By Steve, COO | NnsDAO Labs
DAOs are the kind of way for facilitating human cooperation via collective ownership. The better way for the DAO is to facilitate coordination through organization, and keeping that group of humans moving toward a goal. However DAO software works in service of this goal, and any group using the software is using it to reduce coordination failure meanwhile DAO software is really good at reducing coordination failure. In fact DAOs are so good at doing this because they allow for collective ownership over the organization and decision-making that was previously very difficult to maintain at scale. This collective mindset can have a huge impact on everything from a club, to a corporation, and DAO software can help cement. DAOs are truly magical in what they mean for community coordination, but we’ve been at it long enough now to have recognized a few steps that make a difference if you want your DAO to really work. Here’s a quick rundown on what we’re learned so far.
DAO stands for “Decentralized Autonomous Organization.” Because of the “organization” part the term ends up used to represent a group of people. But, that organization is decentralized, and the ultimate actions of the organization are made autonomous through the use of software, which is why it can end up sounding like a tool and not an organization. However, DAO software works in service of communities of people, and they give those communities coordination superpowers.
Finally Superpowers so great that those communities take on the label DAO. DAOs are the future of organization and work because in order to get things done, humans have always organized themselves into groups, tribes, squads, gangs, crews, teams, companies and other forms of collective action so DAOs are no different. However in other hand some DAOs are groups of developers or investors, others are pressure groups, companies, charities, local initiatives. Literally, membership of a DAO is determined by ownership of some of the DAO’s ‘token’, which is issued on a block chain like Ethereum and acts much like a digital membership card, enabling access to gated content, voting rights and other benefits. DAOs are decentralized in different ways such as infrastructure, payment, workforce, governance and community.
These can be explained as following
Infrastructure
Infrastructure can be decentralized through DAO software. DAO software can be accessed via a web browser but its backend infrastructure is cryptocurrency and payment networks such as Ethereum. The Ethereum network is hosted by thousands of computers all over the world that all check each other’s integrity. If one computer tries to process a rogue payment, it will be rejected by all the others, and even if an entire continent were to ban Ethereum, the network itself would still run normally everywhere else. In this sense, decentralization makes DAOs the most robust and censorship-resistant organizations ever invented.
Payments
Payment can be decentralized through free banking system. Because the Ethereum network is virtually unstoppable, so are payments in its native currency, Ether ($ETH). This means that DAOs are free to contract and trade permissionlessly with any person or organization also on that network. The same goes for any decentralized cryptocurrency that supports DAO creation, such as Cardano ($ADA), Solana ($SOL), or Polkadot ($DOT). It is even possible to create alternative, non-native, currencies on these networks. In essence, cryptocurrencies are a return to a Free Banking system where merchants and consumers are free to choose which currency they use, based on its merits.
Workforce
Workforce can be decentralized through access labor anywhere in the world. Being unconstrained by regulation, DAOs can access labor anywhere in the world. Some DAOs will actively recruit but most are simply open to contributions from anyone willing to give their time and effort in exchange for cryptocurrency. Apart from the well-documented benefits of workforce diversity, DAOs have access to a far larger talent pool than traditional organizations and, being open-source, tend to naturally attract pro-active individuals.
Governance
Governance is the core value in decentralization. For the example DAO software such as Aragon Client is flexible enough to accommodate any organizational structure, but, in contrast to the traditional hierarchy, many DAOs opt for a simple structure where any member can propose an idea, and every member can vote democratically on every decision. A hierarchy is an incredibly inefficient and wasteful way to structure an organization. Ideas that originate at the bottom of the hierarchy — on the ‘factory floor’ — have a very difficult route up through the layers of bureaucracy and middle-management to be heard by anyone with decision-making power. This fact alone has a chilling effect on innovation by making it unlikely that any low-level employee with a good idea will even bother trying to promote it. If floor workers have too little power and influence, upper management can have too much. This enables them to commit vast resources to projects without a broad consensus, only to watch them fail or cancel them mid-way through. Government itself is the epitome of this phenomenon, wasting trillions worldwide on initiatives that no commercial enterprise would touch. By allowing anyone to propose an idea and everyone to vote on it, DAOs foster an Idea Meritocracy that cultivates all of the available talent within an organization, as well as distributing the decision-making power in favor of The Wisdom of the Crowd. Together, this makes for a much more economically efficient organization that, over time, will out-compete more wasteful hierarchies.
Community
Community is important part for contribution in DAOs. Although every decision could, in theory, be decided on-chain within the DAO software, the reality of all organizations is that most decisions are made during informal conversations between colleagues. For this purpose, DAOs use a combination of discussion forums such as Discord or Telegram and more formal vote signaling platforms such as Aragon Voice or Snapshot.
The source of information including What is a DAO? (aragon.org)
