Decentralized Autonomous Organizations: The Online Community Trust
From the first known man Adam there has always been an innate desire within human beings for human connection. The desire for connection between human beings can be the catalyst to what manifests into a community, a village, a tribe, a city, a nation. The connection can usually be language, values, beliefs, culture, religion, or traditions. There is usually an essential common thread that brings people together in harmony to create what can eventually become great nations like the Roman Empire, the Qing Dynasty, the Malian Empire whether it be the desire to concentrate power for the need for resources, the governing of law to create civilization, or the facilitation of spreading one’s beliefs.
There is something that brings people together outside of one’s family. But each nation, city, tribe, community starts with family. The family is the nucleus of any great nation. The core of a great nation starts with trust between 2 or more families. Trust that the families can work together, build together, and fight against any threats to their way of life. Before there were urban cities with dense populations with bustling commerce and markets it must start with 2 or more families settling in a specific geographic area. These families were within a close enough proximity to each other and might even be surrounded by some barrier that prevents others from coming into that space either with an invitation or through force. In order for an outsider to breach that boundary the outsider must show allegiance to those already existing within that community. The new community member is now allowed to coexist within the already existing boundary or barrier and eventually the “gates” expand until the once small village becomes a thriving city and possibly then a thriving nation.
At the core of this expansion from a small community to something larger is the need for trust amongst those living within the bounds of the community. They have to agree to certain rules, appoint leaders, delegate roles for each member of the community before the community can thrive and grow. That basis of trust can sometimes be along the lines of rule of law, tribe values, or religion. Those that do not adhere to the rules are punished or expelled from the community.
The advent of blockchain technology and the power of Web3 has provided a new type of community. A community that allows us to create self-governing organizations with members and entities from all over the world to align on a set of rules, goals, and missions. A previous iteration of this Decentralized Autonomous Organization(DAO) is any community that exists based on a set of governing rules such as a government, a company, community organizations, essentially anything that comprises a group of people that are looking to create a set of rules that they believe are valuable to their way of life. In the analog world where we have governments, companies, and community leaders we rely on the fact that those in leadership are there because they are the best people for the job. We rely on our government to do what is best for the citizens of that government. We rely on leaders at companies to do what is best for their customers and what is best for the company’s employees. We rely on leaders of community organizations to do what is best for the members of that community or organization. But as human nature is self-preserving there will always be the “Principal-agent dilemma”. The Principal-agent dilemma is an economic theory that describes the problem that sometime the people elected or appointed to represent a group will not do not what is in the best interest of those they are meant to represent or serve but will first serve their own interest and find opportunities to enrich themselves at the expense of the people they are supposed to represent. In human history, there has always been this moral hazard which has led to the demise of these self-serving leaders by a revolt of the people they were meant to serve or the demise of a nation due to the corrupt few.
The basis of blockchain technology is the innate transparency that comes from the ability to have many “people” mining the blockchain and ensuring a distributed ledger that allows the system to keep a record of every transaction that happens using that specific blockchain. The blockchain miners are all incentivized to ensure that there are no transactions that are changed after or before without mathematical verification of the transaction. The power of DAOs come from a building block of blockchain technology called “smart contracts”. The smart contract can be thought of as a governing rule or set of rules that steer the actions and transactions within a DAO. The smart contract can be a set of rules that state “for x to happen y must happen first” or “for this value exchange to happen y needs to be verified by z” and until the contracts are executed as outlined the proceeds of a the intended transaction will not be distributed. The idea of a smart contract is similar to the production line for goods developed and sold by a company, the constitution of a nation, agreements between two parties, or agreements between multiple countries. These rules can be aligned based on set rules, goals, or a mission that aligns with a group of people or organizations desires, wants, and needs. It allows for true democracy for the members of the DAO.
Since 2019 United Nations has used blockchain technology to provide aid throughout the world. Their blockchain program assisted Syrian refugees by ensuring that they get the necessary provisions they need despite being in a conflict zone. The UN has also assisted cashmere farmers utilized the transparency of blockchain technology to ensure that the farmers are not exploited due to their lack of knowledge and access to the cashmere market and ensure they get a larger share of the value chain.
There are various use cases where DAOs and blockchain technology can be applied such supply-chains, world aid, and the governing of nation-states. In the supply chain, it can be used to provide transparency in the movement of goods, receipt of transactions for marketplace actors and stakeholders, credit provisioning as well as the necessary mechanisms for organization management costs. In the application of a DAO for aid donors can easily monitor where their funds are distributed and even how the goods purchased are distributed to refugees in conflict zones. In nation-states citizens can better monitor how their leaders are voting in their interest or against their interest while also creating mechanisms that ensure bad actors are absolved of their power and access to the nations resources.
