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DAO: New Possibilities for “Freedom to Work”

In the last article introducing the domestic NFT market, Sanlin mentioned the DAO, a new organizational method based on the development of blockchain.

As the underlying technology, blockchain has been widely used, and new organizational requirements have emerged. DAO is such a new thing. Many people are interested in DAO, a promising “enterprise” operation method. This article will talk about what DAO is, why this “work” method is popular in Silicon Valley, and why some top talents in the industry are more and more inclined to Have a DAO job outside of your regular job.

What is DAO?

In addition to Web3, NFT and Metaverse, the extended industry that follows the development of blockchain, there is also a very popular organizational method in Silicon Valley – DAO, a new decentralized organizational form based on blockchain.

DAO, the full name of Decentralized Autonomous Organization in English, translated as “island” in Chinese, is an organization based on blockchain, relying on smart contracts and using digital assets to operate on the Internet.Simply put, it is to encode the management and operation rules of the organization on the blockchain in the form of smart contracts, and to operate autonomously without centralized control or third-party intervention, and its management is programmed and automated.

The cost of launching a DAO is not high, unlike traditional enterprises that require cumbersome charters and various approvals to be established. It only requires a group of like-minded people to get together and clarify the common mission, vision, organizational goals, etc. Agreed in the form of a smart contract.

For a quick understanding, we might as well simply regard the DAO as a community or company that relies on code to operate on the blockchain.

For those of us working in traditional enterprises, it is difficult to imagine how a company can operate entirely based on program codes, but now this is being realized, and the number of DAOs is gradually increasing at home and abroad, especially in Europe and the United States. 

Some people can’t help but wonder why a DAO needs to be established. The modern enterprise organization is so mature, why is the DAO organization necessary?

Being a DAO obviously has all the advantages of a blockchain.

The first is “decentralization”. Although these four words are a bit tiresome, they are indeed an advantage of the blockchain. As one operating on the blockchain, you can choose any public chain to develop a set of programs and use it as the DAO operating carrier.

For an organization, all actions and decisions are based on the blockchain, so it is natural to take advantage of the non-tampering, open and transparent characteristics of blockchain information. All actions of the organization can be recorded on the blockchain for everyone to view. Corruption and opacity within companies can also be changed.

Image source: Blockchain, DApps, NEWS

Not only is the program transparent, but everyone is the main decision-making body is another major feature of DAO.

Because the operation is based on the blockchain, the status of each node of the blockchain is equal, so in the DAO, there is no so-called management and ordinary employees. All people have equal status and are decision makers of the enterprise. Since the management and operation rules of the DAO are already encoded on the blockchain in the form of smart contracts, it can be ensured that everyone in the organization is given the right to freely express their opinions from the very beginning.

Some people want to ask, isn’t this employee autonomy, and what is the real difference from a traditional enterprise such as Huawei where employees hold shares? Obviously, Huawei is employee-owned, but employee-owned does not mean that employees have the final say. Employees can share dividends, but they cannot control the management of the company.

In true democracy, the decision-making power should be in the hands of the masses.

In an organizational model such as DAO, code is democracy, code is law, and each decision starts to run in a procedural way. Everyone in the organization needs to abide by the rules of the period, and it is impossible not to abide by them. This procedure can be any decision-making related to the organization, it may be how to arrange the division of the project, it may be the operating rules and methods of the organization (such as the determination of fixed meeting time, such as reward and punishment mechanism), the operation of new projects, and so on.

What is the organization of modern enterprises?

Whether it is the popular flat management of Internet companies, the top-down management of state-owned enterprises, or the coexistence of labor unions and organizations in foreign companies, they all operate based on a set of management systems. In this management system, there are the board of directors (decision-making level), senior management (CEO/CFO/COO, etc.), middle-level managers, and bottom-level employees. There are many disputes in the company due to various positions and salaries, which even affect the operation of the company.

In the whole process of the operation of the enterprise, everyone has to do things as well as people.

Running in the organizational form of DAO does not require manual and cumbersome verification and promotion. Organization members use software and code to manage affairs. Depending on the set procedures, the whole system can run smoothly, which also improves the efficiency of the overall operation, we don’t even have to call it a business, because the organization does not need written agreements or other forms of legal formalities.

At present, DAOs exist on different public chains. Of course, there are the most DAOs on Ethereum. In addition, DAO’s income is distributed in the form of encrypted currency (Ethereum or stable currency), distributed in the form of project share and bonus, and the project collaboration tools used are still the tools used by everyone in the current Web2.0 network environment, such as Discord, Twitter, Telegram.

Image source: dev.to

The DAO: From Veteran VC to Startup

The advantages of DAO are already obvious. Based on these advantages of DAO, some established fund institutions are undergoing transformation.

In December last year, Sequoia said it would help the brave people create a legendary DAO. Sequoia’s entry into DAO has brought this emerging organizational form into people’s field of vision once again.

So, is it possible for established funds to transform into DAOs? (In the technology podcast “Technology Knows Early”, there is an episode of discussion about the successive entry of DAOs by big funds such as Sequoia. Interested friends can go to the podcast to listen to it.)

In fact, the addition of Sequoia is only the beginning of traditional financial institutions entering the DAO, because not long after, in March this year, Bessemer Venture Partners (Bessemer Venture Partners, one of the oldest venture capital institutions in the United States) 1) Launched BessemerDAO and invested $250 million to build the Web3 community.

Why did the old fund companies become the first companies to embrace the DAO organizational model?

The author believes that the operation mode based on DAO, on the one hand, may be based on the embrace of new things, and on the other hand, for venture capital institutions, DAO does have some advantages: the transparency of the organization avoids the dark-box operation of funds; Clarity of rules saves management costs; organizational autonomy avoids dictatorship. With the loss of DAO, the chains between many rights (ownership, governance and dividend rights) in the traditional model can be disintegrated. From efficiency to risk to cost control, DAO has its own advantages.

All members of the DAO share the same organizational goals and organizational culture, provided that the founders have made relevant preparations. Based on this goal, create a system of governance, incentives and other rules that everyone recognizes, and then operate these rules in the form of code programs through blockchain technology. All participants in the DAO will participate in the operation of this organization and obtain relevant incentives .

 Note: Five of the most popular DAOs

For financial institutions and innovative industries, such an approach can stimulate organizational vitality, and financial institutions rely heavily on the autonomy of their employees. Such a choice is understandable.

What’s more, in the form of DAO, the layout cost is not high. For example, in the traditional company system, the transfer of equity is very cumbersome, while for DAO, the transfer of “equity” takes only a few minutes or even seconds, just like completing an online virtual transaction, with high efficiency and high cost. Low.

If one day, after trying, the financial institution finds that this method is not in line with the company’s development, it can also cancel it at any time. It is also easy for community members to quit the organization. It is an organization based on consensus and smart contracts. To put it rudely, you can quit by unplugging a network cable.

There is also the existence of DAO as an organizational method in China. Conflux, the largest public chain in China, has its own autonomous organization, ConfluxDAO. If members want to join the DAO, they need to first enter its departmental organization, and whether they can become core members is determined by their contributions in the department. At present, ConfluxDAO has begun to take shape.

In the future, it is foreseeable that more domestic and foreign enterprises or communities will use the DAO as an organizational method to operate.

Not all organizations are suitable for the DAO model

As can be seen from the above, the operation of DAO has many advantages. Before this, everyone was excited about the future way of working as digital nomads, and now, even enterprises can be non-existent, allowing you to transition to DAOs with one click. However, when the current blockchain technology is far from mature, the way DAO operates naturally has many flaws.

In 2014, The DAO received a huge amount of crowdfunding and locked the funds raised in the Ethereum smart contract, but due to technical loopholes, the crowdfunding was stolen by hackers. Undoubtedly, DAO is still technically immature, and it is expensive to rashly try it when the infrastructure in the initial stage is not yet perfect.

In addition, the DAO runs smoothly and the system is efficient, but once it involves things outside the program, it still cannot get rid of the old problem of the long cycle of democratic decision-making.

We mentioned above that DAO’s decision-making is democratic enough, but what is the price of democracy?

Sanlin believes that one of them is efficiency, which is also the difficulty of DAO’s organizational form in China. According to the characteristics of project implementation in the United States, for a project to be implemented, a proposal needs to be reviewed and confirmed by all parties, and opinions from all parties must be collected for evaluation. It can be seen that the price of democracy sometimes means an excessively long cycle. In DAO, such a problem also exists.

Furthermore, in the world of DAOs, there are still many problems to be solved, such as:

  • compliance issues;
  • Questions about how to collaborate within DAO members and between DAOs and DAOs;
  • If the member does not join the enterprise but participates in several DAOs as a trendy way of employment, how will the member’s pension, insurance and other benefits be calculated?
  • In a DAO, the flow of members is simple and casual. How does a DAO organization ensure that the organization has sufficient talent to maintain its operations?
  • Since it is an organization formed by consensus, stability has become the fatal injury of DAO. When many people hope to have a stable job and source of income, can the advantages of DAO outweigh the disadvantages? After all, freelancing has never been mainstream, and income fluctuations are difficult for most people to accept;

    ……

     

In addition, Sanlin believes that not all organizations are suitable for such a form of DAO.

Indeed, DAO members can feel that it is difficult for traditional organizations to gain a sense of ownership, and they do not need to create their own companies to take on the entrepreneurial trend, which does seem trendy enough. However, apart from enthusiasts and those who have a persistent pursuit of decentralization, industries and companies with innovative needs may be more suitable for an organizational method like DAO, because stimulating the vitality of creators is the biggest feature of DAO, while some companies , it still needs the board and policymakers to determine the way forward.

Of course, we all know that the development of new things takes time. Samlin’s view on DAO is: this is a method that can be accepted by some industries and organizations, but it may not be suitable for all industries, at least at this stage.

Even if there are deficiencies, insiders still have high expectations for DAO. Before 2021, the DAO is not recognized by law in the United States, but since last year, the legal provisions have been relaxed. Last July, Wyoming became the first region in the United States to legally recognize DAOs as legal, and the CryptoFed DAO became the first legal DAO recognized in Wyoming.

In February of this year, the Republic of the Marshall Islands (RMI) announced the registration of a Decentralized Autonomous Organization (DAO) as a legal entity, the first sovereign nation to be so defined.

In the future, Sanlin believes that more and more countries will open up legal licenses.

In the first two years of the outbreak, “digital nomads” once entered the public eye and were considered to be very trendy. With some technology companies in Silicon Valley and New York allowing permanent home offices, digital nomads have become a popular way of working for young people. . Now, after the DAO came out, even the trendy concept of “digital nomad” is not enough.

Not only can we get rid of working from home, we can even get rid of traditional organizational forms and start working for ourselves. We started to realize the way of living in Vietnam, enjoying cheap villas, eating juicy fruits and plenty of sunshine, and integrating work and life.

With the development of DAO, who knows whether such a scenario will be realized in the future?