Are DAO’s gaining traction in the business world? The new corporate paradigm?

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Worklife | Mar 2, 2022

should i start a DAO - Are DAO's gaining traction in the business world? The new corporate paradigm?

“A DAO is an organization that can operate by itself, using code, without anyone in charge to make decisions,” said Travis Miller, a blockchain enthusiast who has worked on numerous cryptocurrency projects. “Imagine a corporation without a CEO.” As a result, hiring, pay raises and other essential functions to an operation can be performed automatically, without human intervention.”

Matveev believes that as companies move closer to adopting more transparent, flexible operational models, there may be a push away from traditional organizational structures in favor of the flat, democratized system that DAOs provide. “While DAOs are mainly seen within the crypto and blockchain industries, due to the emphasis on decentralization, many other spheres that want to prioritize community and transparency could definitely use the structure,” he added.

Early days: more maturity needed

But Grace Rachmany, an Israeli living in Slovenia who founded organizational consultancy DAO Leadership in 2019 — urged caution. She first became interested in alternative forms of governance a decade ago, during the Arab Spring — the series of anti-government protests and uprisings that occurred throughout the Middle East and North Africa in the early 2010s. “I realized that although it’s great to overthrow a dictatorship, there are no modern forms of democracy that are suitable,” Rachmany said.

See: VC-backed DAO Startups Racing to Define What DAOs Actually Are

DAOs have more maturing to do, though, she suggested:

“Conceptually, people hope that DAOs will create a collaborative or equal environment where people share responsibility. For instance, non-profits have been looking at making shared decisions through a DAO. The current technology for DAO is limited and based only on the division of funds, however, so it’s unclear that this format will benefit businesses in any way,” said Rachmany.

Considering how DAOs could shape the future of work, she believes that they will evolve particularly in the gig economy and in recruitment.

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Cointelegraph magazine | Andrew Singer | Feb 22, 2022

Year 1602 revisited: Are DAOs the new corporate paradigm?

In 1602, the Dutch East India Company was formed in what many consider the world’s first initial public offering — allowing perfect strangers to share in stock ownership. Four centuries later, the joint-stock model — especially its incarnation as the modern business “corporation” — sets the pace for much of the economic world.

See: VC-backed DAO Startups Racing to Define What DAOs Actually Are

But, decentralized autonomous organizations, or DAOs, could soon disrupt the joint-stock capitalized business model, much as the Dutch East India supplanted the limited partnerships of its day — or so some may say.

“DAOs are the new limited liability companies (LLCs),” says DAO investor Cooper Turley of these leaderless internet-native entities where key decisions are typically made by consensus. “In five years, companies won’t have equity anymore. They’ll have tokens and they’ll be represented as DAOs,” while high-profile investor Mark Cuban adds, “The future of corporations could be very different as DAOs take on legacy businesses.” Others see DAOs challenging venture capital firms in the race to fund Web3 projects.

According to law professor Aaron Wright: “DAOs are not run by boards or managers, but rather aim to be governed by democratic or highly participatory processes or algorithms.”

A better business model?

“There is a future for DAOs,” Erik Vermeulen, professor of business and financial law at Tilburg University, tells Magazine, given their transparency, security and open source governance protocols which mean that weaknesses are constantly probed and tested. Moreover, they discourage “rent-seeking,” i.e., manipulating public policy or the economy to increase profits. This is similar to when a company lobbies the government for subsidies. They aim to discourage natural and political monopolies because of their distributed nature, adds Vermeulen.

See: In the face of wreckage, DeFi’s self-policing shines

But, are they really superior to traditional organizational business models? Not all agree. “The current token system does not necessarily prevent monopolies because there are individuals that may own a large amount of the DAO tokens and thus may control voting results,” Sarah Hammer, managing director of The Wharton School’s Stevens Center for Innovation in Finance, tells Magazine

“The defining attribute that makes DAOs different from past organizations is the use of the blockchain as the root of trust,” Eric Lim, senior lecturer at the University of New South Wales, tells Magazine:

“such that the inputs and outputs from decisions that matter are immutable and auditable.” This represents an advance over traditional centralized organizations, which Lim has called “a zero-sum game.”

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