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January 26, 2022

Indiana DAOs, and the latest crusade toward decentralization.

Image by Shubham Dhage on Unsplash

I first came across the term Decentralized Autonomous Organization, or DAO, in early 2016, looking for blockchain-based organizational or enterprise models that are often driven by a native cryptographic token and whose default nature is decentralized.

At that time, there was very little information, and it was a relatively geeky term; There was a pilot project in Switzerland that was called DAOhub, which was a kind of decentralized investment fund that no one owned, but in which everyone participated, it was all taken with tweezers. However, it conveniently caught my attention a lot.

Six years have passed, and the party has been set up after a very intensive investment; the ecosystem has grown exponentially in this period. We could say that the presence of DAOs as organizational models is entering as a trend in several service sectors.

Web2.0 vs Web3.0

Before getting into the subject, it is worth stopping to understand the disaster box that we are all calling Web 3.0. The DAO would, of course, enter as the organizational model of what we are beginning to label as the third generation of the Internet.

With all the hullabaloo going on, I would not know exactly what would and would not fall under Web 3.0, but I do have a clear idea of how far Web 2.0 has come.

Interactivity, social connectivity, and user-generated content were the main innovations of Web 2.0, a centralized environment that developed in an Internet that by nature was a decentralized p2p (peer to peer), its leading players being Google, Apple, Amazon, and Facebook. As well as Uber or Airbnb.

Trying to find examples of Web 2.0, let’s think of Apple and the developers who create App Store applications, Uber and its drivers, or YouTube and its creators; Participants contribute to companies’ results from the outside, but companies find it very difficult to align incentives with them in order to create an equal win-win.

On the other hand, Web 3.0 is based on the basic concepts of decentralization, openness, and more excellent utility. Platforms such as Brave, Steemit, or Sola would be examples of Web 3.

Here, the organizational model and the establishment of incentives are different.

Organizational model of a DAO.

In practice, not all DAOs are decentralized or autonomous, so it is best to think of DAOs as Internet-based organizations collectively owned and controlled by the network members.

This is the merging of two different worlds; on the one hand, it takes on the decentralized form of Blockchain. On the other, the organizational structure of Open Source, on which we based virtually 70% of the innovation of the last 30 years.

Traditional corporation Vs DAO

The structure of a DAO is inherently open, an incentivized organizational model that forces the sharing of value among the participants that create it. In fact, the best DAOs reward their participants, serving as the basis for what is beginning to be called the Ownership Economy.

In a DAO organizational model, 4 main roles are defined, the “Core Contributors”, the “Bounty Hunters”, the “Network Contributors”, and the “Token Holders”.

Core Contributors

Key contributors could be considered the regular company’s employees today, dedicated full time to a project or organization. They have strategic knowledge about the organization.

Bounty Hunters

It would become a “freelance” for the non-crypto world, and they perform previously defined jobs for a price and a determined duration. They are functional experts in specific areas, providing services to many DAOs simultaneously and fulfilling specific tasks with apparent limits.

Network Contributors

Here we refer to users, consumers, and participants who collaborate in networks as “prosumers” (producers and consumers at the same time); in web2, they would be Twitch content creators, Google Play app developers, or Cabify drivers.

Token Holders

They refer to investors; in the crypto world, anyone can be an investor, creating “a priori” new opportunities to obtain income that was previously reserved to a few.

Road to (highly centralized) decentralization.

As I told you in the 2016 article, for me the promise of a pure decentralization on the Internet-based on Blockchain, did not make much sense, I talked about that there would be a “decentralization” (very centralized), in which the power would be concentrated in large investment funds, my surprise was to see Dorsey’s tweet five years later, I did not think that anyone from his position could launch a similar statement, but yes, sometimes it happens.

There is a technical limitation much more than a governmental one for the cryptocurrency architecture to replace the current FIAT economic model. It is not because of the opposition of the IMF, the US Federal Reserve, or the European Central Bank.

It is about the number of transactions per second that the protocol supports. In an ideal case in which it was said, tomorrow we stop FIAT and move to crypto, the world would come to a standstill, since the current number of economic transactions that happen in FIAT through the Visa, MasterCard, American Express, PayPal, Stripe, etc, is around 24,000 transactions per second, this number, today in Blockchain is a utopia.

Then as a protocol, it is much more secure, reliable, and decentralized, but it has a tremendous technical limitation. Its virtues make it slow, requiring a greater computational capacity in the network.

I am sorry if I have spoiled the party for anyone, but it is advisable to study the issues very well before making any predictions. The most promising project trying to solve this problem of capacity in the number of transactions is called Lightning Network, and it is still in its infancy.

Once this problem is solved, you can be sure that all the organizations and governments that are opposed now will be the first to create their cryptocurrencies and blockchains, generating a great centralization on the last promise and attempt of decentralization towards a pure “peer to peer” on the Internet.

So in the crypto environment, will a more decentralized and egalitarian world be created? Will power be returned to Internet users? Who is behind the investment?

In that 2% of accumulation that appears in the Bitcoin chart, there are what in crypto slang is called “Whales,” we all know Elon Musk; Well, with the capital he has invested, Musk is a “Whale” within the Bitcoin, and with a tweet, he has the power to move the market to one side or another, as it suits him. I bet anything that Visa and Mastercard are also “Whales.”

In the FIAT world, that proportion is 1%. We have gone from 1% to 2%, and it tastes a little. If you ask an optimist, he will tell you we have doubled. If you ask a realist, he will tell you that I expected a little more in the umpteenth attempt of decentralization on the Internet; maybe 2% is not enough to create a more egalitarian world full of opportunities.

On the other hand, at this point, and in the umpteenth attempt at decentralization on the Internet, maybe you will conclude that the elements and wealth within a nation start as a good decentralized p2p idea, and end up as an accumulation of monopolies, maybe this is the logical order that governs the economy, no matter what is done.

Suppose we understand the lecture given by Adam Smith in the book that inspired capitalism, The Wealth of Nations. In that case, you will find that the thinker said that in a capitalist system, monopolies override the market itself, being tremendously detrimental to the particular interest of each one and to the collective interest of society as a whole, since the competitive capacity and progress in nations is annulled.

Two and a half centuries later, we still think that we live in a capitalist system, but no, we live in a plutocratic system, which is different. We try to divide ourselves between pro capitalists and anti-capitalists, left and right, liberals, communists, social democrats, and this is the primary error.

The future of working in a DAO.

New ways of coordinating, measuring, and rewarding contributions are emerging in complex ecosystems based on Blockchain and the Internet.

This will sooner or later redraw what we traditionally know as work and beyond the concept of the traditional enterprise; think about how you would explain to a person from 1760 (at the height of the industrial revolution) how we work today; they would throw their hands up in the air.

This shift is already beginning to unlock new earning potential for individuals, leading to an increasing transfer of value capture from organizations to people participating as individuals in cryptocurrency networks.

If the future of work is remote, your organization will be a DAO. Likely, people will not work for companies as we know it today. Instead, income will be earned in very unusual ways by participating in collaborative networks called DAOs.

You can find the Spanish version of this article here.

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