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In my last article I mentioned in passing the existence of DAOs (Decentralized Autonomous Organizations), I think it is worth exploring this subject as I believe it is a blueprint of how the society of the future might look like.
At its most basic a DAO is a way for a group of people to organize and work together, without needing to meet, know each other or even trust one another. It uses Blockchain technology to make this happen. Basically you create a token, and everyone who holds this token in effect owns a portion of the DAO. By holding it in your wallet you can vote on proposals done by other members, or even, make your own. There are a bunch of different ones already working, I’ll just name a few that you can look up for yourself (since they all work slightly different from each other and I can’t go into too much detail in each one): Uniswap, SushiSwap, 1inch, Audius, Sovryn (I am a part of this one), etc.
DAOs are completely disrupting everything they touch, they bring a new way of organizing structures. Let’s bring some examples: Spotify has a CEO and a team behind it who owns the platform. They in fact sell and rent the space for artists to share their music and give back a percentage of their revenue in form of royalties. It is a good deal if you are an artist, however, the responsibility of Spotify is to their shareholders and not their users. This is the way most businesses have always worked. But now, let’s take a look at Audius. There is no company behind it, anyone is free to use it and upload music to it. Depending on how much people listen to your music, instead of earning royalties in USD you earn AUDIO tokens. With this token you then have a chance to participate in the governance structure of the platform itself. You can vote on the changes being proposed by other users, or propose your own ideas and present them for others to vote on them. The users are now the owners, no shareholders and most importantly (thanks to blockchain) everything is transparent and happens in the open.
This is a very deep shift in the way of conducting business, one that legacy corporations (specially public ones) will have a real hard time adapting to. Of course not EVERYTHING will be run by DAOs, but many things will.
We can also compare SOVRYN (one that I’m a part of) with something like Coinbase. Again, one has a CEO, a legacy structure behind it. I can choose to use it, but I have no say in the way they behave. I used to use COINBASE at the beginning of my crypto journey, but they have made many questionable choices since then (specifically speaking I don’t like their listings of meme coins in their platform). Now with Sovryn, there is no company, only a group of developers and users which use their tokens to reach a consensus on the best way to operate and improve the platform. In this particular case holding the token is not enough, to participate one needs to lock them in the platform. What this does is effectively saying “I’m in this for the long run”, the longer you lock them for (max is 3 years) the more voting power you get from them.
Here we come to one of the main things about DAOs that we need to understand, and it is why I think it is so important when looking forward. While true that every user is in effect an owner, not all of them own the same percentage of it. It is not a democracy, not all votes are worth the same. Everyone’s power is directly tied to the amount of tokens you hold, and in the case of things like Sovryn, how long you lock them up for. This introduces an interesting concept people call “Skin in the Game”. Theoretically speaking, the more tokens you hold the more invested you are, and the more you’d want the DAO to be successful. It also makes them hard to attack, as you’d need to invest a lot of money to gain enough power in it to derail it. If you did, the token would lose its value, and so would your holdings. This is what makes them resilient, it’s a feature, not a bug.
This type of structure has some of the concepts of Democracy (everyone gets a vote) and markets (the more you invest the more you own). I believe this is the way most things will be managed going forward. One may say it’s morally wrong for those who own more have more power, it might tend to centralize things. This can be true, and I’m not making a moral argument here, I’m only trying to see where things are going so that we can be aware of the new structures. Like I always say, those who pay attention and adapt quickly will benefit the most from this period of transition.
Here is what I have been thinking that gives me faith in this new system. While true that centralization is always a big issue. Our current structures are mostly 100% centralized, so even if DAOs are a bit less, it is still a net positive. DAOs seek to reward in an honest and fair way it’s most valuable actors, so in theory those who will gain the most power would tend to be those who deserve it the most. At the same time, creating these DAOs is getting easier by the second, so we will see a period of extreme competition between them. All looking to give the most value back to it’s users/owners. Meaning that we will be able to shop around and support those who are the most honest and decentralized of them all. This is the beauty of free markets.
This is the main point I want to make, when taking this to the larger picture. Democracy is supposed to be fair, meaning everyone gets a vote, and all votes are equal. The problem is: is equality fair?
If you have people that work harder, produce more, know more and are overall more effective. Is it then fair, that the people who do not, also benefit at the same rate?
I’ll be honest, I am not sure. However the answer may be, here is what I do know. We are moving towards an era where the government’s power to make things “Equal” will diminish greatly. I’m not sure if this is good or bad, but it is happening, DAOs are showing this. Moving into the future people will keep most of what they produce, they will be more free than ever to invest and use it to own things like this DAOs. So most likely the wealth divide will deepen. I am not writing this to encourage this or to speak against it. Only so that we can understand the new world that is coming.
I honestly believe that only if you have the right map can you make the right decisions and find your way through the world. So all I’m trying to do here is learn as much as I can, share the info I get and the insight I can offer. Then anyone can do with that, what they feel is best. For my part, I’m looking to become an active member of some DAOs (like I said I’m already in Soveryn and I am uploading my podcasts and music to Audius), I’ll keep a close eye on this fast growing space. As individuals we will experience levels of autonomy that resemble no moment in history. Those of us who embrace it and make the most out of it will benefit, those who are afraid of this and seek the shelter of the nanny-state, things will get rougher and rougher. Again, I’m not taking moral sides here, this is just where I see things going.
Hope this helps :)
