µniverse and Bharatverse: Web3 Explorations (Part 9)

Web3 to DAO – 1

The DAO (decentralised autonomous organisation) is an essential construct in Web3.

Nathan Baschez writes in Every: “The first phases of the internet, web1 and web2, were respectively defined by static one-to-many broadcast websites (e.g. Yahoo) and centrally controlled social networks (e.g. Facebook); in the long arc of history they will come to be seen as a fundamentally flawed and transitory technology, like the digital camera and MP3 player were to the smartphone, or how the Articles of Confederation were to the Constitution. To these crypto degens, web3 is the true and final form of the internet … [DAOs] believe “ask the audience” is the winning strategy, and if you set up the right decision-making systems, collective wisdom is greater than individual vision. One way to think about it is the next wave of democratization. First, we devolved power from monarchs and dictators to elected representatives in the management of nations.”

The Economist explains: “DAOs [are] collectives that use automation and crowdsourcing to make decisions. They do not rely on a single central authority, like a boss. Instead members typically use cryptocurrency to buy tokens, granting them voting rights. Jonah Erlich … has likened a DAO to a group chat with a bank account.”

Youssef Faqir-Rhazoui, Javier Arroyo and Samer Hassan write: “A DAO is a blockchain-based system that enables people to coordinate and self-govern themselves mediated by a set of self-executing rules deployed on a public blockchain, and whose governance is decentralized, that is, independent from central control. DAOs are organizations in the sense that they mediate the interactions of a group of people, typically an open community that joins as members. In some DAOs, members are token holders of a certain token that enables DAO participation, similar to corporation shares. DAOs are considered autonomous because, unless its code explicitly says so, they are independent from their creators. Their operations follow the rules embedded in its code, together with the (human) governance of its members. Moreover, being deployed on a public blockchain, they are censorship-resistant, since there is no central controller that may turn off the DAO and its provided service. Thus, as long as there are members willing to execute their code, DAOs will continue operating, e.g. providing services, purchasing/selling resources or hiring people.”

Arianne Flemming and Jelena Djuric provide a historical perspective: “DAOs are en vogue; the promise and ethos of DAOs are novel but not new. Over 200 years before their transfer onto the blockchain in the form of DAOs, cooperatives have solved governance problems in a democratic and accessible way. Globally and historically practiced structures for corporations, largely ignored by Silicon Valley and technology enthusiasts to date, co-ops are an autonomous association of people united voluntarily to meet common economic, social, and cultural aspirations through a jointly-owned and democratically-controlled enterprise … Little of the operational aspects of what we now call a DAO is new. DAOs don’t need to reinvent the wheel; they can improve on the work already done. Existing cooperatives are useful case studies for DAOs and places to draw inspiration and experience, having stood the test of stable time. What is different is the complete digitization of the cooperative organization, now called platform cooperatives, and the application of blockchain for governance, and cryptocurrency for monetary activities. These are the novel aspects and growth accelerants. The relative ease of use and digitization of trust creates a unique kind of organization when properly leveraged. There are long-standing cooperative business models to learn from and build upon.”

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Rajesh Jain

An Entrepreneur based in Mumbai, India.