Interestingly, the Ethereum white paper (I just read it) talks about DAOs and the author means by DAO “ a virtual entity that has a certain set of members or shareholders which, perhaps with a 67% majority, have the right to spend the entity's funds and modify its code.” https://ethereum.org/en/whitepaper/#decentralized-autonomous-organizations He allows for a pretty general definition of DAO where DAO can be Decentralized Autonomous Corporation with shareholders as well as Decentralized Autonomous Community with 1 vote per person. In both cases Ethereum just provides an infrastructure to safely make collective decisions (voting) and distribute benefits. But I feel that currently, the notion DAO gained the anti-establishment connotation and usually means something like a community of enthusiasts.
That's the early/current connotation but I think it's pretty clear that it enables some really interesting and novel forms of organization. Mainly by reducing transaction costs of entering in sophisticated smart contracts collectively. some of the examples in that white paper are quite interesting. Decentralized platforms is just one type of DAOs, but the universe of possible DAOs is vast and rapidly expanding. Sure, DAOs won't work for everything (e.g. command-and-control traditional org structures are better for producing complicated products and fast), but they will undoubtedly create new types of orgs. And not just frivolous stuff like https://boredapeyachtclub.com/#/
"... collectively owned and collaborative structures, where everyone owns a share (in the form of tokens) and has a vote in what the organization does. " -- It seems that DAO is a reincarnation of a standard corporation with shares but in the land of crypto. I, as an employer of a tech company, receive part of compensation in the company shares and can technically vote in shareholder meetings. Do I understand correctly that the benefit of doing things with tokens is the overhead is smaller (eg, verification and enforcement)?
Julian has some thoughts that he will share as well. Two thoughts from me.
1) In addition to lower overhead, tokens can also allow for easier implementation of contractual structures that align incentives in ways that may not have been possible before (contracting costs too high).
In response to Gleb's question: The applications are much wider than firms letting stakeholders share some form of "equity" in the company. But focusing on that application, then yes it reduces verification and enforcement costs, and potentially by doing so allows the awarding of "equity" to be across a much broader base of stakeholders beyond employees than would be possible for a private company (e.g. users). But this last point depends on how security law and regulation applies, and so a certain amount of the advantage right now seems to be coming from skirting existing regulations, which will not be sustainable if regulators crack down.
Widely spreading the tokens reminds me of the Russian privatization in 1990s when the shares for the entirely was given out to the population with a goal that everyone could participate. Most people didn’t understand what they should do with the shares and quickly sold it to speculators for cash. Ultimately it lead to major concentration of ownership in the hands of the few.
Good comparison. My two co-authors in the post didn't want to explicitly include the parallel to politics but it's quite clear: decentralized platforms are like democracies and centralized ones like dictatorships or authoritarian regimes. We would all like to say that democracies are better, but that's obviously not always the case. To your point, even in a democracy, not everyone votes on everything, i.e. no referendum on every single policy decision. Precisely because most people are uninformed about most policies.
Interestingly, the Ethereum white paper (I just read it) talks about DAOs and the author means by DAO “ a virtual entity that has a certain set of members or shareholders which, perhaps with a 67% majority, have the right to spend the entity's funds and modify its code.” https://ethereum.org/en/whitepaper/#decentralized-autonomous-organizations He allows for a pretty general definition of DAO where DAO can be Decentralized Autonomous Corporation with shareholders as well as Decentralized Autonomous Community with 1 vote per person. In both cases Ethereum just provides an infrastructure to safely make collective decisions (voting) and distribute benefits. But I feel that currently, the notion DAO gained the anti-establishment connotation and usually means something like a community of enthusiasts.
That's the early/current connotation but I think it's pretty clear that it enables some really interesting and novel forms of organization. Mainly by reducing transaction costs of entering in sophisticated smart contracts collectively. some of the examples in that white paper are quite interesting. Decentralized platforms is just one type of DAOs, but the universe of possible DAOs is vast and rapidly expanding. Sure, DAOs won't work for everything (e.g. command-and-control traditional org structures are better for producing complicated products and fast), but they will undoubtedly create new types of orgs. And not just frivolous stuff like https://boredapeyachtclub.com/#/
"... collectively owned and collaborative structures, where everyone owns a share (in the form of tokens) and has a vote in what the organization does. " -- It seems that DAO is a reincarnation of a standard corporation with shares but in the land of crypto. I, as an employer of a tech company, receive part of compensation in the company shares and can technically vote in shareholder meetings. Do I understand correctly that the benefit of doing things with tokens is the overhead is smaller (eg, verification and enforcement)?
Julian has some thoughts that he will share as well. Two thoughts from me.
1) In addition to lower overhead, tokens can also allow for easier implementation of contractual structures that align incentives in ways that may not have been possible before (contracting costs too high).
2) This is a great article I just found: https://jessewalden.com/progressive-decentralization-a-playbook-for-building-crypto-applications/?s=03
The most reasonable approach is centralized first, then progressively involve user community and possibly decentralize some decisions
In response to Gleb's question: The applications are much wider than firms letting stakeholders share some form of "equity" in the company. But focusing on that application, then yes it reduces verification and enforcement costs, and potentially by doing so allows the awarding of "equity" to be across a much broader base of stakeholders beyond employees than would be possible for a private company (e.g. users). But this last point depends on how security law and regulation applies, and so a certain amount of the advantage right now seems to be coming from skirting existing regulations, which will not be sustainable if regulators crack down.
Widely spreading the tokens reminds me of the Russian privatization in 1990s when the shares for the entirely was given out to the population with a goal that everyone could participate. Most people didn’t understand what they should do with the shares and quickly sold it to speculators for cash. Ultimately it lead to major concentration of ownership in the hands of the few.
Good comparison. My two co-authors in the post didn't want to explicitly include the parallel to politics but it's quite clear: decentralized platforms are like democracies and centralized ones like dictatorships or authoritarian regimes. We would all like to say that democracies are better, but that's obviously not always the case. To your point, even in a democracy, not everyone votes on everything, i.e. no referendum on every single policy decision. Precisely because most people are uninformed about most policies.