Why The 2020s Could See The Rise Of DAOs: Decentralized Autonomous Organizations

Written by Niran Babalola, Founder of Panvala

The world is run by organized people. CEOs organize talented workers and scarce resources to keep their customers happy. Politicians organize the constituents they serve and the machinery of government to provide for the welfare of the people. Most of us can’t organize people and resources on the scale that successful executives and politicians do, so the world isn’t just run by organized people, it’s run by other people. People who don’t share our goals or our values shape the choices we can make on the market or at the ballot box, so when we want our society to change, it feels like we don’t have the power to actually make anything happen.

That’s why, of the many sweeping visions of decentralization evangelized by the blockchain industry, the most compelling part to me has been DAOs: decentralized autonomous organizations. DAOs are digital organizations that define themselves by rules that run on a blockchain, not just agreements on paper. DAOs can put the tools to organize people and resources into simple apps that anyone can use. If enough people want to work with you to accomplish goals that you share, you don’t have to wait for someone else to organize you and your resources. If others won’t do it, you can organize yourselves. Whenever the options you seek are missing from the menu, you can shape the choices that change our society.

The concept of DAOs has been around since 2014, but in 2019, DAOs flourished in earnest. The “crypto winter,” which started as the prices of crypto assets plummeted in late 2018 and continued into 2019, called into question the model that had funded most of the work in the blockchain industry thus far. Instead of relying on the Ethereum Foundation to coordinate Ethereum 2.0 funding on its own, MolochDAO launched in February at the ETHDenver conference. Existing members of MolochDAO approve each new member, and together, they spend the funds they have contributed on grants to move Ethereum forward. In July, the MolochDAO codebase was forked to launch MetaCartel, a DAO focused on making user-facing dapps—decentralized applications—more successful. Both of these DAOs were able to organize strangers and their resources with much less friction than was previously possible because their rules are defined by software, and those rules are impartially enforced by Ethereum’s decentralized network of validators.

While these DAOs reduce the friction to organize people and resources, a new wave of DAOs will crest in 2020. These new DAOs don’t just reduce the friction to cooperate, they use incentives to give people a reason to cooperate to begin with. The simplest reason to cooperate is to make a profit; MetaCartel Ventures is a for-profit DAO that adapts the MolochDAO codebase and adds a legal harness for investment purposes. But there are also DAOs working to introduce incentives to cooperate to build common wealth, not just private wealth. Commons Stack is a toolkit in development that uses mechanisms called “augmented bonding curves” to incentivize early contributions to work that sustains the commons. Panvala is an incentivized DAO that uses its token supply to match donations that fund the Ethereum ecosystem, and is currently matching donations at 30.9x.

While 2019 was the year that DAOs made it easier to cooperate, 2020 will be the year we start using incentives to convince the world to cooperate. Some people will be convinced to cooperate to make themselves wealthier with DAO’s like MetaCartel Ventures. But others will be convinced to cooperate to make our society wealthier with DAOs like Panvala. We’ll use DAOs to give people more choices they can make to influence our society. Just like the market provides us options for the fastest phone or the shortest flight, DAOs will provide options for communities you can join to shape our society in the ways you want.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.