These are exciting times in the Blockchain space : a convergence of technology, finance, marketing, internet of things, identity management and governance.
As of this writing and 11 days remaining, The DAO , a form of “Decentralized Autonomous Organization” has raised (see full list) the equivalent of $108M in Ether, the digital cryptocurrency/computing token that fuels the Ethereum public blockchain. In my previous posts The DAO – A Global Ethereum Venture Fund Launches and here, I wrote about this global social crowdfunding experiment. This has the potential to put Ether (see http://coincap.io/ETH) sitting on the sidelines to work on a global scale.
When The DAO token creation phase is complete, DAO Token Holders will vote on proposals to The DAO by people or organizations that want to tap into the DAO’s pool of funds.
Although it was almost missed by the mainstream business media until now, recently articles have raised awareness of this global social experiment, most recently Coindesk: The DAO: Or How A Leaderless Ethereum-Based Organization Raised $50 Million, and here: WSJ: Chiefless Company Rakes In More Than $100 Million
Based on my conversations, the venture community isn’t sure what to make of this new model, but the $100M raise is nothing short of a surprise to the blockchain community and its original organizers. According to the WSJ piece:
The group that built the DAO, mainly people from the Ethereum developers group, expected to raise around $20 million, according to Stephan Tual of slock.it, the startup that wrote the DAO’s code. “It’s really surprising,” to see the total raised so far, he said.
A point of clarification for that article: as I understand it, the team behind Slock.it have actually been the main developers of The DAO’s code.
Is there Enough Governance? Where to Now?
Voting is embedded in the unstoppable code of the DAO’s smart contract. Voting is definitive governance but is it ‘enough’ governance?
What’s missing, and this is actually by design in what we can call DAO 1.0, is ‘traditional’ governance. There’s no central ‘Investment Committee’ to review proposals on behalf of investors. Just to drive the point home, there is no Chief Investment Officer, no Chief Financial Officer. And there is no central government involved in The DAO.
What we have is a global group of cryptocurrency early adopters contributing to a global fund, willing to run with this experiment. All DAO Token Holders (DTH) are effectively acting CIOs, and CFO’s. It’s brilliant that anyone can participate, but does every DTH want and need to be literate in financial and business models? Is every DTH now a VC? VC’s exist because their expertise makes the whole process efficient.
On the DAO “channels”, I’ve voiced a concern of a “first-in, first funded” proposal process. Currently, and still in draft, we have one primary Proposal officially in front of The DAO:
Blockchain + IoT for a new Sharing Economy
Slock.it’s ambitious IoT + Blockchain proposal for the development of Universal Sharing Network has [been] made public on the DAO’s forums. At the core of this proposal lies the Ethereum Computer, a multi-functional device designed to decentralize the Sharing Economy.
Although I’m on record as supporting the incredible innovativeness of the Slock.it plan and its tremendous potential, the bigger question to ask:” “How do we evaluate proposals to make sure the best proposals get funded?”.
As a past tech incubator advisor and tech startup leader, I appreciate the value of disciplined due diligence in evaluating projects. How will the DAO Token Holders be able to make a good assessment of whether the proposal is asking for the “right” amount of funding to succeed?
We know that 9/10 startups fail – will future proposals have the right business model to succeed?
Recommendation: A Proposal-Gathering and Review Period
So, I suggest a “proposal-gathering and review period”, perhaps 3 months, allowing time to gather a good variety of top-notch proposals, and some additional structure to evaluating the proposals.
Currently, there is no clear mechanism for proposal review other than online forum discussions. Before it gets too far down the road, perhaps the The DAO’s first proposal should be one to deliver this additional discipline. As a starting point, rather than the current free form proposal format, perhaps every Proposal needs to structure their request in the form of answers to 10 standard venture capital questions, and DTH’s can vote and comment on the answers. Even more interesting, could the DTH also be given an opportunity to vote on what those key questions are?
These are very exciting, innovative times and uncharted territory.
In subsequent posts, I’ll follow the evolution of DAO governance and suggest some of the best approaches on the path forward.
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 solutions development startup and consultancy. He is a Chartered Professional Accountant with a passion for cutting edge information-based innovation and technology. He has over 25 years of cross-industry finance, risk, governance, and marketing technology management consulting and executive experience. Alan has held leadership roles at PwC, Deloitte, Scotiabank and a variety of tech startups.