#2 - How DAOs can change the way we work
The future of work is decentralized, autonomous, and organized; get in while it's still early.
For decades, humans have been conditioned to see centralized systems as the blueprint. Hierarchical structures where decisions made from the top down are the norm. CEOs and top management make all the decisions with little to no input from employees or users. Government officials determine what’s best for their citizens. And popular apps like Facebook and Twitter own user data and remove user online profiles without warning.
But that's changing. Since the first DAO was formed in 2016, a silent revolution has been brewing. Young people from different backgrounds are pooling funds and resources to build community-owned and governed entities in different nooks of the internet. Why? To create structures that give power back to the people.
What is a DAO?
Decentralized Autonomous Organizations (DAOs) are community-owned projects where members have the power to make proposals, and decisions and oversee the implementation of such projects. A huge part of a DAO’s revolutionary power, aside from its leaderless structure, is that most decisions are made on-chain and guided by the rules encoded in its smart contract with its data backed up on the blockchain. This ensures that members stay true to the DAO’s goals and curbs malicious intent.
Decentralization in a DAO ensures it remains flexible and easily accessible to anyone interested in contributing or being a part of the community.
Autonomy functions as a self-governing principle where the DAO operates according to what has been programmed in its smart contract, and members take ownership of how its day-to-day activities are run.
Organization refers to the coming together of its members to achieve the DAO’s goals and principles.
How do DAOs work?
Corporations or chains like First Bank or Dangote Group have codes of conduct and rules written in fine print; so do DAOs. The difference is that DAOs’ rules and operational models are encoded in the blockchain, making them unalterable, immune to manipulation by members with selfish interests, and transparent to its members.
What distinguishes DAOs from a typical decentralized application is that they rely on humans to govern and operate them. DAOs typically issue their token to raise funds for their treasury. This gives token holders the chance to vote on decisions and contribute to the day-to-day operations and running of the DAO. Although most DAOs currently open up contributions to anyone with the needed skills to come in, work on a task/project, and get compensated in its token, they'll need to own a certain percentage of a token to participate in its on-chain voting process. Anyone can earn this token by contributing.
A more practical example of how DAOs work is the 2020 EndSARS protest. Young Nigerians in different states gathered to protest an end to police brutality and unlawful extortion. Everyone who participated had one thing in common: no protest leaders. Why? They understood early on that appointing anyone as the “head”, whether or not they could be trusted, would make it easier to sabotage the movement. Amidst much criticism, protest participants continued to insist on and implement a leaderless protest. Members also collectively raised funds and took responsibility for how the protest was run without coercion from their peers. A DAO functions the exact way.
How did DAOs come about?
DAO-like systems have been in operation since the evolution of mankind. In the book, Starfish and the Spider; the unstoppable power of leaderless organizations, authors Ori Brafman and Rod Beckstrom compare decentralized organizations to starfishes. “If you cut off a spider’s leg, it’s crippled; if you cut off its head, it dies. But if you cut off a starfish’s leg, it grows a new one, and the old leg can grow into an entirely new starfish.”
Decentralized organizations are made up of many smaller units capable of operating, growing, and multiplying independently of each other. This makes it very difficult for a rival force to control or defeat them.
The author mentioned examples of select groups—the internet, the Apache Indian tribe, and the peer-to-peer rehab community Alcoholics Anonymous— that were able to ward off external threats by thriving under decentralized systems. Some other examples of decentralized organizations are the Esusu group, a traditional finance management institution where groups of individuals contribute to informal savings and credit associations for their mutual benefit, and the pre-colonial Igbo culture which had no ruler or leader.
These systems have evolved to form DAOs as they exist today. A few people argue that bitcoin is the first real experimentation of DAOs because people enter into agreements to buy and sell the cryptocurrency according to a set of terms (smart contracts), and everything is tracked on the bitcoin blockchain. But the first-ever purposely built DAO was The DAO.
The DAO was a venture capital fund that launched as a decentralized application on the Ethereum blockchain in 2016. Its main goal was to raise and fund Web3 projects building on the Ethereum blockchain. It was open to everyone with the sole criteria that they contribute at least 1Eth to the smart contract address of the DAO and get 100 DAO tokens, which were then used to vote and make proposals.
In essence, anyone with at least 1Eth could contribute to governing the DAO. Projects which needed funding from the DAO could apply and token holders would vote on which projects they would like funded. Once approved, the funds were disbursed to the projects. The smart contract executed all these.
The DAO received such a huge community approval that, within its first-week launch, it had raised more than $150 million in Ethereum.
Unfortunately, the DAO got hacked.
Two months after its successful launch, cryptocurrency worth about $70 million was stolen from its treasury. The attack, which was a result of an error in the smart contract code, allowed the hacker to withdraw more than their allocated share of DAO token, draining around 30% of the treasury. Coinmarket has a more detailed explanation of the DAO hack and what it meant for the Ethereum ecosystem.
Although the hack damped the community's high spirits and caused a split in the Ethereum community, it became a learning moment for DAO enthusiasts and builders alike, and interest spiked over the years. DAOs have grown to cover various fields like media, grants, philanthropy, socials, and venture funds. DeepDAO, a DAO tracking tool, records that there are currently over 4384 DAOs as of May 2022. Each one is a model of its first and focuses on entirely new goals and milestones.
DAOs are still very much a work in progress with many internal systems and operational models constantly evolving. The community needs members and contributors from diverse backgrounds who also possess important soft skills to help smoothen out processes and coordination. If this is you, join us next week as we look into how to start earning in DAOs.
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