The idea of the DAO - Of misunderstandings and potentials
What is a DAO? What does the Decentralized Autonomous Organization have to do with bitcoin and blockchain technology? Is it really independent and what role do the shareholders play? A guest contribution by Professor dr. Markus Büch from the FOM Berlin.
The figure of the Decentralized Autonomous Organization (DAO) has a high status in the universe of distributed ledger technologies. Although the term is well-known in the community, much remains unclear. In addition, there are many misunderstandings or misconceptions. Anyone involved in distributed systems technology may be able to do something called "DAO", but the terms "decentralized", "autonomous" and "organization" are misinterpreted.
The DAO is like an elephant: easy to recognize, but hard to describe.
Decentralized: the question of power
It is understandable that an organizational structure based on the basic technological structure of a fully meshed network (P2P) can be described as decentralized. Although even the term "decentralized" does not have its own meaning, since it is only a negative delimitation of "central". However, the concept of decentralization in the DAO context is given a meaning that goes beyond the pure network-like linkage. Rather, the DAO is concerned with power structures deviating from other forms of organization.
In contrast to the established corporate and organizational forms, decision-making authority is not restricted to a limited group of people, but to all those involved. But this comparison does not quite correspond to reality. Each organization is led by its members and not by leaders. By definition, these are always intended to carry out the will of the participants in the organization. For the rest, it is necessary to differentiate between the operative activity and those topics which belong to the organization's interior or to the organization itself.
The role of shareholders in a DAO
Decide on this - exception Foundation (Foundation) - always the members, shareholders or other "shareholder". Incidentally, they may also at any time exempt leaders from their offices. The seemingly perceived systemic lack of control does not exist. Every business organization would come to a standstill if every decision had to be coordinated by all parties involved. This functionality allows independence and agility. In addition, at the present time the majority of business organizations are decentralized. Especially large American online trading platforms draw their strength from a large number of decentralized and independent (non-autonomous!) Operating business units. Anyone who wants to know how decentralization works in reality should therefore also focus on today's corporate and platform structures and not just on the governance of P2P networks.
The DAO and the minority effect
Incidentally, a DAO does not solve the problem that a large number of people, even a few people can influence important decisions. The minority effect can not be neutralized by decentralization alone. Therefore, if decentralization is to address a new form of power limitation, it may be advisable to focus on the aspect of neutrality.
In this sense, a decentralized organization would be one in which there is protection against control by individual interests or monopoly structures. Above all, this would allow, for example, the cooperation of Master Nodes in a network to be raised to a real organizational level. Last but not least, the best decentralized decision-making process does not help if the decision can only be made centrally.
Autonomy - How independent is the Decentralized Autonomous Organization?
This term component is basically a misnomer, as it is also found in smart contracts. As little as a smart contract is an "intelligent contract", so little is a DAO an "autonomous organization". First of all, a DAO is more or less a complex smart contract and therefore not completely autonomous.
Because "autonomy" means "independence". But a DAO is not an organization that acts independently. This can not be done because of the requirements in the Smart Contracts. It only reacts because the Smart Contract is addressed. As a result, only the previously defined procedure is executed automatically. Thus, a "DAO" would probably rather be a Determined Automated Organization. The idea that "autonomous" means a form of artificial intelligence should not be included here. Previously, a consensus would first have to be found, which is to be understood as "artificial intelligence".
DAO: anything but intelligent
At any rate, a DAO is anything but intelligent. Due to their smart contract basis, this is also understandable. Therefore, the point of view is to change the term "autonomous". On the other hand, if autonomy is understood as a specific form of technology-based inventory independence, organizations would have quite different options. Because this opens the way for entrepreneurial activity through ownerless cooperation levels, which would indeed provide a counterbalance to today's monopoly-like platforms.
organization
Finally, the question arises as to whether a DAO is an organization at all. Here it should first be pointed out that, in any case, an organization that is independent of humans and thus can not provide "autonomous" - purely algorithmically controlled - organization conceptually. The lowest common denominator of all organizations is the fact that it still has to be a social (communication) system.
A structure in which only majority decisions are made automatically by a deterministic process flow or by an "artificial intelligence" has little in common. Such a understood DAO can not be assigned an organizational status. Today's DAO structures are predominantly computer program-based voting structures. This is not very much in terms of organizational diversity.
The "TheDAO" induction
Inevitably, dealing with decentralized autonomous organizations leads to the phenomenon "TheDAO". It should be noted that the White Paper is not a "decentralized investment fund". Rather, the original idea was aimed at a company created using the technology of distributed systems. This should not make any return-oriented investments but ask for and offer goods and services and thus participate in the economic cycle like a "real" company. In addition, in the discussion usually "TheDAO" is based on a fixed basic structure.
But "TheDAO" was just one use case of a multitude of possible variants. Already from the Turing completeness of the Smart Contracts architecture can be deduced that there are unlimited possibilities to design a DAO. Nevertheless, the definition of a DAO is always induced from the individual case "TheDAO". Generalizable features that may be found in any DAO framework are usually not searched for.
This restricts the field of application without necessity. To reduce the DAO to a technology-based tool of crowdfunding does not do justice to the potential of the organizational form. Especially since there are DAO-like structures that are of earlier origin. Distributed systems technology offers far more possibilities for a different corporate world, especially when forms of network-based business cooperation are interwoven with the idea of ownership of responsibility. However, this requires that universally valid basic structures be extracted.
Is Bitcoin a DAO?
Finally, there is the occasional statement that "Bitcoin" or the "Bitcoin Network" is the original form of a DAO. Historically, the predecessor to the DAO in the form of the Decentralized Autonomous Company (DAC) was already designed in response to the quasi-plutocratic developments in the Bitcoin network.
This is diametrically opposed to Bitcoin and the DAO. In addition, the actions of the participants in the Bitcoin network are primarily controlled by their individual interests. A common interest and a social interaction system (see above) are missing. The Bitcoin network is more infrastructure and less organization. But more, it never wanted to be.