DAOs enable a whole new model of working, with flat hierarchy, democratic voting, full transparency, and a policy of open doors. Ekin Genç explores how when all that matters is your contribution, communities can form from across the globe and accomplish immense and innovative goals – and set a model for the web2 corporations of today.
During the pandemic, office workers around the world suddenly shifted to a new mode of working. But remote working, now widely-adopted with over 50% of American office space unoccupied, has simply meant traditional ways of working in a different form: hierarchies, line-management, micro-management, a lack of transparency, and a single-minded goal to maximise profits for shareholders.
While remote working became the norm for traditional companies, a novel form of organising gained more popularity in the niche corners of the internet: DAOs, known as decentralised autonomous organisations, are crypto-enabled online structures organised through flat hierarchy, democratic voting, full on-chain transparency, and a policy of open doors.
DAO enthusiasts often joke that a DAO is just “a group chat with a bank account,” but DAOs can be anything that its contributors want it to be: a collective effort to buy the US Constitution, a group of creatives just vibing together, or a billion-dollar entity that develops decentralised products used by hundreds of thousands. Analytics tracker DeepDAO estimates that there are 4,834 DAOs in operation across all chains, holding a total of $8.5 billion in their treasuries.
John Paller, founder of Opolis, a digital employment collective that provides insurance and other benefits to DAO workers, describes existing corporate models of power and value accrual as the "tragedy of the boardroom": corporations rely on hierarchy “to extract value from customers, employees” and “(public companies) are required – legally! – to maximise profit, which inevitably becomes exploitation.”
Unlike the corporate model, he said, DAOs let people unite, digitally, around a shared goal to create value for their community, rather than for "shareholder interests". “These DAOs are owned by themselves, similar to old-school cooperative models we've seen over the past several hundred years, except in this case we have a whole new set of tools at our disposal to build sustainable, scalable economics and structural benevolence for communities."
In practical terms, the incentive alignment that enables DAOs to become genuinely sustainable collections depends on their tokenomics, the financial engine of DAO operations. Governance tokens, another innovation of the DAO model, represent ownership of DAOs and entitle holders to the right to propose changes and vote on DAO matters, controlling its destiny. Governance tokens are also tradable on secondary markets with values subject to market forces, much like corporate shares, but owned by those who build the DAO.
Doo Wan Nam, Asia business development lead at lending protocol and decentralised stablecoin issuer MakerDAO, tells Culture3 that “the Maker community tries to align incentives with the contributors, so most of them, such as smart contract developers or business developers, have Maker token vesting as well.” This means that contributors cannot immediately sell their tokens when they are paid for their work, and thus only those who are willing to stick around choose to participate in the community. He added that Maker, like most DAOs, is open to newcomers. Even new and anonymous members have made valuable contributions, shaping the direction of the protocol.
Traditional organisations are charcaterised by myriad levels of gatekeeping, like diploma requirements, licenses, work experience, and often lengthy recruitment processes. In contrast, DAOs embody the meritocratic ideal: while the standard open-door policy removes barriers to entry, the pro-anonymity culture means that contributors are judged on the basis of their contribution rather than who they are.
Amplice, a pseudonymous contributor to composable leverage platform Gearbox, told Culture3 that one thing they “find extremely cool” about how DAOs work is that there is no expectation for contributors to reveal their identity. Although some people may not care about this, they said, anecdotally there have been cases where people found this particular aspect of DAOs liberating. When you’re pseudonymous, “you're judged solely on the quality of your work and nothing else,” they said.
“DAOs are blind to race, gender, even qualifications. You could literally be a goat farmer with no formal education who lives in the middle of nowhere – as long as you have an internet connection and you have useful skills, in some cases, you get to compete on a level playing field with a Stanford grad living in Silicon Valley,” Amplice said. “I think that's pretty dope.” They contribute to Gearbox as a promo video producer and receive token compensation in return for their work, like making a video for the GEAR Delegation Ceremony.
With the emphasis on flexibility and individual autonomy, the DAO work structure feels like the height of freelancing, particularly when there’s a talent shortage in the space as their is right now and with no non-compete restrictions preventing contributors from working for other DAOs, unlike the similar restrictions issues by most large organisations. “I found this fascinating because I can choose to work on different things which equally excite me. But the main reason might still be lower competition and talent shortage,” says Kydo, a pseudonymous contributor to Gitcoin and Llama, said.
Although DAOs are open to everyone, they aren’t for certain types of people. “At a traditional company, one might be used to having their roles and responsibilities laid out for them unless you are a C-suite executive. In a DAO, no one is telling you what to do, so it takes a strong personality to find their way,” says Ellis Liu, a contributor to Index Coop.
“You get to compete on a level playing field with a Stanford grad living in Silicon Valley.”
— Amplice, a contributor to Gearbox
“The concept of DAO still feels idealistic at the moment, but I’m excited to be part of the journey where we get to refine and shape this working model into one that is empowering and gives many more (people) the freedom to contribute their skills and strengths to a self-sustaining business model,” she said.
Chaotic though they may be, DAOs are also relentlessly transparent; the culture of individual anonymity does not – cannot – translate into organisational secrecy. DAOs, in lockstep with much of web3 culture, have much emphasis on transparent reporting. All organisational updates, no matter how minor, will likely be made public. Discussions are usually held in public Discord servers or on custom-made public governance forums, with votes taken on public platforms like Snapshot. This all means that one can peek into how much a protocol’s contributors make, what they are currently debating, or who’s voting for what – and that they cannot lie about business information that is viewable on-chain.
For those who have seen the benefits of DAOs as a way to coordinate labour, the prototypical DAOs of today open up possibilities for a future world in which large private companies may evolve into DAO-like structures.
“Right now we’re experimenting with these dynamics, but eventually a major function like a telecomm or airline company will realise it’s more profitable to build loyalty into your product or service by way of making your customers your shareholders, and it will revolutionise how all companies are expected to conduct business,” predicts 0xjoshua, a pseudonymous contributor to Opolis: “a non-violent market-based revolution.”
“These DAOs are owned by themselves, similar to old-school cooperative models we've seen over the past several hundred years.”
— John Paller, founder of Opolis
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