My bet is DAO's will eventually over time replace all current forms of imaginary hierarchy that are dependent on the trust of a central authority.
This would amount to a revisionary transformation capable of upending legacy systems that have been in place since as early as the agricultural revolution that took place thousands of years ago.
DAO is web 3.0, it's here to stay, and it will inevitably infiltrate almost very fabric of society.
Age old institutions such as those that control government and finance require an incredible amount of belief which exists almost entirely within our imaginations in order to exist.
What if there was a solution in the form of a protocol that removed the element of trust required to believe in a central leader, facilitated and made record of transactions, and acted strictly based on a set of code that was publicly auditable?
What is a DAO?
At it's core a DAO is a set of smart-contract rules that are enforced on a blockchain.
It is these smart-contracts that allow a Decentralized Autonomous Organization (a group of people!) to cooperate in a fair, open, transparent and trustless manner.
A DAO does this by eliminating the need for a central authority or decision making manager and in a fair and transparent manner facilitates the decentralized decision making process.
Within a DAO code is law, it's visible and can be audited by any third party for verification and security purposes. This removes all elements of trust, allows all participants to understand the set rules and operate on a fair and level playing field.
One of the more popular uses right now is surrounding asset management, as a DAO solves a number of problems but primarily makes the process of pooling funds and growing capital a trustless process. We are seeing this now through the rapid emergence and DeFi protocols and through collaborative asset management communities and organizations.
The key is allowing many different participants to coordinate and collaborate in a transparent and trustless manner.
What is a LAO
In order for DAO's to really reach their fullest potential and succeed in transforming various elements of society they will need to be recognized legally. I'm talking mass adoption here, that's not to say smaller groups won't find great ways to utilize DAO's outside of existing legal frameworks, because they are. There are even some emerging here on the HIVE blockchain.
But just as an LLC is recognized and afforded the same rights as an individual, in the future we will need LLC's that have a flat non-hierarchical structure such as a DOA to be legally recognized by the courts.
A LAO is Limited Liability Autonomous Organization, a bridge that is being formed between legacy legal systems and the technological revolution that is web 3.0.
"The LAO" was launched by a group called OpenLaw in April of 2020, a legal entity that allows investors to earn rewards for investing in upcoming Ethereum projects.
This is a great example of what DAO technology can and should be used for, and in this example (the first of it's kind) they are propose built to operate within the framework of legacy legal system. To date the LAO has acquired apx $25 million in funding, and has invested around 30% of it's funds across 40 different startup projects including the likes of NFT platform SuperRare.
This is just one early example of what is possible with DAO's, but ultimately to achieve mass adoption DAO's will need to work within an existing legal framework.
To do this takes time, lots of time, as we all know how slow government legacy systems move. However there is new law being enacted in places like Wyoming that may seek to clarify the status of DAO's. The technological revolution that is web 3.0 won't happen over night, but it's started, and DAO's being recognized as legit forms of corporate governance would be a massive step forward.
Potential DAO Use Cases
I can see a whole variety of ways that DAO's could be utilized to solve trust and transparency issues. This includes corporate governance, with the emergence of flat non-hierarchical companies and organizations.
We are already seeing investment funds including venture capital firms using DAO's to receive funds and spend funds trustlessly on behalf of it's members.
Charity DAO's - One type of organization that I can see being massively transformed with the use of DAO's is Charity organizations.
Much like pooled investment organizations, charity and non-profit organizations need ways to receive and spend funds in a transparent way. Fund administrators can even have their payroll governed by a DAO, their charter voted upon by a DAO, funds received and administered by a DAO. All these processes can be done in a clear and transparent manner, and crystal clear records of every transaction maintained and available for audit.
Open Source Initiatives Needed
As sort of my final thoughts on the subject for now, I can see a need and desire for future DAO building protocols to be built using open sourced software solutions.
DAO's need to be easy to build, it's code easily verifiable, and a set of open source protocol standards could really help with this. There are a number of organizations out there that are building DAO makers, but I'll save that for another post.
DAO's and their continued development is not something that we should take our eyes off of. There's no doubt in my mind that this technology will continue to emerge as a pivotal and essential piece of the web 3.0 technological revolution. I look forward to exploring the subject further.
Ciao for now,
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