🗺️ Trends #0054 — Decentralized Autonomous Organizations (DAOs)

Why It Matters

Networks, marketplaces and nations will become less corrupt, more equitable and more transparent.

Problem

Network effects lead to natural monopolies. Centralization breeds censorship, corruption and rent-seeking behavior.

Solution

Decentralized Autonomous Organizations (DAOs) are groups with no central management. Individuals coordinate around a shared set of rules to achieve a common goal.

Well-known DAOs include Bitcoin and Ethereum. These are transparent, unstoppable, user-owned networks.

Players

DAOs

Bitcoin - Stores value
Ethereum - Powers ether and decentralized applications
Decentraland - Governs a virtual world
BrightID - Social identity network
MakerDAO - Backs Dai (a stablecoin)
Aave - Lending and borrowing
MintFund - Supports NFT artists
PieDAO - Decentralized asset management

Tools

Aragon - Create and manage DAOs
Roll - Create and manage social tokens
Rally - Create and manage creator coins

Predictions

User-owned networks will become the norm. Facebook's public shares have 1/10th the voting power of private shares. DAO ownership will apply to equity and governance.
Politicians will gut the old system from the inside out. They are stakeholders in the new system and incentivized by lobbyists. The mayor of Miami is a canary in the gold mine. Followed by members of congress. And Biden's second-largest donor. We're witnessing a bloodless war. Politicians are handing over power.
Negative externalities will go unchecked. Governments can enforce carbon credits on factories. How do you stop a decentralized network from mining Bitcoin?

Opportunities

Be a network principal and participant. If you use Uniswap, own governance tokens.
Launch a XaaS around DAOs. Seed Club offers social-tokens-as-a-service. Cooper Turley is a social token manager. Guide others through the frontier.
Work for a DAO. Lewis Freiberg earns his highest salary ever ($180,000) as a community manager for ESD.

Key Lessons

Less lock-in shifts power from principals to participants.
Currencies, social networks and nations will have lower switching costs.
Transparency counters corruption. Smart contracts take us from "Don't Be Evil" to "Can't Be Evil."
DAOs are censorship-resistant. No one will be able to unilaterally ban buying GameStop shares, downloading TikTok or trading with other nations.

Haters

"Didn't The DAO get hacked?"\
Yes. And we're better for it. See antifragility.

"Decentralization slows things down."\
Some DAOs seek progressive decentralization. Representative models may help.

"These don't sound very autonomous."\
Autonomous is a misnomer. A better term may be DCOs (Decentralized Continuous Organizations) or DUOs (Decentralized Unstoppable Organizations).

"Whales will run DAOs."\
They run existing networks. Covertly with high switching costs. DAOs check power with transparency and forkability.

"What about the Oracle Problem?"\
Be more specific. Time is an oracle. Decentralized networks are oracles. *What are you solving for? *Most DAOs are not fully autonomous which removes the need for end-to-end oracles.

"What about private blockchains?"\
They're called computer databases. Centralized and censorable. They've been around since the 60s.