Decentralized autonomous organizations (DAOs) are already changing the world by allowing large groups of people to make decisions autonomously. Enabled by blockchain technology, which is itself life-changing, these groups are eliminating the need for centralized management teams that have traditionally set strategy and overseen all areas of public- and private-sector organizations.
Marcello Mari is CEO of SingularityDAO, an independent project incubated by SingularityNET that combines decentralized finance and artificial intelligence, and provides AI-powered portfolio management for the crypto space.
But DAOs may themselves be in for a change that could fix perhaps their most significant vulnerability. The current DAO model is human-run, and as a result, DAO decisions are prone to errors in judgment. The use of artificial intelligence, another transformative technology, would eliminate those mistakes and make DAOs even more effective.
What are DAOs?
A DAO is an organization guided by rules encoded as a transparent computer program. DAOs are controlled by their organizations' members and are decentralized (well, semi-decentralized in their current form). As the rules of the organizations are embedded into the codes, no managers are required. DAOs eliminate the bureaucracy and hierarchy hurdles present in traditional organizations.
The rise of DAOs can be attributed to one question that internet users have been asking for years: “How can we exchange values in a trusted environment?” The emergence of blockchain technology enables automated trusted transactions and value exchanges, allowing internet users globally to organize themselves in a safe, effective way to achieve common goals.
The financial transactions and rules of DAOs are recorded on the blockchain, eliminating the need to involve third-party entities and simplifying the transactions via smart contracts.
DAOs employ governance tokens, which tend to be used to provide holders with voting rights. In most cases, these tokens give holders the ability to participate in the decentralized governance of protocols, or even in the governance of the tokens themselves.
The Rise of DAOs
We can describe 2021 as the year that DAOs reached wide-scale public awareness. In previous years, DAOs had served several purposes, including investment, charity and fundraising, but all on a smaller scale.
With last year’s massive growth, DAOs now collectively have about a million members. According to ConsenSys, the leading 20 DAOs combined hold over $14 billion in digital assets. And the expansion is not limited to major DeFi players such as Compound and MakerDAO. Smaller DAOs have emerged and are on the rise. One of the most popular DAOs last year was ConstitutionDAO, which raised roughly $47 million in less than a week in a bid to acquire a rare copy of the U.S. Constitution.
While the group fell short of that objective, the big splash it made in mainstream media signified that such projects – and even bigger ones – will surface in coming years. ConstitutionDAO showed that DAOs could transform many different industries, even if some people questioned whether it was a DAO or temporary fundraising mechanism to acquire the historic document. ConstitutionDAO had just that single objective and hasn't made any decisions subsequently.
DAOs are also having an impact on the music industry. Last May, JennyDAO acquired its first NFT – an original song by Steve Aoki and 3LAU. JennyDAO is a metaverse group that provides fractional ownerships of non-fungible tokens. Unlike the case with ConstitutionDAO, members decide which NFTs to acquire. Smart contracts from the Unicly platform control the vault where the NFTs are to be added.
This year may be an even bigger year for DAOs in participation and the staggering sums of money they are likely to raise. The growth of the DAO approach has begun to obviate traditional approaches to finance, medicine, art and the law, among other areas. (Note that many DAOs are not fundraisers, as many people mistakenly believe.)
DAOs will also solve diversity issues by ensuring that people from all over the world can participate in the decision-making process of several projects simultaneously, and they will increasingly serve as a tool to govern the decentralized landscape over the coming months.
Turning to robots
Robots offer a path forward. Despite their spectacular rise, DAOs continue to suffer from human errors that could hinder them from achieving their full potential.
Artificial general intelligence (AGI) could offer a better path forward by executing tasks on behalf of individuals in a DAO. AGI would combine human-like, flexible thinking and reasoning with split-second number crunching and other computational advantages to make better decisions.
Ultimately, the goal of a DAO is to function without human hierarchical management. With AI DAOs, a community of human participants would choose AI agents to represent them in the decision-making process, eliminating human bias. The AI agents would then work together autonomously to make the best decisions about creating their own products and services, selling them and transferring the profits to human participants.
Many DAOs will likely shift to this improved model in the months and years ahead while continuing to benefit from blockchain and other emerging technologies. In the future, many DAOs will likely shift from full human control of functions to automation. The DAOs would then be able to take full advantage of AI, blockchain and other emerging technologies to make them even more efficient.
AI DAOs would also have cost benefits by removing human bias and errors. They would become truly autonomous organisms, fulfilling the original DAO vision of creating a better way of doing business.
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