Are DAOs the Future of Work?
Let me tell you about the future of work. You will work on something you love, without interviewing. You will work for numerous employers, all of which will pay you based on a contract you did not sign. You will compete for rewards with colleagues you don’t know, but you’ll see everything they do. You will get a say on the organization’s strategy, but so will all of its customers. You’ll be remote, global, and always “on”. And you will love it.
Welcome to Decentralized Autonomous Organizations — the future of work.
Easy DAO Definition
The tech community has a habit of making simple concepts difficult. This needn’t be the case. In short, DAOs are how humans come together as a group to make decisions in the digital world. They do so with the help of two key tools. Firstly, the rules that govern the organization are expressed as a series of digital “IF/THEN” statements, that are then coded directly into a blockchain (thus rendering them both auditable and permanent). Secondly, voting shares are issued to stakeholders in the form of “digital governance tokens” — also recorded on a blockchain. Doing things this way replaces, in theory, both the legal mumbo-jumbo of today’s organizations (as rules are coded) and their hierarchical nature (as everyone has a voice).
Technically, all sorts of work structures can be created as Decentralized Autonomous Organizations. Investment companies, consulting companies, engineering companies, etc. But that’s just the theory; the reality is more complex… and more interesting.
1. No more interviews
DAOs today are composed of two types of people : Core Contributors and Edge Contributors. While the former are employees of sort, the latter can just join any DAO’s Discord server and start writing code, sharing updates on Twitter, organizing channels… This is because most DAOs are permissionless : anyone can work on them as their code, smart contracts and lists of contributors are transparently accessible to all.
This means that these new digital organizations have no recruitment process. You come in and start working on anything that you can do and that needs done. A great aspect of this is that once someone consistently adds value, they are likely to be asked to join the core contributor team. No more CVs, no more cover letters : the bottoms up model and opt-in membership of DAOs invert the talent sourcing model.
This is a great step forward for three reasons. Firstly, we know that “classical” selection processes negatively impact minorities because of ingrained prejudices. Doing away with them means we can concentrate on aptitudes. Secondly, it continues the trend of work flexibility that was started by the gig economy (for better or for worse). Thirdly, it may help partly reduce frictional unemployment, as there is no latency between the wish to work and the start of said work.
2. An ability to work for many different corporations
Being able to work for permissionless organizations means that contributors can work for one, two, or twelve DAOs. The sky is the limit. The lack of exclusive relationship can be daunting for some, but is something many technological workers are thriving for. After all, corporations can discard us as they see fit. Why should we not be able to do the same?
Think of it as working on a movie. Directors, producers, actors, production assistants, art directors, prop makers, camera operators and sound engineers come together for a project. Once the project is done, they part ways and go work on multiple different films. In DAOs, the same can be said of developers, community managers, accountants, consultants… Since DAOs are often story-driven, this simile is particularly relevant.
This lack of exclusive relationship will lead to a “Missionaries Vs Mercenaries” discussions. This is because DAOs are particularly mission-driven, but working on just one is unlikely to be enough to secure a living wage. Such discussions are stale. Humans are complex creatures, and most operate in a spectrum between the two extremes, and will continue to do so.
3. A fairer way of getting paid
Working without being asked sounds swell, but discerning adults will wonder how one gets paid in such a system. Indeed, most contributors will expect a reward for their work.
The payment process within a DAO works as follows. The organization sells services or products, and sets aside a pool of the generated revenues for salaries and rewards. Because contributors don’t have a contract, there are no classical ways of deciding what everyone should fairly get. Instead, many DAOs turn to tools such as Coordinape to tackle this challenge. These solutions allow organizations to create “circles” of contributors (the equivalent of teams). Each member of the circle is given points and allocates them to other members of the circle over a certain period. The higher the perceived “value” of the work done during that period, the higher the number of points received, and the higher the financial reward.
This is particularly interesting for a variety of reasons. For starters, it helps us experiment with a new definition of value within an online community. It also incentivizes workers to work towards the mission set out by DAOs’ creators. Since rewards will often take the form of governance tokens, contributors will keep a stake in the organization’s well-being even after they’ve left it. Finally, it also does away with freeriders that have become prevalent in large companies’ middle management.
4. A new way of making decisions
As mentioned above, DAO contributors are often rewarded with governance tokens. These act both as valuable shares that can be traded, and as ballots to make decisions within the organization. In this system, one token is equal to one vote. Unlike classical corporations, everyone has a vote proportional to their stake in the project. Contributors are thus incentivized to act as fiduciaries.
Many DAO creators are well aware that voting, done wrong, can be a form of tyranny. As such, many have begun experimenting with new models. Quadratic voting (aka conviction voting), for example, allows voters to express a degree of preference for the options presented. But because this too can be exploited, I prefer the principles of Sociocracy. In such a system, decisions are made through consent from all stakeholders, which are organized in semi-autonomous circles. This way, one team does not influence the decisions of another.
Lastly, because customers need to purchase tokens to access a DAO’s offerings, they are also able to vote to decide its direction. This may be any retail worker’s worse nightmare, but be ready for your customers to also become your colleagues… or even “bosses” if they purchase enough tokens. Few, if any, corporations today make decisions this way. Workers will need to learn, adapt, and fix potential negative externalities, but this remains a fascination paradigm shift.
5. The renewed importance of community values
DAOs are first and foremost the latest iteration of digital communities. People voluntarily come together around a set of shared values, and work together to further their agenda, with the help of smart contracts. This is what is meant by emergence in the context of organizations : you start with a mission, and the organization will slowly emerge around it. If that means an end to Facebook Groups, all the better; what goes around, comes around.
DAOs are often touted at the future of all corporations. I believe it best to dream smaller. Let’s take fandoms as an example. Today, many struggle to survive and thrive under the boot of algorithms promoting virality at any cost. But having stakeholders become customers, owners and contributors will provide a lifeline to these online communities, as the greatest ones (the most passionate) will be able to attract more people in a virtuous circle. This means people creating great niche communities can now survive and make their project evolve with their community.
DAOs, amongst other things, also solve some of the issues around open-source projects. The people using it need to get a token to access it, which pays the contributors, but also allows the users to have a voice in the project’s direction. In essence, this means that people will be able to make a living(ish), while working on things they are passionate about.
6. A more global, more asynchronous way of working
DAOs are remote by their very nature. Anyone with an internet connection can access and work on them. While the gig economy today is hyper-local, we are now seeing it become global.
This shift will impact workers in new and unexpected ways. By being fully global and remote, digital organizations allow people from all over the world to participate. Globalization led to blue-collar workers in Western countries having to fight for their survival. DAOs may very well impact white-collar workers in the same way. By being asynchronous, they will also (finally) put an end to the traditional 9 to 5.
This may benefit under-privileged cohorts. While the office world values “showing up”, we can now fully concentrate on the value created for the community. I also think of young parents, who will be able to organize their workday as they see fit. The COVID pandemic shift showed we were capable of this; let’s push the idea to its logical conclusion.
7. No boss, fewer colleagues
DAOs may be transparent, but they are also, counter-intuitively, anonymous. As payments are done to crypto-wallets, and Discords are full of Avatars, one no longer needs to bring their full selves to work (thank god).
This anonymity means that workers will no longer have colleagues per say. This is both a challenge and an opportunity. We’ve seen communities erode over the past 60 years as church and neighborhood became less important to one’s identity. For a while, the workplace became the place one could socialize in. Now that it is disappearing, the lack of physical community and identity is worrying. This is however an opportunity for organizations to be much more active and deliberate when it comes to team-building. The fate of the DAO may very well depend on it.
It’s one thing not to know your colleagues, it’s another not to have a boss, as you can often work on whatever you like in a DAO. This is something many people are not accustomed to. One of the greatest shifts in this new future of work is the increased importance of self-management. This will be uncomfortable for many, but will undoubtedly lead to strong personal growth.
8. A full Transparent & Anonymous workplace
As alluded above, DAOs are both transparent and anonymous, thanks to the use of blockchains and smart contract. All decisions and actions can be audited, something few workers today are privy to in large organizations. This will partly solve the Principal/Agent challenge many corporations face, but will also lead to unwanted externalities that one needs to be aware of.
Firstly, linking a crypto wallet to a DAO means that anyone and everyone can see every transaction made with that wallet. That’s fine if the person is anonymous, but not everyone will want to be. One could fix this by having different wallets, but that seems like a hassle we don’t have today. Secondly, the ability to identify individual contributors on blockchains may also invite unwelcome individual consequences for work done on behalf of the DAO, which in turn may discourage the kind of risk-taking that may lead to technological breakthroughs.
Anonymity does solve both these issues. But, as I mentioned, DAOs are for communities to come together. A certain level of trusts is necessary between members to make it work, and people like to attach their selves to what they like; not their avatar. As such, many will choose not to be anonymous, and will thus need to be weary of the two points highlighted above.
Seen through key numbers, DAOs today may seem like a huge deal. They have accumulated more than $10 billion in treasury assets under management. 60K decisions have been made, through 4M votes cast by 700K active voters and proposal makers.
This is however peanuts compared to non-decentralized organizations. Sure, we may argue that DAOs will continue to rise while classical corporations start failing. This is unlikely. What may happen, however, is the creation of a broader spectrum of corporations, with a broader spectrum of ways of working. I only hope we keep the good within each option, and leave the bad behind. From experience, this is unlikely.
Good luck out there.