DAO Brings a Revolution to Working Style
Transition from Centralized Organization to Decentralized Organization
Organization style had a transition process from centralized organizations based fully upon the specific characteristics of their leaders within hierarchical structures to today’s platform economy where we have moved into semi-distributed organizations where businesses operate platforms where the rules are executed by computer code automatically.
Platforms, like YouTube, WeChat or Uber, are a combination of both centralized digital platforms operated by private businesses and distribute user-generated systems build on the platform by hundreds of millions of users. In our current platform economy, organizations have transformed to a hybrid of distributed automated platform and centralized business organization managed by people over the past decade,
However, a new era in web technology is emerging with the rise of the blockchain in the midst of a stage where things are changing rapidly.
With the blockchain, we are able to create truly distributed organizations at a global scale, something we have never experienced.
What is DAO(Decentralized Autonomous Organization)?
DAO is short for “Decentralized Autonomous Organization” that does not have centralized parties and runs autonomously according to contracts and program codes.
Generally, “organization” requires managers who control an organization and members and labors belong to it. In the case of company, there are managers and workers, however, DAO requires only workers(users), but not managers.
DAO is capable to make decisions through members’ consensus, and implement and maintain them after the consensus, thus DAO can run as an organization without managers.
Therefore, Bitcoin which is running and maintaining a network by providing an incentive system as rewards for mining and Ethereum which is functioning as a platform without requiring intermediary for any contracts by applying automated transaction of contracts with smart contract technology can be called DAO. The both of them have a system that participants work autonomously according to protocol without managers.
Thus, while “human” who are managers of the organization managed everything in traditional organizations, “protocol” manages everything in the new style of organizations DAO.
Smart Contract is Necessary for DAO
Smart contract on Ethereum enables any contracts to be automatically executed and creating a “trustless” world in which any screening processes of credibility are no longer needs. Currently, the most DAO projects are operated using smart contract, thus, source codes recorded on blockchain is the law for the organization, that is “Code is Law”
Advantages of DAO
1. Decentralization of Decision-Making Authorities
Generally, the person who has “the highest decision-making right” is “a leader of the organization”. While members action changes according to the leader’s decision, each user who participates in the network has a decision-making authority in DAO.
2. Cost Reduction for Contract
Organizations can dramatically reduce operational costs, such as wages, paper work costs related to sign contracts, thus, everything become more efficient.
3. Recruit Talents from Global Market
Company/organizations can grow while working with exceptional people worldwide as long as their skills and vision meet company’s/organization’s ones.
4. All Participants Commit to One Goal
Projects has its own token, so an incentive, increase the value of project means rise of token value, is the driving force of participants’ action. This prevents the situation of inhibiting projects, and all participants has strong commitments towards projects.
1. Legal Status is Vague
When tokens based on DAO is issued, the legal status of the token is uncertain and which country is going to regulate that is not clear. DAO is abled to be created globally regardless of country, however, legal risks still remains.
2. Possibility of Not Able to Obtain Appropriate Consensus
There may be cases of not able to obtain appropriate consensus when only a small number of people are participating in the DAO network, a large number of participants are interested in only the rise of token value and not interested in consensus which expresses their opinion.
3. Problems Including Hacking and Transaction Delay
Once DAO is implemented and released, not easy to change codes, therefore, even if bug was detected, it may take some time to remove bug and transaction may be delayed. Moreover, DAO may face with risks of hacking such as The DAO incident.
A Specific Example of DAO Using Ethereum
Colony is the company established in 2014 in England and developed the open-source blockchain projects, Colony, the same name as the company name, which is leading the charge in current DAO market. Colony focuses primarily on a problem in organization that wrong people are rewarded because bosses don’t have full visibility and politics are at play.
How will Colony Work?
There are domains, tasks, and people within Colony. Domains are like departments, such as marketing, human resource and accounting and specialized people in each area work on tasks that fit their skills. This sounds like ordinally companies. Here is a difference; these specialized people don’t know each other at all within Colony and instead of being monitored and evaluated by bosses, their work will be calculated through systematic peer review of completed work and represented numerically on the blockchain.
When people contribute more to a project, they can earn more tokens and reputation. As your reputation grows, you will have more power to vote on projects. Unlike centralized organizations, this power is based purely on merit, reflects numerically by reputation points and tokens,
“Huobi”, one of top exchanges in the world, has also announced their plan that they will be DAO by shifting its business to “blockchain business”.
The program will start with one global leader who’s truly on board with the vision and values of a DAO. Huobi then plans to divide it into 10 milestones, so that anyone around the world can join in and compete for a prize pool. This incentivizes new teams to get involved constantly, at any point, for a chance to claim the reward. Huobi will fund the project initially by investing some 20 million Huobi Tokens (HT).
Some challenges remain in DAO, nevertheless, it has a great potential. DAO may become an organization system that meets future business society evolution once overcomes problems.
“Wrappy”, our developing app, aims to create SNS which has high quality “trustworthy information” by implementing “fair value” on blockchain and produce business opportunities worldwide by using smart contracts.