If you’ve been in the blockchain space for a while, you’d be familiar with the terms “smart contract” or “decentralized applications”. But a concept that is less talked about these days is the DAO, or Decentralized Autonomous Organization.
In this article, we recap what it is, why it’s needed, and how DAOstack is stoking the flame that makes this cornerstone blockchain tenet burn brightly.
Blockchain. Industries throw the word around so much nowadays that it’s not hard to get lost in the details and forget what it stands for and is built upon. What complicates matters even further is the fact that what started out as the foundational principles upon which the technology was created, is no longer the only accepted definition.
When Satoshi Nakamoto first released his groundbreaking white paper that ultimately unleashed the Bitcoin beast that’s taken the world by storm, the premise was straightforward.
The monetary system, due to human greed and corruption which resulted in the 2008 financial crisis, could no longer be trusted. Instead, thanks to the foundations laid down by cryptography, a technology was introduced that replaced the need for trust.
Bitcoin, and the blockchain technology it is built on, introduced to the world to seemingly impossible concepts, such as replacing trust with trustlessness. This, in turn, placed the notion of decentralization centre stage, and nearly a decade later, most blockchain initiates are still coming to grips with exactly what this means or entails.
Just how entrenched we are in centralization comes to the fore when we consider the textbook definition of decentralization:
In the world that led us here, the concept of decentralization implied a localized authority – run by, arguably, a centralized group of people with executive power over their subjects – would replace (or relieve) a central authority that possesses similar executive power over its subjects.
It was never going to trickle down to ground level. Governmental decentralization wouldn’t mean that we the people would govern ourselves, and organizational decentralization wouldn’t replace management and company shareholders with the man on the street.
With the introduction of blockchain technology, however, we do now have an all-new definition of the word. Suddenly, to decentralize does mean that power is widely distributed across every entity that opts in freely (in comparison to being elected).
And it eliminates the very Achilles heel that has made every authority, be it centralized or “decentralized”: fallibility. Information and transactions are immutable and cannot be reversed or corrupted. Neither can the underlying rules that govern them, except with explicit consensus from a network majority vote.
It’s important to keep in mind that blockchain is a system changer. The introduction and exponential growth of the internet changed the meaning and vehicle of communication and commerce. Blockchain is rewriting the rules on governance and transparency. Currently, it’s difficult to predict the extent of the ripple effects this will have not only on global markets but on global politics.
We’re already seeing governments and authorities moving in to regulate or outright ban cryptocurrencies. On the surface, blockchain is a more system-friendly option than the audacity to privatize a monetary structure that’s been tightly controlled for the past few thousand years.
Yet, despite many a government or legacy corporation flocking to implement blockchain use cases into its systems, the technology is fundamentally changing the way we see the world.
This essentially organic bottom-up approach means applications are so much more than what meets the eye. You might think that you’re using blockchain simply to bring transparency to your rental agreement or consolidate information on where to locate an echarging station.
In reality, what is happening is that the rules are being rewritten day after day. There will be a day when we find it inconceivable that business deals weren’t conducted via the transparency of blockchain or fairness of smart contracts.
Blockchain, these days, comprise 3 main types:
Public blockchains, like Bitcoin and Ethereum, are the ones that make news headlines. They’re open for all to see, use, and scrutinize.
Private blockchains are those custom-built by governments, banks, and the business sector, created to serve internal procedural needs.
Hybrid blockchains have a foot in both these worlds, with some elements public and others private. These can normally be found in most for-profit blockchain startup ecosystems.
With this in mind, it’s no longer possible to classify blockchain as inherently decentralized as the very concept of “blockchain” is evolving.
When we refer to the “nature” of a thing, be it man, monkey, or machine, we focus on the very essence that makes it “it”. Case in point: Humanity might have made it past the monkey stage and is squarely on its way to deus ex machina, but for all our intellectual achievements, we’re still baseline organic matter.
In this same vein, blockchain might continue to take shape in a mixed bag of varying and seemingly disparate forms. Yet it is inherently a decentralized technology that has not only redefined the term itself but is silently redefining how the world is run.
In the blockchain context, it’s not hard to recognise a DAO or understand its technological and governance underpinnings. It’s how we’ve been introduced to the industry and what we’ve inherently come to expect from blockchain startups.
Essentially, a DAO is built on a blockchain and coded to run on smart contracts. Sound familiar?
Ethereum founder Vitalik Buterin ascertained, back in the day, that a DAO could build on these technological foundations to build an organizational governance model that eliminates the need for human managerial interactivity, pending the introduction of Turing completeness.
Thus Ethereum was born, and with it came the now universally accepted industry concept of “if-then”.
Yet old habits die hard, and rules even harder. We live in a world where we’re faced with increasingly overblown headlines warning us that robots will take our jobs and artificial intelligence will end up controlling our fate.
Now we’re asked to leap across gigantic paradigm boulders, namely the potential end of human executive management in favor of technological governance supremacy. It’s not hard to see why the concept of a true DAO organization remains undeveloped and underutilized.
One of the biggest issues faced by the DAO model is inefficient scaling of decision-making. A DAO might be good at giving equal voice in limited numbers, but blow it up to the millions (of course, it’d likely start facing serious issues long before it hits the million-mark) and things fall apart quickly.
Arguably, that’s one of the benefits of having leadership: the few can be heard when the many drown each other out. Is this, however, “proof” that DAO is dead? A problem, after all, is simply something for which a solution has not yet been found.
For a DAO model to be effective, it cannot stop at the level that allows technology to replace human executive governance. This fails to recognise that to disrupt a system and replace it with a more effective one is to take all contributing factors into account.
In humanity’s case, the problem is never just a technologically inefficient one. We’re complex creatures who present complex problems for which complex solutions must be sought.
What is needed, then, is the technology not only to allow for truly decentralized governance but to enable humans – considering the unique challenges we pose – to thrive within such a system.
The first principle of designing the DAO stack was not to build a specific protocol or a specific application, but rather to build the soil, the ground from which a whole ecosystem can grow and thrive.
– DAOstack architect and CEO, Matan Field
Given the lack of scalability and resulting lack of sophistication the formerly incomplete DAO framework has presented, it’s no surprise that there are indeed very few DAO-governed companies in blockchain.
Companies cannot be expected to build, sell, and scale while simultaneously figuring out how to effectively manage and channel ecosystem voters’ attention.
DAOstack knows that a problem will remain unsolved until dedicated people develop an ingenious solution that will turn an issue into an opportunity. Ethereum did it with smart contracts. DAOstack is doing it with DAOs.
Through its DAO stack, this operating system makes an abstract concept, namely running a truly decentralized autonomous organization, a reality.
It’s no surprise that Ethereum powers so many of the world’s blockchain solutions. Not only did it infuse smart contracts with Turing completeness, but the company has made it possible for teams with great ideas to, quite easily, turn them into dapps, breathing life into the conceptual.
While many great companies have since materialized to facilitate the meteoric interest in building smart contract solutions, Ethereum has managed to ease a complicated process into something that is quite doable and entirely possible.
Similarly, DAOstack allows for the first real introduction of DAO principles at scale. While a company might have wanted to stay true to blockchain’s origins and the visionary outlook of the industry’s pioneers, incomplete development of the model made implementing such principles near-impossible without seriously affecting the management team’s focus, productivity, and effectiveness.
While DAOstack presents the perfect solution for new startups, one can hardly expect a company that is already operational to turn on its heels and redesign its business model to reflect blockchain’s roots. Companies were built in the absence of DAO because DAO was incomplete. To that end, DAOstack offers dapps the opportunity to embrace the practicalities that make up the philosophy.
In other words, DAOstack is the bridge to DAO governance for both new and existing companies. At scale.
DAOstack is building a simple yet transformative platform for a changing world.
Watch the intro video below for an overview of what makes DAOstack something to get excited about:
How will the company achieve this? Essentially, it boils down to the elegance of their technology, and its ease of use and integration.
Firstly, DAOstack recognises that there is no one-size-fits-all solution for DAO governance as the needs of each organization or group would differ depending on context, complexity and conditions. With this in mind, they set out to create an offering that would allow each DAO to essentially mix-and-match when designing their own decentralized infrastructure. This also means that DAOstack allows for seamless integration into existing ecosystems.
Secondly, DAOstack understands that user experience is paramount, both on the front-end and the back-end. On the front-end, they designed their system to be accessible and easy-to-use for all types of users, ranging from tech-savvy developers to new participants to the DAO concept. On the back-end, each DAO is able to build their own unique dapps that meet the ends of their specific use case.
DAOstack is also introducing an important innovation in decentralized governance, something they have termed “Holographic Consensus.”
One issue with a DAO is managing both scalability (the number of decisions that can be made within a period of time) and resilience (ensuring those decisions are not corrupted). Holographic Consensus is a mechanism that allows a smaller group to come to a decision that is aligned with the interests of the majority.
This is how it works.
Within the DAOstack system, token ownership (wealth) and voting power (reputation) are separated to ensure that the DAO is free from any corrupt influence. While tokens can be bought and sold, reputation (and therefore voting power) should not be transferable in a DAO.
The GEN token, which is native to DAOstack, thus works as an attention token in a staking system.
GEN tokens are not used for voting or even to buy votes; instead, they are used as a stake to increase or decrease attention to a particular proposal. If voters (reputation holders) support the proposal you have staked for, you stand to get more GEN as a reward. Alternatively, a failed proposal leads to a loss of your staked GEN.
This prediction market mechanism means that Holographic Consensus can reflect the collective will of the majority in an efficient and scalable manner while ensuring the integrity of the decision.
In this way, DAOstack paves the way for organizations to introduce collective intelligence into their governance models without compromising on functionality or effectiveness, and without being bogged down or blocked by scalability issues. Their elegant design allows for the integration of crowd decisions that are driven by crypto-economic incentives and consented to by a network majority.
What does this translate to in real life?
DAOstack easily slots into other blockchain ecosystems, allowing companies to employ majority vote governance in any organizational or technological governance network (including user base) decision-making.
This might translate into seeking crowd votes for important business decisions, i.e. “after a vote, the ‘yes’ outnumbered the ‘no’, so we’ll go with ‘yes’ in terms of whether we should list on XYZ exchange.”
Through the simplified sophistication of its programming, DAOstack achieves this by enabling large number management of crowd participation. This is something that has not been a possibility to date, due to incomplete tech solutions.
The DAO stack is comprised of a number of powerful tech layers that, together, enable a new era of blockchain-powered governance.
These include:
A modular Solidity framework that lives on the Ethereum blockchain, Arc is the foundation of the stack. Arc allows for the deployment, configuration, and upgrade of “smart agencies” which are atomic entities of governance that live and operate on the blockhain with the use of smart contracts.
Thanks to its open library of governance modules and templates, Arc is to DAOs what WordPress is to websites. Each DAO is able to select the elements that are necessary for their governance ecosystem and build a solution that is customized.
This base layer will mostly be used by developers.
This JavaScript library eliminates the need for Solidity or blockchain expertise, thereby allowing front-end developers to build collaborative dapps on top of Arc. DAOstack’s goal is for Arc.js to be home to numerous dapps.
The application layer is expected to be the one that most DAOstack users experience, whether they are creators or participants of DAOs. These users will interact with DAOstack via dapps build on Arc and Arc.js. The first application being built is Alchemy, which is a native user interface for DAO budgeting and resource allocation.
ArcHives are shared registries that allow for interoperability between dapps built on DAOstack. Interoperability will allow for even greater organization and collaboration and, ultimately, a more powerful and robust ecosystem. For instance, The Hive consists of offers and requests for the sharing of resources and talents.
DAOstack promises to lead the pack in terms of adopting decentralized autonomous organizational governance. Imagine a world in which we’re truly able to say that “we the people rule the world.” DAOstack is just getting started.
It’s not every day you get to invest in a company founded by a string theory/holographic duality researcher who holds a PhD in Physics or a co-founder who used his Physics PhD to research quantum effects in black holes. But then, CEO Matan Field and CTO Adam Levi are not your average company execs, and this is not just any blockchain startup.
Participate in the DAOstack ICO and grab some GEN tokens. As the ecosystem’s native token, these will be used to perform basic operational functions such as attracting collaborative attention and promoting proposals. The DAOstack will also award GEN to value creators within the ecosystem, which will encourage development, promotion, early adoption, and overall engagement.
After a successful private sale and token presale in 2017, the DAOstack public sale is scheduled for April 2018. Read the white paper to learn more, and join the Telegram group to get answers to any questions you may have about the project.
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