Anyone interested in the future of business, organizational governance, venture investing, and the broader internet should know about “The DAO”.
Ethereum, the groundbreaking blockchain platform, continues to blaze a technological trail of world changing, innovative experiments. It was a short time ago in the summer of 2014 that Ethereum was one of the largest crowdfunding campaigns in the world.
I predicted that 2016 will the year that the Blockchain Awakens.
Today, “The DAO“, named for a new type of organization called the “Decentralized Autonomous Organization“, is in Creation Phase, allowing anyone with Ether to become a DAO Token owner. [As such Ether and DAO Token are described as digital assets or cryptocurrencies.]
At May 8, 2016 The DAO had crossed $US 29M in funding, making it the 2nd largest crowdfunding project.
The full details of The DAO are available in the DAO Whitepaper.
Why is the DAO Revolutionary? Why Should You Care?
In a word, decentralization. More specifically, decentralized investment and governance. The DAO fundamentally provides a new kind of investment and governance model that doesn’t rely on a stock exchange, a centralized crowdfunding platform like kickstarter, or a financial institution.
Let that last sentence sink in.
The DAO doesn’t disrupt today’s centralized financial institutions…. but it could.
The DAO’s Members get to vote on investment proposals presented to The DAO by its Members. Profits of projects funded by The DAO may be subsequently distributed to Members in accordance with the Proposals.
Because The DAO is “smart contract” software code that mimics the investment functions of an organizatio, and lives on the public Ethereum Blockchain, it is immediately a global organization, accessible to anyone with an internet connection.
One way to think about smart contracts is to consider them a program that can’t be stopped. Although no one is forced to use The DAO, the code itself is immutable and therefore cannot be removed by a single individual or organization. The DAO smart contract lives (and will continue to exist as long as the Ethereum public blockchain exists) at Ethereum address: 0xbb9bc244d798123fde783fcc1c72d3bb8c189413
The DAO demonstrates one of the key benefits of being deployed on the public Ethereum blockchain: transparency.
Today and anytime in the future, we can look at the activity in The DAO. As an example, the following snapshot at http://etherscan.io/token/TheDAO#balances provides an overview of which Ethereum accounts own DAO Tokens:
Note that one can’t easily know the identities of the account owners, although it’s possible that account owners can be found based on their public activity.
The DAO’s Goals
From the DAO’s manifesto:
To blaze a new path in business organization for the betterment of its members, existing simultaneously nowhere and everywhere and operating solely with the steadfast iron will of immutable code. The goal of The DAO is to diligently use the ETH it controls to support projects that will:
- Provide a return on investment or benefit to the DAO and its members.
- Benefit the decentralized ecosystem as a whole.
The first goal resembles a typical organization today. The second goal supports the networks effects of the Ethereum platform.
The Process: Bringing the DAO to Life
The DAO explains its creation phase.
Let us turn to the terms by which users will bring The DAO to life and engage in its future. Users become DAO Token Holders by fuelling The DAO with ETH during its Creation Phase. When The DAO receives ETH, new DAO tokens are created in that moment. Each DAO Token Holder is granted voting rights and complete control over The DAO’s digital assets (ETH to begin with) proportional to the amount of DAO tokens they hold.
The creators of the DAO have stipulated a core code of conduct:
We as a DAO, both as a whole and as individual members, will adhere to the following code of conduct:
- We will not seek profits through means contradictory to our stated values or the categorical imperative.
- We shall respect free speech and encourage all opinions to be both voiced and heard freely, without persecution.
- We will strive toward decentralization and autonomy whenever and wherever it is reasonably possible and beneficial.
Where to Next?
There’s nothing that determines this will be the only DAO of its kind. In fact, we should anticipate the opposite : since The DAO code is public and included in The DAO White Paper, anyone that wants to create a new one can simply deploy the exact same code onto the blockchain. Imagine thousands or millions of these new organizational structures being created just as easily as uploading code to a cloud.
It is time to realize the potential global impact of this new technology. It is critical that governments, regulators, financial institutions, executives and entrepreneurs alike begin to understand the possible future scenarios.
Imagine this : we could have national, state, provincial or municipal DAO’s, invested in by its citizens. Could these be the pension funds of the future? We could have family DAO’s. Could these be the trust funds of the future?
And remember, they don’t require a financial intermediary to execute, just the global Ethereum virtual computing environment.
If you’d like to discuss the potential impacts of blockchain technology further, please contact me at email@example.com (Twitter: @alanwunsche) or contact me through www.leadingknowledge.com (Twitter: @LeadingK)
Alan Wunsche (LinkedIn) is CEO of Leading Knowledge Ltd, a blockchain consultancy and blockchain solutions development startup. He is a Chartered Professional Accountant with a passion for cutting edge information-based innovation and brings over 25 years of cross-industry financial, risk, and marketing technology management consulting and executive experience. Alan has held leadership roles at PwC, Deloitte, Scotiabank and a variety of tech startups.
P.S. This is Not Investment Advice
This is new, ground-breaking territory and so the White Paper provides some good advice:
A word of caution, at the outset: the legal status of DAOs remains the subject of active and vigorous debate and discussion. Not everyone shares the same definition. Some have said that they are autonomous code and can operate independently of legal systems; others have said that they must be owned or operate by humans or human created entities. There will be many uses cases, and the DAO code will develop over time. Ultimately, how a DAO functions and its legal status will depend on many factors, including how DAO code is used, where it is used, and who uses it. This paper does not speculate about the legal status of DAOs worldwide. This paper is not intended to offer legal advice or conclusions. Anyone who uses DAO code will do so at their own risk.