Traditionally, building an organization or company required going out and finding a group of people who shared a common vision. Forming these groups could be done by scouring social media, posting ads, or tapping into your networks. But even when you found these people, there was never any guarantee that you would work well together. Because in group dynamics, everyone needs to be motivated or honest or harbor any number of other traits crucial to establishing a productive, high-functioning relationship.
And once these relationships developed and the projects began to grow, you’d run into the issue of hierarchy. Some wanted the prestige of leadership. Some wanted to fade into the background and follow. Ultimately though, everyone wanted a voice. Everyone wanted to feel like they were contributing – they wanted to feel valued.
This is still the case for most organizations, but like everything right now, this outdated model is changing. Fast. What’s driving this change? A new organizational structure – enabled by blockchain technology – known as a DAO.
What is a DAO?
A DAO (decentralized autonomous organization) is a group of people who get together to pool resources to achieve a common goal. Structurally, DAOs operate as a community or cooperative, not a hierarchy. Members are the most critical element of a DAO. There are no “leaders” in DAOs, only participants or members. Each member holds equal voting rights. A DAO has a built-in treasury that is accessed only through the members’ approval [or vote].
Each DAO has its own smart contract. A smart contract is an agreement on the blockchain that negates the need for a central authority or legal counsel (like a traditional contract). In a DAO, the smart contract acts as a pledge toward a common goal. Some popular DAOs include:
- PleasrDAO – A collective that is committed to investing in high-value NFTs.
- UniSwap – This altcoin exchange allows users to trade crypto anywhere in the world without an intermediary.
- MetaCartel Ventures – A community of investors committed to investing in early-stage Decentralized Applications (DApps).
The Potential Benefits of DAOs
Every traditional project or organization that involves funding and capital requires a great deal of trust. With DAOs, there is no need to trust the people involved because you can rely on the DAO’s code, which is transparent and visible. If you join a DAO, you believe in a mission, not in the people involved – most [if not all] of whom you may never meet. Some of the benefits of a DAO include:
DAOs operate through computer code.
While traditional companies or organizations operate based on a top-down structure, a DAO is fully operational via computer code. No one person or group is in control, so decision-making is faster and more transparent.
DAOs use smart contracts.
A smart contract doesn’t require lawyers or other third parties to create or oversee it. The creator of the contract defines its terms and adds it to the blockchain. Once the contract is on the blockchain, the smart contract terms cannot be altered. Members of the DAO must agree upon any future adjustments made to the smart contract. Each smart contract includes rules and regulations, guidelines, functionality, and the contract address. Each member has full access to the DAO smart contract at all times.
DAOs are 100% based on trust and transparency.
As mentioned earlier, members of a DAO may never actually meet in real life. Entrance into the DAO means that everyone who participates commits to the shared goal outlined in the contract. Members of the DAO must agree upon any revisions to the contract.
DAOs are all about community.
By eliminating organizational structure, DAOs represent the true nature of community. Each token holder within the organization holds voting rights. And these voting rights can vary based on each user’s token count. Individual members have no additional privileges or rights.
DAOs and the Future of Organizational Structure
There are still a lot of issues to work out. But soon we’ll see die-hard fans banding together to buy their favorite sports teams or investors purchasing empty land and giving members a vote on how that land is developed.
Some organizations are already moving toward this less leader-based, more community-based decision-making model. But giving a voice to so many comes with its own set of challenges.
There’s Still a Long Road Ahead
One of the biggest challenges right now is the voting process. This is tricky because everyone needs to agree on the outcome. If you’ve ever tried to take a group vote, you know what this is like. And when the decision involves minor changes to the smart contract – like changing the color of the logo or adjusting a word in the mission statement – giving everyone a say can cause significant stalls. This can become incredibly inefficient, causing frustration for all involved.
Another challenge is security. Creating a DAO is easy (it only requires a few lines of code), but keeping it secure is another story. Because developing and maintaining robust security features within a DAO requires a lot of capital and even more skill. On top of that, members often choose to remain anonymous. This anonymity can put the organization at risk if the wrong people enter the picture.
With security top of mind for developers in the DAO space, there’s no doubt that this risk will begin to decrease over time. And, once the voting part is figured out, it’s [well, not] all smooth sailing from there. Either way, DAOs allow us to build communities where every member has a voice. These communities may focus on financial gain, supporting a cause, or funding impact-driven projects. DAOs offer us a path to a future built on purpose-driven community action no matter what the objective.
Orderinbox is a social NFT marketplace that aspires to be a DAO. Our goal is to give the power to the creators and collectors that use our platform. Orderinbox is by creators for creators. We believe strongly in the power of community. We want to ensure that every user that contributes to Orderinbox shares in the success of what we all build together. To learn more, please read our whitepaper.