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IPFS News Link • Blockchain

To DAO or Not to DAO?


Over the past couple of weeks, talk of The DAO, or decentralized autonomous organizations in general, has dominated the blockchain space. News of a near US $150 million (12 percent of total Ethereum tokens) investment from a network of investors has questions being asked, many of which fall within range of whether or not such a system is even viable.

DJ Pangburn wrote in his article, The Humans Who Dream of Companies That Won't Need Us, "A DAO or DAC, operated by servers around the world, would exist within no borders and, in theory, be very difficult to shut down."

A borderless organization, the epitome of enterprise decentralized. The DAO is marketed as a faceless corporation of investors who operate democratically, as a flat shareholder base, voting on budgetary decisions down to the very protocol that automates the entire process.

Trust is placed in the collective, in the crowd, a homogenous group of investors with myriad interests, diverse tastes for risk, of knowledge, and maybe even insight.

So while the inner workings of The DAO as a crowdfunding vehicle is automated, the collective of minds and the decisions afforded to them are not — and so the picture of inefficiency, indecisiveness and lack of top-end leadership begins to paint itself.

It's not necessarily a chaotic system, there is order set by the governing contract (DAO 1.0).  

But from an objective position, someone who has no vested interest or stake in the Ethereum-based crowdfunding vehicle, it seems a decentralized organism lacks something so pivotal to success in business — to entrepreneurship — especially early on, that is, a central guiding force.

Without a chief executive or executive core to guide the ship, to feed wind into the sails when no advancement is being made, or progress has plateaued, or worst, slowed, how does the course correct?

Leadership is still a core ingredient to business success. The expectation that communications innovation removes that need for strong overarching management is a romantic thought though also quite idealistic.

A digital company, without an attached legal entity, fully decentralized and community-led is certainly a fascinating experiment, on multiple levels — socially, economically, politically and more — but so was the Soviet Union's attempt at socialism.

A decentralized system is progressive in terms of governance, but the resounding question is whether such a governance model is the most effective, efficient and sturdiest apparatus capable of providing the support and backbone required to combat the troughs and peaks that exist in everyday business.

An article published by DAOhub on May 28 led with the statement: "The DAO contract, or "DAO 1.0", is an innovation in governance because it is decentralized, provably democratic, immutable, efficient and has a relatively low barrier to entry."

The following paragraph: "Improvements in performance are what will come together to form "DAO 2.0", governance solutions made possible thanks to the Ethereum turing-complete blockchain."

But governance cannot be separated from performance.

How something is conducted — the policies, the actions in response to various affairs — is directly related to results.

The DAOhub article reiterated that decentralizing corporate power, maintaining "a completely flat shareholder democracy … isn't much of an innovation performance wise."

As such those seeking to improve the DAO contract are proposing an adaptation to the DAO's cryptogovernance framework and rules, termed DAO 2.0 pre-proposals.

These DAO 2.0 solutions, as the article states, can be thought of as applying to two separate layers of cryptogovernance: voting and census, utilizing principles of liquid or delegative democracy, quadratic voting and a second layer based around predictive markets within a futarchy-based system. The latter ostensibly creates an incentive for investors to invest wisely.

So already we are witnessing a shift in decision-making powers. And maybe this is the evolutionary path to take. Decentralizing opens the door to subjectivity, and despite the common goal, the means to the end can be perceived or desired differently, across DAO members, for a multitude of reasons.

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