We have had internet companies, but not companies on the internet until now. Decentralized Autonomous Organizations (DAOs) are the subsequent application of blockchain technology, which enforce trustless global cooperation and are paving the way for the next growth wave of the internet network.
-Crypto networks as new economies
According to Investopedia, an economy is “a large set of inter-related production, consumption, and exchange activities that aid in determining how scarce resources are allocated. The production, consumption, and distribution of goods and services are used to fulfill the needs of those living and operating within the economy, which is also referred to as an economic system”.
In the real world, market participants (individuals, companies & organizations) are the suppliers and demanders of the system. They produce goods and services, consume them, and exchange value with each other. For this activity to happen in a fair and meaningful way, a set of public institutions has to exist to create rules that govern these relationships as well as enforce them.
Crypto networks behave the same way, except they live on the internet. Instead of public institutions that oversee the system’s fairness, crypto networks rely on code, where all the rules are programmed and executed automatically by a shared consensus, thus reducing the risk that comes from the centralization of power.
Take the Bitcoin network, for example. It is an economic system where miners are offering a straightforward service; a decentralized, non-sovereign, uncensorable form of money to transact value over the internet. Consumers that use this service keep miners in business by paying fees in bitcoin. At the same time, all of this operation of producing coins, validating transactions, and exchanging value between the network users is enforced by the Bitcoin code in a trustless and open manner.
Smart contract platforms like Ethereum operate in the same way, but with different rules, capacities, and product offerings. They are the new economies that serve global internet citizens without borders, in a trustless and permissionless way.
-Cooperating in the new world through DAOs
An organization is a group of people who work together in an organized way for a shared purpose. It can be a company, institution, association, etc. In the real world, organizations are registered in public institutions. They have a shared bank account to finance their operations and internal laws that govern them. Members of these organizations are hired through paper contracts, which are enforced by public institutions like courts. In the new digital economies powered by blockchains, organizations are registered in public blockchain infrastructures like Ethereum, Solana, Cosmos and they also have a shared “bank” account, as well as internal regulations to govern their operations, powered by smart contracts, which are enforced by the underlying blockchain.
We call these “Decentralized Autonomous Organizations”, or DAOs for short. Each DAO is represented by a token with the goal of organizing members' behaviors and incentives. They are Decentralized because decision-making is distributed to token holders that can be located anywhere in the world. They are Autonomous because a great number of administrative processes are replaced by smart contracts making them an efficient and superior tool for organizing people globally with a shared goal, in a trustless and permissionless way.
Looking at how fast the world is changing maybe our kids will work for a DAO someday, but we are still early in the journey.
-Coordination problem and DAOs nature
Human beings compete for resources, but we also coordinate to survive. We coordinate schedules, finances, groceries, international trade, etc. Thus, we depend on families, companies, institutions, and markets to survive.
We believe DAOs stand on the frontier of the coordination problem space. Their permissionless, mission-driven, and community-run architecture represents a step function improvement for the future of work.
Through them, we can now invent new mechanisms upon an unprecedentedly solid and incorruptible foundation, and use this to fundamentally change how resource allocation is coordinated. Improving coordination means better resource allocation, less corruption, and more symmetry between value created and value captured.
Each DAO has its own structure, but they often have:
A mission
A treasury
Governance of that treasury
Coordination to turn that treasury into outcomes aligned with the mission
As the number of DAOs and creators working for them grows, the space for resource allocation/coordination tools will grow exponentially. We are now entering a world in which, to achieve their mission, DAOs will need to attract creators to their cause, deeply engage them, and coordinate in a mutually beneficial way.
The shift between DAOs and traditional companies is that the former is typically Default Open.
Default Open is exactly what it sounds like: it means that access to the information within a company is, by default, open to the entire company to view. You can think of this as akin to your sharing of Google Drive; the default here is that it’s shared with the entire company base, rather than the default being private.
DAOs take Web2 Default Open to a new level. If in Web2, Default Open allows the entire company to access all its information, in Web3, this universe is extended to the whole world.
When looking at joining DAOs, you would assume you would need to fill out an application, talk to a key organizer, and get some sort of approval before starting to engage. While this is true of some DAOs, this was not my experience at large. In many cases, I gained access to the Discord server right away.
These public Discords are literally where work gets done, where calls get scheduled, where people get hired, and where governance happens.
Discussions that would be happening at the Board of Directors level in Web2, around things like “what does our employee stock options plan look like?” and “where do we want this protocol to be in five years?” are held totally in public.
Voting on crucial governance matters - which would typically happen at the Board level - is often put forth to the community of token-holders as a whole.
Conversations around treasury allocation (i.e., how the company plans to manage & spend its money, basically) are also happening publicly.
The level of detail here varies, but in many cases, you can even see job offers – yes, all the way down to specific terms of an offer for a particular candidate. And, if you’re a token holder, you can vote on whether or not to approve that hire.
Since decisions are made collectively, even discussions around raising a venture round are not exempt from community participation. VCs have to join community calls and jump into Discords to pitch DAOs, answer questions and articulate their value-add - not just to the CEO but also to the voting community.
From a transparency lens, what’s fascinating here is that the dialogue the VCs had with the community can be publicly viewed. These are conversations that would typically happen behind closed doors with a select group of executives, let alone in the presence of employees, and are now visible to the public at large.
About VIAL
VIAL aims to be the first Decentralized Autonomous Society (DAS) tokenizing Albania and its diaspora in the new digital world through blockchain, consumer apps, and a fair token-based governance system operating in the new ownership economy of Web3.
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