Watch: Working for a DAO: 'No boardroom, no boss, no bias' | The Crypto Mile
A DAO is a new type of organisation that utilises blockchain technology and promises to radically change the way we work. The Crypto Mile sat down with the co-founder of SyndicateDAO Will Papper to find out more about this new concept that is attempting to turn the traditional corporation on its head.
The web3 term DAO is short for decentralised autonomous organisation. For those not seasoned in crypto-jargon, decentralisation describes how power, data and decisions are spread across many individuals or nodes on the blockchain, making a more democratic system that has no single point of failure.
The word autonomous describes the process of using the blockchain to automate everything from payment transactions, to legal contracts and to execute decisions within organisations.
"DAOs are a true meritocracy, it does not matter where you are or who you are or your background or privileges are," Papper told Yahoo Finance UK's The Crypto Mile.
"What matters are a person's contributions, and a person's contributions can speak for themselves."
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Papper described a DAO as a community that comes together to accomplish a shared goal.
He added that being decentralised means there is no single point of failure, control or decision-making inside a DAO.
He said: "This is what makes DAOs so exciting and so radically different from traditional entities like corporations.
"The fact that DAOs act in an autonomous way is something really unique to blockchain networks.
"Autonomous means that these organisations run without human intervention and are controlled by computer code."
But, who creates and manages the code that will inevitably be responsible for executing all the important decisions within these new organisation?
Papper said that this computer code is created and managed by a decentralised group of humans who vote to decide what the code can do.
Those who wish to control how the code functions must vote using governance tokens, these can be shared out democratically, or in other cases purchased on the market and become similar to buying shares in a traditional corporation.
So, hostile takeovers can happen within a DAO structure if the governance tokens associated with that DAO are transferable on the open market.
The algorithms that run DAOs are deployed onto blockchain networks like the Ethereum blockchain.
The code decides how software should be run in the day-to-day functioning of the organisation, and how the funds of the DAO are spent.
However, because DAOs are structurally leaderless, could this make them suffer from stagnation of decision making, leading to a "death by committee?"
Papper said: "In my opinion DAOs are a trade-off between efficiency and resiliency.
"If you want to make a quick decision with as little overhead as possible then you probably should not use a DAO.
"However, the downside in efficiency is made up for in the benefits of resiliency.
"My own belief is that DAOs are organisations that don't have a single point of failure so they will last much, much longer than our traditional corporations."
DAOs have a social structure made up of a community of individuals that are incentivised to coalesce around a shared goal.
Founder of Panony Group, Alyssa Tsai, said that DAOs can become clogged down when project development is not always moving fast, as collecting votes can take time.
"The technology of automated calculations will not work in all cases, for example in a crisis, but in automated systems, the decision-making process can lack critical thinking."
Tsai sees DAOs as disrupting organisational structure with reward systems that help founders and builders to rethink what is possible and create new realities.
She said: "They will not kill traditional corporations overnight because it is still been shaped to be more mature.
"It will also not necessarily compete with each other.
"Potentially we might be able to see DAOs buying corporates or corporates setting up DAOs for experiments."
She said DAOs can bring about a new way of working in non-local workplaces without CEOs and office locations.
She said: "At DAOs, there aren’t central authorities like corporates where decision-making processes are top-down.
"DAO members find it fascinating to be entitled to initiate any proposals and new proposals are happening everyday.
"People will also get more liberty in participating in multiple DAOs in various forms where they share value, however in the traditional corporate, the structure limits people from taking multiple roles and jobs."
The GitcoinDAO, co-founded in November 2017 by Kevin Owocki and Scott Moore, consists of community members who vote on how to fund public goods and use the Gitcoin token (GTC) to make decisions about where to allocate resources.
Coders and developers are paid to work on open-source software in many different programming languages.
It is a popular crypto platform with over 300,000 monthly visits by developers on Gitcoin’s web domain.
Gitcoin contributor Yinka Tanimomo said: "Between, grants, bounties and hackathons GitcoinDAO has helped me to sharpen my skills, expand my network and to work on projects I otherwise would not have even gotten to know about.”
Because GitcoinDAO operates in a decentralised autonomous manner anyone can get involved and show off their talent, irrespective of their background or contacts.
GitcoinDAO contributor JC said: “Gitcoin is one of the first non-defi, game-changer, on-chain platforms that has created actual value for a lot of people, including myself.
"It revolves around the idea that people's work is valuable and anyone is welcome to be part of it.
“It actually opened my eyes when I first saw so many people being funded to work on the project they love, and that in many cases, would have been very difficult for them to 'get accepted' or even 'allowed' into sponsorships of with other platforms.”
The Crypto Mile asked Will Papper what he believed was the most impressive thing that a DAO has done to date.
He said: “MakerDAO (DAI-USD) is the best example, where it is a running a lending market, it gives you the ability to lend ether (ETH-USD) or other assets and receive what is known as a stablecoin, essentially a coin that represents $1 in return."
MakerDAO operates in a way that looks like a traditional bank and even has assets that rivals traditional banks, according to Papper.
He said: "In MakerDAO, all of the funds are transparent, all of the funds are available to members and there is no favouritism, there are no special deals and the most impressive part is that Maker and these other lending markets, that are run by DAOs, in the cryptocurrency crash, they faired better than the centralised institutions.”
However, does the very anonymity and decentralised, non-local structure of a DAO leave it open to a lack of personal responsibility and accountability?
When things go wrong, who faces up to the mistakes made, or would people vanish into cyberspace maintaining their anonymity?
Papper admitted that it was possible for someone to build a pseudo-identity, do something bad and then walk away and create a new anonymous identity — something which has happened in a crypto space before.
However, he argued that DAOs are resistant structures and that the fact that they operate via a shared bank account with multiple people needing to sign off on transactions means that no one person can steal the money.
He also argued that some DAOs function with fully democratic principles in which everyone present has a vote meaning and that scams are highly unlikely as a majority of votes are needed to withdraw funds.