First of all, we must answer the question, “What is a DAO?” A DAO is an acronym that stands for “decentralized autonomous organization”. It is a business, an association, a consortium, or any loosely structured organization whose decisions or actions are made through the vote of its members – OR made electronically by a written computer code. That system of rules is hard coded into the core framework of the software powering the affiliation and actions of the constituents define the actions the organization will take.

The Origin of DAOs

Blockchain software and the distributed ledger technology that powers the transactions of a network have become the toolset to enable the concept of a DAO (also called a DAC, or “distributed autonomous corporation”). The secure, digital ledger can track all interactions of its members across the internet, and provides a safe, secure environmental structure within with all the transactions between actors are governed and recorded.

Blockchain uses a concept called “trusted timestamping”, which helps to combat against falsified transactions. Because the distributed database is held and accessible by all users of a particular blockchain, corruption and the need to involve third-party intermediaries isn’t necessary.

This advancement of technology is the key to evolving how we organize and manage efforts as a cooperative society – up to and including the empowerment of any organization to run without the overhead of managerial supervision.

In fact, a DAO could theoretically run perpetually on an autonomous basis so long as the software framework provided for sufficient rules to maintain the necessary governance.

What are the Implications of a DAO?

Aside from the fact technology is exponentially further advanced from the present regulatory considerations, the uses for such an infrastructure schema are far-reaching and disruptive to present social constructs, business models, and even governments. We are now in an era where entire bureaucracies and intermediary-laden operational models can be replaced with automated systems of operation that even remove the need for CEOs or hierarchical management oversight.

Absent the regulatory ability to do so, blockchain data can replace most public records like birth certificates, land titles, deeds, mortgages, credit reports, voting registrations or even tax filings. Healthcare providers could eliminate the mountains of manual billing processing, delivery companies could control entire fleets of driverless trucks, and software companies could employ hundreds of independent freelance developers.

The list is staggering, and a DAO model can be modified and applied to nearly any business or social organizational model. The technology has literally opened the door to completely rethink how we organize ourselves and our world.

There are already numerous examples of blockchain-powered DAO projects that prove how the rules upon which the organization functions are enforced through the software. Other aspects like how decisions are made by stakeholders are powered through their individual control of tokens or smart contracts. Pre-programmed rules enable and control what can ultimately happen within the software framework. Some rules could be hard-coded into the organizational framework like the amount of dividend payouts and distribution schedules. Other rules could determine a certain action triggered by the occurrence of a specific event. Other rules can even determine which projects will receive money by allowing token holders to cast their vote for proposals.

Current Drawbacks of DAOs

One of the current problems with the nascent implementation of DAOs is participation of stakeholders. Really no different than the real world, a lack of voting participation can hamper the necessary operation of a DAO framework.

Another issue is the fundamental legal status of this kind of organizational model. Given that lawmakers are largely technology illiterate, this kind of organization is still at the mercy of simply not being understood as viable, let alone having an awareness sufficient to motivate policymakers to establish concrete regulatory guidelines for those working to develop DAO models. Currently, DAO structures are still at legal risk of being considered a “general partnership”, wherein all participants could be made liable for any legal actions or debts the DAO might encounter.

The Future

Not everyone is comfortable with the idea of humans being replaced by software that governs organizational processes and oversight. But at the same time, the technology now exists, and within a few decades, human-powered management may simply not exist. On one hand, this doesn’t bode well for the internal intermediary functions and jobs that will be displaced. On the other hand, the capital required to execute the mission of the DAO is more efficiently applied, reducing costs and maximizing returns and impact.

10XTS Creates DAOs

10XTS is a blockchain software consulting and development group that creates DAO solutions. We are able to launch enterprise-grade DAO software frameworks that can transform existing organizations or create new ones from the ground up. Contact us to discuss your project.

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