Only around for a few years, decentralized autonomous entities (DAOs) are now exerting significant impacts on how businesses throughout the globe operate. As DAOs become more widespread, they will bring in a new style of working and a new age of digital competition and transform the traditional business models.
DAOs usher in business operations’ transparency.
One of the most discernable benefits of decentralized autonomous organizations (DAOs) will be the transparency they bring to corporations. Almost every stakeholder in DAOs can submit and vote on governance proposals. These proposals are mainly similar to shareholder resolutions of big businesses, yet they may be far more detailed.
For example, the end of a project team at a well-established DAO is an excellent illustration of such a termination. Voters approved a proposal to terminate the funding for this team, citing that it had failed to make any progress over a cause of time. In fact, this team seemed to have few clearly defined and publicly available success metrics, but the argument over such a proposal was somewhat subjective.
Even though we are still in the early stages of this kind of governance, my takeaway was that if I were working for a DAO, I would want to see transparent metrics and well-organized documentation. People would be more responsive if exposed to such extreme transparency. Despite being crowdsourced, ride-sharing services are consistently good, thanks to the never-ending and ruthless feedback cycle.
DAOs herald a fierce new age of digital competition.
In addition to changing the way we work, DAOs will also transform how we compete. Many DAOs supply their product in the form of a protocol. And while copyrights may protect software, protocols cannot be protected from public scrutiny. Almost everything given by DAOs, from incentive structures to essential algorithms, is entirely open to the public. This implies that excellent ideas travel rapidly, and innovators build on one another’s work at breakneck speed.
The outcome might be a digital economy that is more brutally competitive than it has ever been. Businesses have less control over their customers as the blockchain ecosystems are permissionless, decentralized, and interoperable. Market share shifts may occur swiftly when a rival protocol or service performs better.
Recent advancements in decentralized exchange markets have illustrated that even minor improvements in performance or cost have significantly impacted market share. If relying on the strength of previous efforts, blockchain entities will face significant challenges to maintain their position in the future.
DAOs allow for more engaged systems of governance.
DAOs are also expected to revolutionize enterprises by enabling more dynamic governance systems. The possibility to transfer voting power is a great advancement since most stakeholders (and shareholders in traditional organizations) do not have enough time or resources to keep up with the many potential problems. Therefore, when voting is delegated, people will concentrate their efforts on specific areas or businesses, yielding increased levels of involvement and engagement.
In big corporations, few stakeholders truly contribute intelligently to governance. This isn’t a deterioration in morals; instead, it’s a practical problem. Consider the following example: I hold stock in S&P 500 index funds, but I couldn’t reasonably keep up with various issues at even a quarter of the firms represented by the funds.
I prefer to transfer my voting rights to professionals and those concerned about the same problems. All of this isn’t wholly new. Partnerships, co-ops, and collaborative governance models, to name a few examples, have been around for a long time and don’t seem to give in to gigantic egos or empire-building CEOs as people discuss and vote on significant issues.
Partnerships are already equipped with a sophisticated staking structure. Believe me when I say that borrowing several hundred thousand dollars to invest in a partnership is just the same as any other means of staking. The only difference is that the modern digital voting technologies and delegation capabilities make it more feasible and scalable to become a partner or stakeholder.
We sometimes need to employ new technologies to revitalize old ideas and make them powerful again.
