This is an exciting time for those who are planning to include DAO in their business structure, but we are also witnessing a fair level of caution. It is important to be aware that things do not always unfold as smoothly as envisioned by the creators of tech solutions. This report will examine some of the steps forward – and backward – that have been encountered by DAO in the last few years.

First, it is important to remember that DAO – Decentralised Autonomous Organisation – is a new method of doing business that is still in its infancy. Although both blockchain and cryptocurrency are now openly discussed on a daily basis in mainstream global news media, not simply amongst so-called ‘tech geeks’ – there are still problems to iron out. Issues of trust need to be resolved, and a higher level of general acceptance may need to be reached before DAO can achieve its full potential. Let’s examine some of those challenges.

As far back as 2015, it was clear to some of the more astute financial writers, that incorporating DAO into a company, government, or NGO structure would most likely be a slow-and-steady process. The stages of development – the scope — that they could foresee included:

  • being autonomous and able to be maintained by artificial intelligence
  • being decentralised and able to scale up or down as needed
  • being distributed in various places around the world
  • being cooperative in order to maximise shared gains
  • being collaborative with other departments or other organisations to add shared value
  • being participatory as users choose to voluntarily self-assign tasks to take on

Maintaining a stake in DAO could be achieved through the purchase of shares in the organisation, the purchase of coins that are partnered with the venture, or by being given an allotted amount in return for work done or as a gift.

The value that could possibly be received includes tokens, coins, points with an assigned value, and rewards.

Creating an atmosphere that is fair, equitable, and inclusive is the goal of governance in a well-run DAO.

The technology of a DAO consists of APIs, Smart Programs/Smart Contracts, and the User Data that is owned and managed by the named user.1

By mid-2016, there was a growing interest in DAO and newly announced sales of shares saw money flooding into DAO projects. With more votes being allocated to those who owned more shares, the project still maintained equal voting rights for all shareholders by allowing each of them to vote on the projects that would be pursued. Over $168 million had been invested by the end of the intake period for one new DAO company, but a problem was immediately evident when it was discovered that most of the approximately 10,000 investors intended to vote on ways to change the DAO. Flaws in both the security of the project and the method of voting were pointed out by computer scientists and that prompted the suspension of the DAO project.

Since one of the goals of DAO establishment and operation was to do away with the ‘old boy networks’ that frequently ran businesses for the benefit of themselves and their friends instead of the greater community of investors, many of the DAO investors agreed with the decision to have a closer look at the administration and security of the project – even if it meant a delay in the launch.

The future of the voting process, as seen by an individual voter, seemed to be a particular area of concern. Although all stockholders were able to vote on the projects that were presented, once a vote had been placed for a particular project, the funds that the individual stockholder had invested were locked in place whilst waiting for the outcome of the vote. Also, if the majority of the stockholders voted for a different project, the individual’s vote was assigned to that project, even if was not their preferred project.2

A happier result is seen in the successful use of DAO as witnessed in the rise of social media platform Steemit. This project rewards the writers, journalists, entrepreneurs, and bloggers who share information with payment in its own currency.

Another sparkling success in the use of DAO has been “Dash” – Digital Cash. It has run smoothly, implemented their proposals swiftly and successfully, and they have maintained their value whilst integrating external contractors who have all agreed to be paid in Dash.

In contrast, an utter fizz-out was “The DAO” – an Ethereum-based project launched in 2016. Shortly after the initial sale and issuing of tokens to shareholders, an attack on a code vulnerability resulted in approximately one-third of the assets being stolen.

German site codecentric points out that DAO is a truly interesting proposition with benefits that could potentially revolutionise the organisations that embrace it. However, they also note that there are deep doubts in some quarters of the business world due to the uncertainty of the legal status of DAO, previous hacks and attacks on DAO projects, and the possibility that banks, corporations, and governments – those who could benefit the most from this new technology – might instead choose to boycott it and stick with old-fashioned ‘tried and true’ methods.3

REFERENCES

  1. Mougayar, William (2015, Feb. 21). What Does It Take To Succeed As A Decentralized Autonomous Organization? Retrieved from https://www.coindesk.com/succeed-as-decentralized-autonomous-organization/
  2. Metz, Cade (2016, June 6). The Biggest Crowdfunding Project Ever – DAO – Is Kind Of A Mess. Retrieved from https://www.wired.com/2016/06/biggest-crowdfunding-project-ever-dao-mess/
  3. Verhoelen, Jonas (2017, Aug. 29). Decentralized Autonomous Organization – organizations on the Blockchain. Retrieved from https://blog.codecentric.de/2017/08/decentralized-autonomous-organization-blockchain/