Perspective 4: Sharing economy 2.0
Today, decentralized autonomous organizations (DAOs) are similar to stocks, web2.0, and the sharing economy. This may not be their final form.
Nowadays, we find democratic organizations in some companies and in many governments. Stakeholders or voters choose who will be representing them in the decision making, and those with more votes make the rules, usually for a fixed period of time. These representatives can be considered middlemen, and one of the promises of crypto is replacing middlemen with software.
DAOs use smart contracts to replace these representatives. Tokens are therefore equivalent to shares in the corresponding organizations. Governance tokens grant voting rights, in some cases also dividends, and beyond some level the right to create proposals, to be voted. Some famous examples include SushiSwap, Curve, and Balancer.
As much as people are replaced by smart contracts, the DAOs’ behavior becomes predictable, definite, and transparent. DAOs may also be decentralized in governance and often in service providers, similar to cooperatives, the web 2.0, or the sharing economy, e.g. users can create liquidity pools by providing their own liquidity. YouTube would not exist without people uploading videos, and Uber would be useless without drivers. Decentralized ownership may be best for some assets. For example:
- Assets that would provide too much power if centralized, e.g. artificial general intelligence.
- Assets that are considered externalities in the economy but may be invaluable to survive and would benefit from stewardship1, e.g. environmental tokens, for CO₂.2
DAOs may achieve greater decentralization in their software in at least two ways: bounty-based services like Gitcoin, and parts of their software directly configured through governance, e.g. variables, and rules. DAOs may also in a similar way hire people and establish partnerships and collaborations with other organizations. Potentially all organizations could be replaced with DAOs, in the future.
Ownership puts skin in the game of stewardship, solving the principal-agent problem.
Green Peace and similar organizations could emerge as DAOs. However, with governance linked to investment (as it is usually the case), deep pockets could seize control of them and eliminate opposition. There are proposals to prevent this, including quadratic voting and zero-knowledge proofs. To the best of my knowledge, they are not battle-tested yet.
Cross-posted from the Sigmoid newsletter
