Ryan Watkins posted a thread last week on Decentralized Autonomous Organizations (DAOs) that inspired me to reflect on the disparity between what I imagined when I first started thinking deeply about DAOs in 2014, and the reality of how most people relate to them today.
Vitalik Buterin captured the essence of what DAO visionaries aspired to create in a 2014 blog post.
"The ideal of a decentralized autonomous organization is easy to describe: it is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do." – DAOs, DACs, DAs and More: An Incomplete Terminology Guide
The majority of "DAOs" we see today are more accurately described as what Buterin referred to as decentralized organizations (DOs). DOs are like traditional organizations, but they replace a hierarchical structure where people at the top set the rules, with a flatter structure where humans interact directly with each other governed by a set of code-based rules. They replace property that is enforced by the legal system with digital assets enforced by a blockchain.
In DOs humans are required to constantly make decisions. A DAO is, to some degree, making decisions for itself.
Most DAOs getting a lot of attention clearly rely on humans to manage daily operations.
- Friends With Benefits is a "group of cultural creators and maintainers using Web3 to build community and foster creative agency."
- The LAO is "a global group of Ethereum enthusiasts and experts supporting the work of Ethereum builders."
- CityDAO is "exploring decentralized asset ownership on chain, starting with a piece of land in Wyoming. Each parcel of land is an NFT that can be owned collectively by the DAO collectively or by individuals. It is a DAO, or Decentralized Autonomous Organization, meaning it is managed by the community."
If a handful of influential leaders or a significant chunk of the community decided to stop participating in any of these projects, it would have a noticeable impact on the organization's behavior, possibly even bringing its operations to a halt. These organizations are not autonomous in any meaningful way.
This can be starkly contrasted with something like Bitcoin, which Ralph Merkle described as a potential "first prototype for a DAO" in 2016.
There is no identifiable set of key individuals whose lack of involvement would cause Bitcoin to stop performing its core function–"allowing any two willing parties to transact directly with each other without the need for a trusted third party." Half or 75% of network participants could stop contributing tomorrow and Bitcoin would chug along.
Protocol DAOs like Uniswap, Compound, and MakerDAO come much closer to the true vision of DAOs because the software is semi-autonomous. These protocols provide 24/7 globally accessible and permisionless decentralized trading, borrowing/lending, and stablecoin creation without relying on humans to provide constant input. They would be disrupted, but not crippled if key contributors or large numbers of governance token holders stopped participating.
I'm not writing this because I believe there is anything wrong with the experimentation we're seeing with more decentralized forms of organization. Last year I was quite caught up in the DAO hype and I wasn't really thinking about how far we had strayed from the original vision for DAOs until I saw Ryan's thread.
That being said, I would love to see more focus on creating novel autonomous organizations. Bitcoin and Ethereum have demonstrated the value of open-source autonomous digital public infrastructure that humans can depend on to not be easily corrupted or co-opted by other humans.
Some low-hanging fruit I'd love to see explored:
- Investment DAOs built with protocols like Enzyme Finance or Set that autonomously manage portfolios of cryptoassets.
- Charity and philanthropy DAOs that raise funds from humans and then autonomously donate money according to a transparent and pre-programmed set of rules.
- Prediction market DAOs that bet on the outcomes of real world events in decentralized prediction markets and send any profits to investment or charity/philanthropy DAOs.
If you're working on anything in this space, please reach out!