The first limited liability company was established in Wyoming in 1977, and It took a decade for the federal government – and many business owners – to wrap their heads around this pivot in the idea of organization and ownership in business. Coincidentally, it seems Wyoming yet again serves as the legal birthplace of this new type of enterprise, as it is the first state to officially recognize a decentralized autonomous organization (DAO) as a business entity.
DAOs represent the most dramatic shift of structure, governance and asset management in business in our contemporary lives. Though many DAOs that govern treasuries have fallen prey to losses due to exploits or bugs in the code, these issues are a reflection of the greater need across all of Web3 for robust auditing – and not a reflection of the value of decentralized governance itself. In concept, DAOs now stand out as the most significant leap in terms of how we can think about running and managing organizations since the disco era.
Parker McCurley is the founder of Decent, a decentralized autonomous organization. This article is part of CoinDesk’s Future of Work Week series
By and large, however, the primary questions concerning DAOs in the larger conversation remain fundamental in nature. Chiefly, what exactly are the principles that define organizations and businesses, and can DAOs meet and redefine those standards in a healthier, more equitable way?
Open-source access to knowledge
In most business structures, information is kept secret, as though knowledge itself assigns a monetary right to ownership. In extreme cases, we have even witnessed manufacturers purposefully designing products so that owners are unable to repair or modify them out of fear that may lead to the increase of reverse-engineered designs. Thankfully, right-to-repair laws are starting to come to the U.S., but when even physical items have become inaccessible to inquiring minds, we’ve crossed a line when it comes to stifling competition and knowledge of how the world works. Locking innovative technologies in proprietary forms suppresses valuable information that could be used to improve systems and conditions for all.
This exclusionary behavior inhibits innovation by design, prioritizing proprietors’ need to generate value and prohibiting competitors from piercing their monopoly. Imagine if the entire human genome had to be rediscovered to perform genetic research. Think of all the ways that keeping information in silos can damage advancements in nearly every field of science, health care, business and entertainment. Unfettered access to information leads to innovation, and innovation enables emerging technologies to evolve in ways that serve to advance knowledge in naturalistic and representational ways. Empowering individuals is the catalyst for true societal progress.
Read more: The Coming InDAOstrial Revolution
Open-source methodologies break down the walled gardens built by privileged corporations and restore to all the freedom to innovate, paving the way for society to progress. However, a major roadblock to open-source approaches becoming more common is the lack of uniform standards of earning income from contributions.
Simply put – it’s hard to get paid to create something that will be given away for free.
The labor proposition
Being part of something greater than oneself offers a source of meaning and purpose.
The approach to open-source contribution in the tech sector has a long and storied history of people who have shared their specific knowledge or skill and expected nothing in return but the satisfaction of work and its potential impact. Contributing to open-source projects, however, is difficult for most people who are exhausted trying to make ends meet and pay bills by working their day jobs. As a result, creators and contributors for many open-source projects are well-intentioned volunteers who have limited time and attention to allocate.
The paradox here is clear: Altruistic projects often cannot be bankrolled by those who would be most helped by those innovations. Physical and emotional constraints, economic barriers, class antagonisms and scarcity of leisure time limit contribution and support from the individuals whom the projects are intended to benefit most.
The accumulation of wealth
In a proprietary organization, considerable work is extracted from the worker, which is not matched in compensation.
The pursuit of wealth is not inherently bad, and the idea that successful wealth creation must be unethical, selfish or greedy is false. Predatory profit motives are the problem – when a hierarchical system of revenue and earnings becomes more important than an equality of social prosperity, the system grows inhumane.
A common word heard in the world of open-source and cryptocurrency is meritocracy. A meritocracy ensures that work of value yields wealth of equal value. In other words, it’s a system that should reward members strictly based on their contribution toward the system’s goals. Sadly, in a proprietary system whereby economically or politically advantaged actors can opt in to increase wealth without contribution, meritocracy is impossible.
Once individuals are tricked into mistrusting open-source methods as a potential pathway to wealth, they face a sobering truth: In our society, it’s far easier to contribute to the proprietary system and be happy with the drip-feed of trickle-down economics than to attempt an alternative approach.
DAOs are the best model we have to create an open-source meritocratic framework for promoting unbiased knowledge, work and wealth. In practice, here is what DAOs can offer as solutions to the above conditions.
- DAOs revolve around a shared mission that inspires their members to value the significance of their work.
- In a DAO, all information required to understand the mission, goals and objectives is openly available to all.
- The strategy by which a DAO accomplishes its mission can be contributed to, and updated, via open forums in real time, allowing a DAO to redirect and iterate its own strategic path quickly and efficiently.
- DAOs can publish specific and granular tasks that contribute to their greater goals and mission. This work should be denominated in levels of granularity based on risk and required resources so that the DAO supports the spectrum from livable wages to an hour of one's time.
- By providing access for global contributors, the DAO provides more opportunities for scalable employment scenarios than a traditional company hiring full-time employees in its own region.
- Available work becomes an open meritocratic marketplace that’s remunerated based on contribution to the overall mission and goals of a DAO and serviceable by anyone.
- Through the tokenization of labor hours and expertise, members are compensated fairly, based on contributions, resulting in a meritocratic reward and governance system.
- Over time, assuming the mission of a DAO is truly valued by society, the desire to contribute or govern the DAO will increase and drive demand for consistent participation.
- As the DAO succeeds, so do all its members.
DAOs present a clear path to coordinating meaningful labor opportunities and ethical wealth creation in an open-source design, and will reshape the future of business.
Further Reading of CoinDesk’s Future of Work Week series:
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