What is DAO?

Title: "what is DAO?"
Blue fox notes by Delton Rhodes

DAO is one of many exciting concepts on blockchain. Why does DAO get so much attention? This is important because of its characteristics:The unified rules, transparency and stakeholders of automated execution can express their interest demands, which represents a possible direction of organizational management.But at the same time DAO development is in the initial stage, is its governance mechanism reasonable? How can it benefit the development of the organization? There are many details to explore here. The writer is Delton Rhodes, translated by SIEN of the blue fox notes community.

Historically, the concept of organization has been centered around a rigid ownership structure. Over the past few decades, companies have begun to introduce open, flat organizational structures that allow more people in the organization to express themselves. But in the end, making decisions for the whole organization is usually the responsibility of one person or a few.

When we look at large companies, clear hierarchies are the norm. After all, Apple, Google, and Facebook all have ceos, ctos, and cmos, as well as directors, managers, and subordinates. Early startups and large companies have well-defined ownership and leadership structures. While it is possible to have an equity stake in a company and, in theory, part of an organisation, its influence is very limited.

For centuries, the dilemma of determining ownership, hierarchy, and rules has been a major obstacle to organizational development. But what if the company doesn't necessarily need an owner? This question has been based on idealism for most of history. Today distributed ownerless organizations are possible thanks to the emergence of the DAO (distributed autonomous organization).

What is DAO?

The DAO is sometimes referred to as a DAC (decentralized autonomous corporation), an organization represented by rules encoded as a computer program that is transparent, controlled by shareholders or token holders, and not influenced by central institutions. DAO USES blockchain to validate transactions.

Everyone in the DAO can publish proposals and vote to make decisions. Cryptocurrencies are used to represent key values, with the highest number of votes won at the end of a specified period. This is in direct contrast to other forms of voting, which usually have the same percentage of votes per person. Usually, the proposal is A "yes or no" question, i.e., should company A develop product x?

Why do people want this?

Fast, borderless business decisions

If someone in country A wants to start A business with the founders of country B, country C, etc., the process of doing something is very complicated at present. Different jurisdictions have different requirements. The time frame for decisions also varies. For example, suppose it takes only one day for someone in country A to formally establish A business, while it takes three months for someone in country B to start up. Obviously, people in country B don't have the same resources as people in country A.

DAO provides a solution that allows everyone to work in the same conditions, regardless of geographic location, by following a standard set of rules. Essentially, one of the main reasons for creating daos isProvide an equal system for the establishment and operation of the organization。

Organization-wide voting

Many companies have boards of directors to make important decisions. The problem with this is that these organizations usually only vote on a few selected issues and do not necessarily represent the majority of the organization. DAO can change this by allowing anyone in the organization to vote on issues of concern to them. For example, A might care about problem A and problem C, but not so much about problem B.

Through DAO, A can vote on the proposal in token according to the degree of concern. The DAO doesn't use a system that ignores or doesn't count inputs to members of the organization, but rather ensures that all votes are counted and displayed to everyone. (blue fox note: DAO ensures that stakeholders within the organization, i.e. token holders, have the opportunity to express their opinions)

You can't change the rules

Within any organization, policies and rules determine what can and cannot be done. For example, in a company, employees who do not follow the rules may be punished. If someone is late for work, this may or may not result in a corresponding deduction. This decision can be automatically enforced with a timestamp, but not all organizations enforce it.

For example, if the boss is late, it might change the rule by setting exceptions. In daos, it encodes rules that apply to everyone. An established set of rules within an organisation cannot be tampered with unless the voters agree to do so.

The limitations of the DAO

Many decisions depend on human activity, not automation

Smart contracts have been implemented to automate many human tasks. For example, smart contracts can determine whether A can send money to B based on whether it meets A set of criteria. The problem is that you can't do many activities just by clicking a button.

One example is about allocating work funds. For example, daos can use smart contracts to send money that the development team can use to build apps. However, the DAO has no way of ensuring that the development team is finished or even that the funds are being used correctly. Mechanisms to minimize such problems may include requiring a vote on the completion of a large project by milestone.

Lack of legal support

Although daos are thought to be more efficient at running an organization's business because of their borderless nature, this can also be seen as a drawback. The legal status of such organizations is ambiguous at best, since no official laws governing the operation of daos are in place. Smart contract codes seem to help protect individuals, but the courts have not formally recognised them.

Can fortune 500 companies become distributed organizations?

In 2017, Siemens became the first fortune 500 company to use DAO internally. The concept of running large companies entirely on daos is interesting, but not very practical. If a fortune 500 company suddenly decided today to turn to DAO for all of its governance, it would create numerous technical challenges (UI/UX, security, scalability) that would need to be addressed in order for blockchain to support such organizational structures. The limitations mentioned above will also apply. There is a learning curve for the participants.

Finally, there are human factors to consider. If the participation rate is too low, it is difficult to tell whether the voting actually represents the true majority of the organization. Relying too much on DAO proposals and votes can also lead to individuals making many small decisions on an ongoing basis, which essentially limits the amount of time voters actually have to complete their assigned tasks. Realistically, for all of these reasons,It is more feasible to create small organizations that run on daos.(blue fox note: the author believes that running large organizations on daos is not feasible for the time being, so it is not realistic for fortune 500 companies to run daos)

Related reading:How far are we from the real DAO?》

Source:mp.weixin.qq.com

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