Thread by @mohakagr

(1/n) DAOs will be the future - for everything.
They will revolutionize the way organizations function and how people work. Too bold a claim?

Read this 🧵 as I explore the emergence of DAOs as a replacement to how human society is organized 👇

(2/n) Humans are driven by self-interest. It's true for even altruistic socialist governments where those in power work to preserve their self-interest.

This creates division and breeds inequality. How do we stop that?

(3/n) Create an autonomous organization that runs on principles written into code. Eliminate the need for one human to decide how an organization runs. Democratize the power of decision-making.

Let every member decide the future of the org they are part of.

(4/n) But why? Can't we just trust those in power? We can. But creating a top-down hierarchical system has only created more problems for us.

How?
Get popcorn because this is going to be interesting.

(5/n) 10,000s BC:  Members of a Neolithic tribe are arguing about the inefficient utilization of resources. They start blaming each other for unequal distribution. The arguments turn ugly. A bloody battle follows.

Lesson learned: "headless" tribes don't work.

(6/n) If tribes didn't work, then organizational hierarchies could? Sure, delegate centralized power of decision-making to a select few. For eg: centralized institutions. The result?

Autocratic nations of the 1600s. Monarchs control markets. Resources are unequally distributed.

(7/n) What do we do then? Listen to the Physiocrats' argument for a free-market (capitalist) economy. Move away from mercantilism and don't let monarchs/govt. control the market or decide the prices for products/services.

(8/n) That's a great idea! The market decides everything for itself. Doesn't it? In theory yes. The few organizations with more power and more resources dominate the market. Or should I say the leaders of those organizations dominate the market?

(9/n) What's more? Those in power in the market are in bed with those in government. And, the govt. promises those controlling the market free rule while imposing restrictions that affect smaller participants.

Problem? Wealth is still unequally distributed.

(10/n) What happens if the market breaks down? Well, regardless of how it breaks down or who causes the breakdown, the government simply bails them out, whilst millions of people are left hanging in the balance.

Those at the top, win. Those at the bottom, suffer.

(11/n) What does this tell us? Centralized authorities with humans at the top don't seem to work. Resources are always disproportionately shared. If a human is in power, their self-interest will get the best of them.

Is there a way out of this conundrum? Yes.

(12/n) DAO solves the major problems of traditional organizational structures - by delegating the power of decision-making of a protocol to its community members.

Thus, whoever holds the tokens gets to participate in deciding how the organization functions.

(13/n) While some DAOs have elected councils that make decisions, some have no hierarchical structure. The members get to vote on changes/proposals. No central entity controls the DAO. In the case of a council (eg: Polkadot), the members are selected by voting.

(14/n) This is made possible by the different models of membership for DAOs - token-based and/or share-based.

The first is more permissionless and the governance tokens can be traded easily on a DEX. E.g.: @MakerDAO 's MKR governance token.

(15/n) The second is more permissioned. Potential members submit a proposal to join the DAO and offer some tokens in return. Shares represent direct voting power and ownership. Exit anytime.

This model is famous for tight-knit organizations like charities. E.g: @MolochDAO

(16/n) The first DAO that was ever created was "The DAO", launched in Apr 2016. It was released by @ChrJentzsch and was built on the Ethereum network.

The objective was to eliminate human error/manipulation of investor funds by delegating decision-making to an automated system.

(17/n) It raised $150M+ in ETH in May 2016, although a month later it was attacked and over 3.6M ETH was lost to a governance proposal to fix a bug. But this surely wasn't the end for DAOs.

In fact, over the years many DAOs emerged.

(18/n) The process of creating one has become easier.
@OpenLawOfficial and @daostack on Ethereum are a few examples.
@AragonProject, an open-source project, can be used for creating and maintaining DAOs on Ethereum.

(19/n) Users can now set up a DAO using NFTs where the latter represents participation within a community.

@songcamp_ is one such example that started as a community of artists coming together and creating work that is being further minted as NFTs.

(20/n) As the process of building a DAO has become easier, so has that of submitting proposals. Do you want to propose a change to any DAO? Simply use @SnapshotLabs.

The best part? You can create proposals for hundreds of different DAOs.

(21/n) And guess what all this simplification has done? The emergence of more DAOs in a plethora of different sectors.

I'll just reference a few of the many different DAOs from this massive thread by Shegen:

https://twitter.com/shegenerates/status/1417482201294311438?s=20

(22/n)
-Support ETH ecosystem grants with @Meta_Cartel
-Revive fallen comic heroes with @Hero_DAO
-Fight whales with @WhalerDAO
-Support artists with @Ultra_DAO
-Support a for-profit, US-law-compliant VC fund @TheLAOOfficial

(23/n) And this is not even the limit to their applicability.
Now in Wyoming, you can create a legally recognized DAO? Devs have now clarity at least in some parts of the world.

And this is just the beginning.

(24/n) As per the Q2 DeFi report by @ConsenSys, more than $6B worth of digital assets is held in the top 20 DAOs alone, with roughly 190K DAO members in the entire ecosystem.

(25/n) It's an understatement to say that DAOs are getting popular. The growth of this type of community has been staggering. But where exactly are we headed?

(26/n) In an article on the future of work, @drorpoleg envisions DAOs creating decentralized workplaces. Imagine working with members you don't meet, on projects that you like, and earning an income that you desire.

A world is no less than a utopia, created with the help of DAOs

(27/n) But wait. Not everything is perfect in the world of DAOs either. The biggest challenge right now is achieving quorum. Set the threshold too high, and it is never achieved.

Set it too low, and unfavorable proposals can be passed.

(28/n) Even if the problem of quorum is solved through gamification or incentivization, how can we ensure that only fundamentally useful proposals are approved?

Also, understanding these proposals implies supplying the members with the required info. It can be time-consuming.

(29/n) If a particular change affects half of the users positively, but not the other half, then how is a conclusion supposed to be reached?

Wouldn't the users who are negatively affected want to continue debate until the decision is made in their favor?
coindesk.com/cut-the-consen…

(30/n) Also, because most DAOs' membership is token-based, what's stopping huge whales from controlling it? If these whales decide to dump all their tokens, this can create drive the price of the token down.

This will further reduce the value of the DAOs' remaining funds.

(31/n) DAOs can be distributed across multiple jurisdictions, and there are no established legal frameworks for them.

If an issue does arise, then the members are left hanging in a complicated legal battle. But that doesn't mean we cannot find a way around these problems.

(32/n) In theory, DAOs create a decentralized world. But can an entire community be trusted with decision-making?
What's stopping certain members from colluding with each other off-chain & potentially causing digital anarchy?

I'm equally skeptical and hopeful. What do you think?