Coordination is humanity’s killer app. It's what's allowed us to dominate Planet Earth. Markets, corporations and nation states have allowed us to coordinate more effectively, on a larger scale, achieving the impossible.
Today we face incredibly challenging problems. Success depends on our ability to coordinate as a species to address the existential threats that stand in our way.
But instead of coordinating better, we stand divided. We are making some of the worst political decisions in history. Why? The Internet brought us the tools to share and discuss, but we are lacking the tools to align incentives. Thanks to cryptocurrencies, we can now encode incentive systems that are transparent and harder to capture (e.g. corruption) than traditional systems. We need to experiment with introducing cryptoeconomic systems into communities.
The real problem of humanity is the following: we have paleolithic emotions; medieval institutions; and god-like technology. And it is terrifically dangerous, and it is now approaching a point of crisis overall. — E. O. Wilson
Enter the Internet
The Internet has changed the way we organize. Blogs made it possible to share ideas across borders, instantly. Blogs then gave way to social media. Social media made it possible to discuss those ideas and influence the communities around them.
Social media is so powerful that it can start revolutions and influence elections. Yet it is hard to know how positive the impact of social media really is.
As we are seeing with issues like climate change, on social networks, people make a lot of noise with little tangible output. We can do better.
Blogs and social media already gave us the ability to share and discuss. Now we need to transcend the virtual realm and coordinate to bring those ideas to society.
Discussions should lead to decisions, and decisions should lead to decisive action that solve problems. We need to come together as a species to create solutions, not more problems — we already have enough of the latter. How do we do that?
DAO stands for Decentralized Autonomous Organization. DAOs allow groups of people distributed across the globe to manage resources and make decisions with minimal trust in each other.
DAOs are entities whose bylaws are encoded in a blockchain. The blockchain makes sure that the rules set forth by the DAO are enforced, so that all participants have assurance about the rules of the game.
Just as Bitcoin commoditizes storage and transfer of value, DAOs commoditize human coordination.
Today, every market interaction is regulated by incorporated entities: companies, nation states, cooperatives, etc. Each has a very clear set of rules on how to operate and participate in society.
Yet a lot of our interactions are mediated by unincorporated entities. A Facebook group or a Telegram channel is an entity, just an unincorporated one. That allows them to have unparalleled flexibility — they are global, borderless and have lower barriers to entry.
DAOs are a hybrid of the incorporated and unincorporated entity models — they are unincorporated in nature, but can manage funds and participate in the market in the way incorporated entities can. Therefore they can produce goods. Some examples are PieDAO, which produces financial products, or BrightID, which produces a social identity network.
DAOs are agreements written in computer code and interpreted by a blockchain. Since they are code, they are fully programmable! Due to the modular interoperability of smart contracts you can integrate new apps and features for your DAO in a similar way to how you might add apps to your phone. This means that you can compose new coordination mechanisms like they were LEGOs. DAOs enable a Cambrian explosion of human coordination!
Blogs and social media allowed society to iterate on culture faster than ever. Now DAOs allow society to iterate on coordination models faster than ever.
Now and forevermore
DAOs are still very early — there are just a few thousand of them with less than $12m of assets in total.
Their user experience is still not the best, and they lack clear product-market fit. But interest in them and the number of talented people working on them are both growing steadily.
The Internet enabled many things, but it was missing a few essential pieces, which led to the rise of Facebook and surveillance capitalism. The missing building blocks of Internet 1.0 are finally here: trustless execution environments (blockchains), digital money, and decentralized coordination mechanisms (DAOs).
Building on this momentum, and seeing how the current COVID-19 outbreak is showcasing the failure of traditional top-down institutions, we need to come up with better coordination mechanisms.
Because of that, 2020 could still be the year of the DAO.