires relatively low transaction volume. So DAO is a blockchain use case that can actually scale before the blockchain itself figures out how to scale.
The Collaborative Economy
Eventually, DAOstack envisions hundreds of millions of people participating in a collaborative economy catalyzed by its technology. This new “internet of work” will be built on principles in which everyone is on an even playing field, all are rewarded in a fair manner (i.e. in proportion to the value contributed), and incentivization is properly aligned with the common good. This ecosystem of interoperable DAOs and dApps (decentralized organizations) will be able to share talent, ideas, and learnings, and will be able to better address some of today’s great global challenges better than existing corporate structures.
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