In which way #DAOs and #blockchain can help the organization of modern corporations?
We made a business case to understand the potential of a #DAO in a family-run business.
A thread 🧵
1. 2021 for #DAOs was an extraordinary year, in less than 360 days the #TVL grew up by 13X!
Data provided by @DeepDAO_io
2. #DAOs are one-of-a-kind native online organizations that empower their decisions making privileges.
Members get together to form the organization, establish goals, and set up rules for supporting the #DAO’s mission.
3. While you heard about the meaning of #decentralized, what is exactly #autonomous in the organization?
The Autonomy refers to the rules that govern the operations of a #DAO, programmed and written in source code.
All executed with no interference of any human actor.
4. Consider traditional corporate organizations:
Each firm is characterized by a set of hierarchical rules that must follow the laws of the nation in which they operate.
Basically the core principles every employer will have to abide by, for the company to fulfill its mission.
5. #DAOs are not that different, but with the inclusion of technology.
#DAO rules are written through the use of a #smartcontract enabled set of rules.
The same one is created and changed based on proposals and community votes.
This is the definition of a Digital Contract.
6. One of the key advantages of a #DAO is more openness compared to traditional corporations.
The transparency level is high since anybody can examine all activity and financing.
The whole balance sheet of the DAO is accessible and documented through a public #blockchain.
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7. This new type of business structure combines Digital and legal contracts.
Doing so helps the exchange of assets and smoothens social and commercial interactions.
How does it work?
8. One of the most important features of a #DAO operation is the development of rules through community vote using #smartcontracts.
You might ask, how do I become a DAO member, and what do I need to exercise my voting right?
This is where the need for a DAO #token would begin.
9. Members must get the #DAO’s native #token, which is linked with the project and mission of the DAO.
(There are cases of #DAOs where a token is not needed, as of now we will not take into consideration the token-based membership vs share-based membership )
10. All the #token holders get voting rights in the community according to the share of their holdings.
The tokens allow ownership in the equity of the #DAO alongside shaping up its future growth.
Being a #token holder in a #DAO is exciting because you are not bound by any kind of legal contract and instead are rewarded to act in ways that help the DAO achieve its core mission.
For clarity let’s examine the @compoundfinance proposal mechanism:
Each #DAO can have a different mechanism and set of rules, based on the initial settings of the #smartcontract.
It might be the case that a proposal passes after compelling with certain implications.
Let’s keep using #Compound as our reference to check one of their proposals:
The beauty of this system is the clarity with which it operates.
You can see past proposals and votes navigating through the governance dashboard.
As you understand, the number of tokens a user hold plays a key role in the weight of each casted vote.
The proposals can be about modifying the rules, funds distribution, hiring or firing of certain individuals etc..
This is similar to having voting shares in a company but with more freedom to transfer your permissionless tokens.
While this raises some concerns about the #decentralization of a #DAO, its stability relies on passing governance proposals only with the approval of the majority of stakeholders or a council of high experts in the field.
It is also clear that the above class of shareholders are the ones that most believe in the DAO’s mission, and so they must play an important role within the #DAO itself.
Imagine the flood of new proposals if every stakeholder has the same power on the governance propositions..
Time is the best of all assets, and so it is something that should not be wasted.
During my experience in a corporate job, I always felt like organizations waste a ton of time on decisions.
Imagine having a #DAO incorporated in your business what could be the potential?
Of course, you should not switch your business model to a #DAO, not yet.
The purpose of our research is around the benefits of having one in your business model.
#DAOs can have infinite use cases, from taking governance decisions on #DeFi protocols to offering media services, venture funds, social media platforms, freelancer networks, and so on...
Every single one of these with a core mission well defined.
Below I used a screenshot from an article of @Coopahtroopa to give you a breeze of the current #DAO landscape.
Let’s play a game and assume we are willing to create a #DAO to fund our old family-run business Fashion Suites LLC.
Our goal is to accumulate liquidity through a native token ($FS Token) and fund a strategy that will help our brand go viral.
Ultimately we just want to produce the best male fashion suites in existence, what could be one way to put the beauty of a #DAO to work?
Our ideal Fashion Suites LLC DAO would look something like this:
Oversimplifying a #DAO structure we can now proceed and pitch our project.
By using our $FS token we will be able through the power of an organized community to fund particular projects such as:⬇️
1. Hire / Fire designers to put our project to work.
2. Increase spending budget on the marketing side and promote our brand.
3. Re-distribute profits coming from the selling / renting of our suites to the token holders.
I can go on and on with how many physical businesses can be digitalized with the power of a #DAO (think of real estate for example).
You might wonder, why not crowdfund the whole process?
While a #DAO is partially an injection of liquidity, in this case, we are bringing in the board people that will convey on a common mission (creators, fashion experts), for the DAO success DAO.
Remember organizing is power, understanding organization is a part of the solution.
Traditional organizations have centralized forms of authority, which is one of their primary flaws.
When it comes to hierarchy, bureaucracy, authority, power, corruption, and persistent flaws in organizational theory, our legacy corporate world has severe concerns.
The centralization of authority such as management and managerial work is meant to make the whole operations flawless.
But instead, they produce unintended consequences such as information asymmetries, tensions, and conflicts between the managers and the managed.
#DAOs have a #decentralized collective power structure built on community, which gives all members of the organization a stronger voice.
As expressed above, #blockchain technology enables an efficient method of decision-making.
Although #DAOs are not perfect and as per any highly and new technological invention it comes with flaws:
1. Decision-making that involves the participation of the majority of members can end up being very slow and inefficient.
2. The uncertain legal environment surrounding #DAOs, how are these getting regulated now? and in the future?
#DAOs are flexible and can be adapted in plenty of use cases for numerous contexts.
This new type of socio dynamics mechanism is up to re-shape the way we organize and create collaboration the magnitude of top tier companies.
Sky is the limit.
For the full medium article please read our link in BIO.
This is not, in any case, financial advice, the goal of my research will always be to dive deep into projects and study them from different angles.
I do include personal opinions based on my experience with similar projects that I have recently studied.