🏦 Go Fund us buy <​insert the asset’s name>

An illustration of a Ethereum coin, Photo by Moose Photos from Pexels

Crowd- Funding meets Co-operatives ; Can DAOs become a movement for a greater social good?

If you need to buy some assets but does not have the financial strength one thing you can do is inviting some of your friends (or other “known” people) to pool in some money and make the purchase / investment. And the ownership of the asset would be shared appropriately.

But is it possible that hundreds, if not thousands of strangers on the Internet can come together as a Co-operative and Crowd-fund their way to, bid at a Sotheby’s auction or even buy a Fast-food Franchise? It seems possible, with the help of blockchain, cryptocurrencies and social media.

First of all, what is a D.A.O ?

DAO stands for Decentralized Autonomous Organization(s) and to understand it’s characteristics we don’t need to look everywhere but the individual words of the name.

Decentralized since there is no central authority in this organization, but hundreds if not thousands of members that share voting rights. And also it is based on Blockchain technology and infrastructure such as smart contracts which is a decentralized network itself.

Autonomous as the organization does not depend on a C-suit level to take there decisions, but self-governed through a more direct-democracy like voting system. Any member that holds a token is entitled to a vote and they can use their vote on suggestions, and changes that the DAO should make. Compared to a traditional shareholder voting system, due to the dependency on smart contracts, the relevant changes will occur automatically as soon as the voting is finished.

Organization this is where the concept of common purpose comes in. Similar to a common or a co-operative in the traditional markets (or real world) the members of the DAOs gather together for a shared vision / purpose. However due to the scale and the advantages of blockchain as a medium, the members of the organization will not be be limited to a particular region or country.

The ideal of a decentralized autonomous organization is easy to describe: it is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do. — Vitalik Buterin, Co-founder of Ethereum 2014

Overall DAOs can be identified as an extension of what is called as a Cyber-Physical system, a combination of humans and machines that interact together to conduct processes eg: — Smart Grinds in Energy sector and use the feedback to adjust the system. In this context a DAO is a community with a shared purpose, using a cyber-physical system, to achieve such goals in a more digital manner.

An example would help to explain this concept better. Let’s take the initiative of friesDAO, which aims to own fast food franchises, and govern them through the “wisdom of the crowd” as per the website states. The DAO has collected around US$5.4 mn which they would now utilize to buy fast-food franchises around the world. If we breakdown the aspects of this cyber-physical system, it would be as follows :

  1. Cyber — Smart Contract (the code with the organization’s rules), Tokens (the block-chain based contribution to the fund)
  2. Physical — Fast-food restaurants (the will be bought by the Fund), Management (the industry-experts that will be hired to run these franchises) last but not least Food! ( the most important “fungible token”)

Depending on the policies this cyber — physical connection will get stronger. One instance is the recently passed bill in Wyoming that will allow the DAOs to be registered as Limited Liability Companies (LLCs) in the state. This recognition as a legal entity would be a key instrument in providing a tool to interact between Physical and Cyber worlds. And slowly DAOs are recognizing the opportunity and the potential as seen by the entrance of groups such as CityDAO, which has an idea of building an asset with a governance through blockchain and bought 40 Acres of Land for this purpose through their rights as a LLC.

Though their intention seems more utopian at the moment, it is possible that other groups would be motivated to use such legal rights for socially “better” reasons. It is important to note on the fact that what is socially valuable will depend on the place and context.

(Mostly Good) Paths Ahead and pitfalls to look out for

DAOs can be a tool to expand the Co-operatives beyond geographical boundaries, while maintaining the mission and the values of the organization. This not only includes the economic or the commercial values, that are mostly prioritized by internet-based organizations (often most of the DAOs), but also a shared cultural and social beliefs with the power of decision making is in a more original form of democracy.

Thus expanding the good work that is already performed by the co-operatives around the world, such as driving towards achieving certain SDG goals and also addressing and working to minimize the climate change. This is evident through a World Co-operative Monitor report as it states,

“The cooperative business model can be resolute in facing crises. Indeed, their unique governance and core pillars have demonstrated that choosing a sustainable and green strategy helped them in the recovery phase”

This further emphasize the characteristics of a co-operative that make it agile in addressing key issues which are easily transferable to DAOs, given the fundamentals of the digital system is maintained and protected. Since, due to the attractiveness of the DAOs, and mostly all the crypto-currency based initiatives, they are increasingly targeted by scammers and hackers. Furthermore specifically for DAOs, the initial smart contract is an essential part of the system, hence it is necessary to thoroughly focus on making the underlying code is error free, effective and conforms to the group’s mission.

A well organized DAO will contribute further to the impact of the world’s co-operative, which currently provides as they have the capabilities to take the lead in projects and initiatives that can effortlessly create a positive impact not only to the Economy, but also the Society and the World. Specially when compared to other firms which often make more promises than actions and bounded by rigid organizational structures and mandates that prioritize shareholders over stakeholders.

Originally published at https://www.linkedin.com.




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Ashen Hirantha

Ashen Hirantha

An Economic Undergraduate that is curious about everything else

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