DAO : The changing future of work in Web3

In the mid 2000s, with the advent of the Web2 which opened the gate for thousands of passive ‘consumers’ of the internet to actively contribute to the creation of data, brick-and-mortar businesses were suddenly struck with the pressing need to create a digital presence, or risk losing their customers to competitors who were quickly capturing the internet. Not only did the digital service industry see a massive boom in growth, having a website, running digital ad campaigns and interacting with customers online became an integral part of managing even traditional businesses. Moreover, through social media, Web2 revolutionized the advertisement industry irrevocably, as businesses could access precise and highly personalized user information in exchange for a few bucks. As a result, targeted advertisements have never been better.

Naturally, the rapid digitalization of businesses brought forth its own unique set of problems. For the end user, a data monopoly has been created, with a few big tech industries legally (and illegally) owning the majority of user data available on the internet. The work flow of big corporations is riddled with inefficiencies due to structural and communication barriers, and the standardization of work policies has hardly empowered employees to organize their work schedules in a way that is individually tailored to their needs. The lack of autonomy has become a source of frustration for many. On the organizational front, we must consider the costs of acquiring top talent and countless other redundant contractual costs arising due to the interference of multiple intermediaries, legal and otherwise. While the Web2 has theoretically erased the geographical constraints that limited the scope of business, and enabled businesses to closely interact with their customers, the inefficiencies of the current organizational system are apparent.

As our lives become increasingly, and inevitably dependent on the internet, with AR and VR challenging even the physical boundaries of our realities, relying on inefficient organizations for these services may not be the smartest move for us. Web3 is the tech world’s proposed answer to address these inefficiencies. And DAOs, or Decentralized Autonomous Organizations are a new form of organizational structure supported by the Web3 infrastructure. For the uninitiated, we have broken down the elusive concept of Web3 here. Based on blockchain, DAOs seem to tackle problems on all three fronts - user, employee and organization. If brought to the mainstream, DAOs have the potential to alter the conventional meaning of a company, and give new depth to the organizational collective. So what exactly is new about DAOs, and why should we care?

DAOs are a collection of smart contracts hosted on a blockchain, which are formulated and modified by the consent of a peer-to-peer network. Let’s understand what this means in practical usage :

1. Theoretically, anyone with access to the internet has the opportunity to participate in a DAO. You can choose to contribute value to the DAO in terms of funding, creating digital assets for the network, or contributing to the development of the network in any other way.
   
2. You will be rewarded for your contribution in the form of network tokens, which can represent any fungible or non fungible digital asset, including cryptocurrency.
   
3. Once you are a holder of the DAO’s network token, you will be able to influence its governance decisions through voting.
   
4. You can ideally also choose to exchange network tokens for any other type of token, which can then be converted to fiat money.

Although the correct terminology to be used here is network participant, as an ‘employee’ or an ‘investor’ of a DAO, you will, therefore, automatically have rights to participate in its governance. You can choose the type, amount, and time period of your contribution. You can also choose to contribute to several DAOs, in the form of freelancing. You will be able to create and monetize digital assets of any form - artwork, 3D experiences, entertainment content, and earn direct revenue for your work without having to split your income with any intermediaries.

From an organizational perspective, a DAO structure will enable global talent to collectively create a business which can obtain funding much more quickly than an average startup. The structure of startup funding and incubation can also be altered fundamentally. You can read more about this here. Since there is no concept of ‘hiring’ in a DAO, skilled professionals will automatically flock towards the best projects, and the contractual costs will be greatly optimized by automatically executed smart contracts. A DAO will operate and develop much smoother when the people contributing to it are empowered to choose the terms of their contribution and be incentivized to act according to their shared beliefs.

And lastly, as an end user, you will benefit from the best outputs, which naturally result from the passion, hard work and diligence of like minded, and highly skilled professionals. More importantly, thanks to blockchain technology, the internal workings of a DAO are publicly maintained in the form of a distributed ledger. Your data will not be under the ownership of any single organization, whose stakeholders can decide to use it at their own discretion. Instead, this transparent system will allow you to have a close look into the management of the organization.

The intricacies of the legal basis of smart contracts, digital assets and cryptocurrency are still in the early phases of formulation. DAOs, however groundbreaking, provide considerable challenge to the current norms of business. With DAOs, we are essentially trading a lack of a regulatory authority (and consequently accountability) in exchange for greater autonomy and collective participation. Moreover, since the size of a user’s contribution to the network determines their influence on its governance, DAOs can fall into the hands of rich investors. The system of democratized governance may also give rise to undue delays. The security protocol to address these concerns is nuanced and time-consuming to formulate and complex to implement - to say the least.

DAOs have undeniable potential to improve the efficiency of the digital economy for all stakeholders. They represent a philosophy of freedom, autonomy and transparency which is difficult to argue with. The appeal of this new form of organization is apparent when we look at the various DAO projects such as Maker DAO, Curve DAO, etc. It is crucial to support such projects in order to nurture an ecosystem where innovators and risk-takers can collaboratively experiment to develop a standardized form of a DAO which is practically conceivable and has a real chance of being implemented in the mainstream.

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