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Rise of the DAOs

From the dawn of humanity, Homo sapiens have formed alliances. Starting with the first groups of nomadic hunter‐gatherers to ancient agricultural civilizations, it is evident that we need each other to survive and thrive.

From family units to communities, early humans had their individual roles to play to make a society work and the more diversified they were, the faster their society progressed. There were checks and balances in place to ensure that we did not have too many people doing the same job as resources were already scarce, not to mention it took years to be a proficient hunter with primitive tools, and probably longer for gatherers to identify all the species of edible flora that would not kill them.

As we grew larger in numbers through agriculture, leadership was needed. But instead of dividing the task of leading, in the heat of constant wars in an age where might is right, kings were crowned and dynasties ruled with the power kept solely in their bloodlines.

When citizens realized a new form of governance was needed, the idea of nation states was born. Led by leaders elected through a democratic process of voting, balance would finally be restored. This provided levels of governance under people who were chosen by us. Now, we could all decide on our own future by electing our own leader who would act in the best interest of the country and majority, or so we thought…

After two world wars and countless conflicts, genocides, and human rights atrocities, it is clear that whatever system of governance we have trusted is not enough. According to the 2016 Edelman Trust Barometer, half the world population distrusts the government. It is not hard to see why.

The elected officials in power who were sworn to protect us act in the best interest of big business and themselves. As evident from reports on Wikileaks, and exposés on the likes of the Panama and Pandora Papers, those with influence hide their wealth in the offshore accounts of shell companies. According to the BBC, The Pandora Papers leak alone includes 6.4 million documents, almost three million images, more than one million emails, and almost half‐a‐million spreadsheets pertaining to 330 politicians from 90 countries who use secret offshore companies to hide their wealth.

The power structure has, until today, been a pyramid with a few sitting on top. We are no longer in an age where might is right. It is not the nations with the biggest guns that will rule the world, it is the nations with the biggest GDPs that will inherit significant veto power and sit at the head of the table of international negotiations. Cash, with its explicable ability to bend the will of nations today, is king.

Likewise, many of us have the same thing in mind. Make enough money so we can retire and enjoy life at whatever age we target. It used to be by age 40, if you're ambitious. Today, some of Gen Z are doing it before hitting 20.

Cash is driving us to act as individuals instead of as a community. We all want what's best for ourselves and are willing to get it at the expense of others, whether knowingly or not. It is the circle of pain that consumerism and capitalism have trapped us in and if we don't find a way out, our children will suffer the same fate.

There are eight billion of us in the world today. Humans just keep growing in numbers despite the scarcity of resources and global warming; however, according to scientists working for the United Nations, we have nearly peaked in our numbers.

Due to the competitive, high‐consuming nature of our lives, the global population is predicted to grow to 8.5 billion by 2030. After that, it will slightly increase to 8.97 billion by 2300. This is a far cry from the boom of billions of new souls we saw in the last two centuries, brought about by breakthroughs in medical science that made certain diseases and health risks, like the act of giving birth, a thing of the past.

Source: Ourworldindata / https://ourworldindata.org/world-population-growth / last accessed December 08, 2022 / CC BY 4.0.

The flattening of the curve in our population growth is more than just a telling sign that there is something wrong with the world today. Maybe that is why sustainability has been the buzzword for the past decade. As it is, we are looking at extended periods of drought that will disrupt food supplies. What more when it comes to fuel and other mineral shortages? What about the world's depleting freshwater supply?

Often, the most vulnerable in our societies will suffer the consequences of our actions and it is ironic that democracy and the vote were supposed to ensure that no one gets left behind.

The answers to our most concerning questions are not being addressed or taken seriously enough by leaders, and anyone who challenges the status quo gets reprimanded, jailed, or even executed, by the state.

It seems that no matter how many seas we sail across, how many new lands we discover, or how many flags we raise, we will always have a problem with leadership.

King for a Day

We feel safe when we believe we have a capable leader who can defend us from threats, whether from invading forces or waning job markets and a weak economy.

When might was right, leaders were also commanders of great armies who had proven themselves on the battlegrounds. A nation felt safe in the hands of ex‐military men such as Winston Churchill, Napoleon Bonaparte, or Mustafa Kemal Atatürk. But in times of peace, people return to voting for the candidate who can promise a brighter future or, at least, stability.

Winning an election is essentially a game of numbers but if we look past the divisive politics used to gain votes, most people just want stability. Hence, we want to see the results before making decisions, so based on past records the most credible person is often chosen.

The Guardian interviewed six Donald Trump voters during his first campaign for presidency of the United States and among the reasons given for voting for Trump was because they wanted “more conservative laws,” and believed he could make deals that will make America prosperous again and renew the American Dream.

As an outsider, he wasn't a politician. He was a blank canvas and as a reality TV star, he could be many things to different people – he could stoke racial and religious tensions with Islamophobia and anti‐immigrant fascism with his Mexican border wall idea, while selling the notion of voters as the ones to Make America Great Again.

The act of deciding on a course of action is a double‐edged sword. Make the right decision, get praised, and reap the rewards for the outcome, likewise, make the wrong decision and bear the blame. Despite his loud antics in his debate with Joe Biden, Trump's true persona was revealed that night to a very much different America – an America that had been torn by conflicts it could no longer hide.

Trump's refusal to criticize Proud Boys, a radical right‐wing militant group amid the on‐going Black Lives Matters, and his denial of the inadequacy of his administration's response to COVID‐19, did not sit well with Americans. Whatever faces Trump wore while charismatically speaking to voters at rallies, melded into one and revealed a person who was only looking out for himself.

If you need an even more harrowing example of how a leader can mislead a nation, Adolf Hitler himself once said, “I use emotion for the many and reserve reason for the few.”

This has happened across the globe throughout history – we've elected what we perceived as strong leaders, who some even revere as godlike, only to find out they are fallible humans just like the rest of us.

How can we trust anyone, when we can't even trust ourselves?

The best that we can hope for is that we choose leaders who know what they are doing. So we elect leaders who surround themselves with subject matter experts who aren't always acting in our best interest and are limited by bureaucracy. They, in turn, surround themselves with other sub‐experts and the cycle goes on. Before you know it, another traditionally structured organization is born. Whoopee.

This brings us back to square one: small, elite groups of people who decide the fate of the world.

Can we continue to trust these people to steer us in the right direction?

Does Your Vote Really Count?

Voting on a mass scale has never been an easy task to execute. Nations spend millions of dollars running general elections every four or five years to choose a leader or ruling party from the same pool of candidates. And nothing ever changes.

The idea of voting is great. In practice, however, it doesn't work so well.

Voting gave us the right to elect our own leaders but through vote tampering, gerrymandering, party hopping, control of media and propaganda, and outright bribery, less than desirable leaders stay in power for extended periods of time – even amending laws to prolong their dictatorships. If this is the best democracy can do, it needs to be fixed.

In fact, the world seems more divided now more than ever. And despite all the technology we have to stay connected, we just can't seem to understand each other due to the use of social media to disseminate propaganda and fake news to stoke tensions.

Millions or even billions of voices – many uninformed – spoil the outcome. The human traits of selfishness and competitiveness will always get the better of us and cloud our judgment. Remember what Hitler said about using emotions to control the masses?

In addition, use of the ballot box was largely limited to politics due to the manpower needed to execute the count, and the transparency and credibility required by all voters to accept the outcome as legitimate. As such, large‐scale voting is usually limited to elections of politicians to lead a nation. Only a few of us around the world have the right to vote for our local council persons, and fewer still when it comes to other local governance officials.

Imagine what we could achieve if we changed the system, most people are already thinking of this – how to evolve past the system of ballot voting that we're stuck in.

If we could just gain trust again, and turn voting into a natural act, we could technically vote on anything and everything.

Imagine a world where experts could converge and vote on the best course of action with total transparency, and seamlessly. Imagine what if the right groups of people came together, found the best solutions, and voted for the right answers to the world's problems.

Now, imagine that these groups of people were not from the same country and weren't bound by any agendas apart from their own desire to see a better future.

Sounds like something out of a science fiction movie, but the foundations of this new system are being laid out now as we speak.

What a Wonderful, Trustless World

Can we have a nation without a leader? How about a company with no CEO or a school with no principal or headmaster?

The most successful groups of people in this world are probably musicians. They come together with a common goal – to create music, and don't overlap each other in abilities – how many times have you seen a band with four drummers?

Maybe that was the world that Louis Armstrong meant when he sang “What a Wonderful World.” A trustless world. A place where everyone has something specific to do, and they do it right. A place where we wouldn't need to question the outcome, where we could just trust the system.

If we could get everyone to do their part and remove the issue of trust, humanity would leap forward.

Decentralized Autonomous Organizations, or DAOs, are the next evolution in internet communities. Drawing back to the days of early tribalism, DAOs are groups of people driven by common goals. These new‐age tribes are essentially decentralized in power. There is no leader, each member is a leader.

But what about the problem of having too many voices?

By staking something or bringing more value, a member of a DAO receives more tokens, which will give them more power to vote, participate, and steer the direction of the group. What value they bring to the group could be in the form of experience or qualification – or how much they stake financially. In theory, there could be various levels of power in a DAO according to how many tokens a person has but each level of authority will be verified through what the person brings to the table. Likewise, there could be no limit to how many top‐level decision makers there are, hence solving the problem of a few individuals deciding the outcome of many.

What we have right now with our current internet (Web 2.0) is a platform where people converge with moderators and admins – be it an actual person looking through what everyone is saying or a Facebook bot picking up violations to community guidelines. Much like the real world, there is no failsafe if people pull out of agreements or deals go bad or even if vote tampering happens.

But we are entering into a Web 3.0 world shaped by blockchain.

Blockchain technology changed the way accountability could be handled with full transparency. Although it started with the original cryptocurrency, Bitcoin, the technology has grown from just a way to verify transactions using anonymous servers that then added the records to a digital ledger. If Bitcoin decentralized money with blockchain, then Ethereum decentralized the world with a blockchain that was adaptable through programming smart contracts.

Smart contracts are programs stored on a blockchain that perform functions when predetermined conditions are met. As we are still in the early years of blockchain, smart contracts are typically used to execute an agreement autonomously, instantaneously, and without any third parties except for the blockchain verifying the outcome.

In a DAO, everything is automated and run by smart contracts. Think of it as the agreements made by the original founders of the DAO. These agreements are dictated by the desired outcome of the DAO.

Communication between DAO members may or may not be necessary, depending on the objective of the DAO. But in theory, a DAO is run by humans who use computers to verify their governance of the group. From proposing to voting, the function of a DAO is controlled by servers that validate data and keep things transparent.

Unlimited by distance, the doctors of the world could form a DAO, and so could lawyers, architects, engineers, or even musicians across the globe. And they could come together to find a vaccine, create new laws, build cities that address global warming better, or invent new genres of music (and create an automated way to market it as a non‐fungible token, or NFT). Voting in these tribes will be fully automated, run with smart contracts powered by blockchain technology, eliminating the issue of trust.

It is most likely that you will be a member of a DAO sometime in the near future. Even if it is for a purpose as mundane as deciding what music gets played more on the radio – which might be a free‐stake DAO that is just run by how often you stream and share music and your agreement to sharing your data.

Why the First DAO Had to Fall

The first DAO, simply known as The DAO, started as a way for investors to autonomously invest ETH. It got hacked and a total of 30% of users' funds (US$60 million) were lost.

The idea for The DAO was first born in 2015 by a team of developers called Slock.it to raise funds for various Web 3.0 projects and startups. They built a smart contract  for crowdfunding and programmed voting rights and ownership. The DAO was launched less than a year later in May 2016 to much hype. People were excited that the future of organizations could actually be decentralized. It was, in all sincerity, the first truly decentralized, autonomous, and community‐run fund in history.

As expected, everyone rushed to join The DAO and staked their ETH. The DAO raised an unimaginable amount for a new conception and something so abstract at the time. US$150 million (based on the value of Ethereum in June 2016) was collected from members of The DAO and placed in the group's fund.

The DAO did not last long. It's quick success and decline is perhaps a reminder not to take new technology for granted, or to avoid FOMO, fear of missing out.

Similar to investing in a company, investors placed money into The DAO with the hope that their shares, or tokens in this case, would appreciate in value.

Instead of the executive decisions that majority shareholders in a traditional company get, in a DAO, you have control over the organization's collected assets based on how many governance tokens you hold.

In addition, if you own any reputable amount of tokens, then you can draft any type of proposal to which the rest of the DAO's community will vote on. Examples of proposals in The DAO's case could be to invest a portion of the group's funds into emerging blockchain startups or flipping NFTs for profit.

Being the first isn't always a good thing. And for The DAO, ambition clearly clouded the group as the rise in value of The DAO's market capitalization and other hyped‐up news about its bright future blinded the community from messages on various chat boards written by programmers who warned of code vulnerabilities in The DAO's smart contracts.

Not long after The DAO's formation, hackers exploited the vulnerabilities and siphoned more than half of The DAO's funds before a portion, but not everything, was returned. The lesson was clear. Cash got the better of The DAO. However, The DAO paved the way for other DAOs that were not investment vehicles – DAOs that could be agents of change.

And from the early crash and burn of The DAO, coders learned to program a safer environment where things could be decentralized once again.

New‐Age Tribes

So how are we using DAOs today and what will the DAOs of the future look like?

Investment vehicle‐DAOs, like the original The DAO, are still the majority but that is because blockchain was conceived for the financial realm. It was only natural that a new coin would be created and run by a DAO. The stablecoin DAI, launched by MakerDAO, has a market capitalization of US$7 billion today and is backed by real‐world assets. More DAOs have followed suit, like BitDAO which invested in decentralized finance (DeFi) projects and BeetsDAO that flips NFTs, taking the concept that cryptocurrency can be crowdfunded and investments decided by the holders themselves, a step further.

However, and thankfully, that's not all that DAOs are doing today. It's not all about the money!

The ship unanimously steered by a tribe of people making decisions with the aid of an autonomous voting mechanism has sailed into uncharted territories of our lives. Today's DAOs are creating new social media ecospheres, attempting to buy the US Constitution, city planning in the metaverse, automating legal services for accessibility, decentralizing blogging, designing and marketing for Web 3.0, and advising the whole blockchain industry on governance, among other game‐changing ventures. Let's look at some of them…

FriendsWithBenefitsDAO, or simply known as FWB, wants to see how Web 3.0 can make social media more rewarding and exclusive. Although anyone can be a member by buying tokens, what FWB is essentially doing is crowdfunding its social activities that happen in the real world – namely, New York, London, and Los Angeles, where sub‐DAOs of FWB are based.

ConstitutionDAO tried to win the bid for a highly rare copy of the US Constitution auctioned by Sotheby's to preserve history and, in a rebellious decentralization fashion, stick it to the man.

A DAO created to run a game, Decentraland DAO presides over the virtual land in one of the most popular metaverse games: Decentraland. Players can buy and sell virtual real estate, create digital art, and play casino games, while interacting with other users. Like many virtual currencies and assets these days, the money and land in this game can fetch a pretty penny in the real world. As such, the DAO acts as both a homeowners, association and a city planning committee. Voting power is based on how much virtual property a player owns and decisions are driven toward the common goal of creating an incentivized global network of users to operate a shared virtual world.

There is a group of attorneys called LexDAO who want to make legal services more affordable, or even free. Working with programmers, they are developing blockchain projects to replace some basic and often expensive legal services.

Likewise, a group of writers are trying to use blockchain to revolutionize publishing on a platform called Mirror, which is also a DAO. Users on Mirror vote for writers in its weekly Write Race. The winners receive Write tokens, which they can exchange for publishing Mirror‐hosted blogs that can be turned into NFTs. Emily Segal crowdfunded her next novel, Burn Alpha, using Mirror.

RaidGuild is a DAO consisting of freelance Web 3.0 builders and designers who are on a mission to fund the development of more open‐source Web 3.0 tools. They do so by outsourcing their talent as a marketing and design agency for clients looking to enter the Web 3.0 world.

You can think of Uniswap DAO as the decentralized advisory committee of everything DeFi, with an aim to improve DeFi governance. Heated debates among members include a proposal to use US$40 million in the project's treasury to fund “political defense” for the broader DeFi sector.

But these are just examples of what we have today, and that is just the tip of the iceberg if we're talking about what could happen tomorrow…

The Monetary Authorities or Ministries of Finance of the world could be DAOs with various large financial institutions like JP Morgan, DBS, Standard Chartered, HSBC, and Citibank and more voting on new banking regulations along with large law firms like Clifford Chance and others added as members.

Government agencies giving grants could be DAOs with decisions on grant allocations being made by its members. A church could run a DAO on how offering funds are used with Deacons and senior church officials as members voting. A labor union could be a DAO with Union Members representing votes for the bigger Union Group itself. A charity could be a DAO with donors represented as members voting on how funds are used.

You could be in a neighborhood DAO voting on where a train stop should be built, which construction company should get the job, and whether to include street art on the walls.

Wouldn't you like to have a say in our future once again?