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DAOs: leaderless online crypto clubs could be the future of companies

The new crypto craze is a community in action. Distributed Autonomous Organizations (DAOs) are online groups with a purpose – sometimes social, often financial. Members join by buying tokens which they use to vote. Smart contracts make decisions easier. Everything is documented. Decentralization means that no one is responsible.

DAOs were introduced as a way to automate trust. Many operate as investment groups, which combine funds to purchase assets. Venture capital firm Andreessen Horowitz, which has invested in the sector, is going further. It presents DAOs as a structure that will one day replace companies. Instead of management making decisions and paying salaries or shares, stakeholders will participate – and be rewarded for – any action.

To date, these collectives have been used, among other things, to buy land in Wyoming and submit a failed bid for a copy of the U.S. Constitution. It’s a quick job. Uniswap, the largest DAO with more than 300,000 government token holders, is a little over a year old.

Funding is volatile. The DeepDAO data group says DAO has $ 7.7 billion in reserve cryptocurrency assets, down from $ 13 billion previously November. The fall follows the collapse of cryptocurrency prices, and does not diminish the interest of users. More than 1.8 million people have a government token, compared to 1.6 million at the end of last year.

But transferring any decision to the group has drawbacks. Like all cooperatives they may be slow to operate. Members may be overwhelmed and cancel the vote – in effect returning the hierarchies. Some members may hold more control by owning more tokens. Participation can go back to some members who can use DAOs for their special interests.

The administration also remains a work in progress. When something goes wrong, DAO can just dissolve. Efforts to knit them into the real world are imperfect. In most areas they are not considered legal entities. There remains a risk that regulators will think of token securities. Need to gain trust.

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