DAO

From P2P Foundation
Jump to navigation Jump to search

= this page refers both to a generic concept, i.e. the Decentralized Autonomous Organization and to a specific (failed) investment project, TheDAO


The concept

1.

"A Decentralized autonomous organizations (“DAO”) is a new type of organization, best comparable to a digital company, but without an attached legal entity. Made from irrefutable computer code, it is operated entirely by its community, which backs its future growth by purchasing DAO tokens using ETH, the fuel of the Ethereum network." (https://slock.it/dao.html)

Description

Primavera de Filippi:

"While some argue that Bitcoin is effectively the first DAO (Buterin 2014)(Hsieh et al., 2019), the term is today understood as referring not to a blockchain network in and of itself, but rather to organisations deployed as smart contracts on top of an existing blockchain network. Although there have been several attempts at instantiating a DAO on the Ethereum blockchain (Tufnell, 2014), the first DAO that attracted widespread attention is a 2016 venture capital fund confusingly called “TheDAO” (DuPont, 2017). Despite the short-life of the experiment , TheDAO has inspired a variety of new DAOs (e.g. MolochDAO, MetaCartel), including several platforms aimed at facilitating DAO deployment with a DAO-as-a-service model, such as Aragon, DAOstack, Colony or DAOhaus. The DAO concept has enabled other derived terms: the term Decentralized Collaborative Organization (DCO) is typically referred as a DAO with strengthened collaborative aspects (Hall, 2015)(Schiener, 2015)(Davidson, de Filippi and Potts, 2018); a more elaborate concept derived from those attempts is “Distributed Cooperative Organization” (DisCO), which highlights its co-op and democratic nature (DisCO Manifesto, 2019).

...


There are multiple coexisting definitions of DAOs in use within the industry. The most relevant are the following:

● Buterin, in the Ethereum white paper (Ethereum, 2013), defines a DAO as a “virtual entity that has a certain set of members or shareholders which [...] have the right to spend the entity's funds and modify its code”. That is, the aim is to replicate “the legal trappings of a traditional company or nonprofit but using only cryptographic blockchain technology for enforcement”.

● Some of the most popular DAO platforms, such as DAOstack and Aragon define a DAO similarly as ”a network of stakeholders with no central governing body” (https://daostack.io), “which is regulated by a set of automatically enforceable rules on a public blockchain” (https://aragon.org/dao). Conversely, other DAOs platforms have opted to use a different terminology as a proxy to a DAO, such as the “colonies” of Colony (https://colony.io) or DAOhaus’ “magic internet communities”(http://daohaus.club).

In the academic literature on DAOs, although some works avoid picking a definition (Norta et al 2015) or refer to industry definitions (DiRose and Mansouri, 2018), multiple attempts have been made at providing a specific definition of DAOs." ([1])


Characteristics

Primavera de Filippi:

"Most of these definitions include the following distinctive characteristics:

● DAOs enable people to coordinate and self-govern themselves online. Although no mention is made as to the minimum size of the group, the term “organization” is generally understood to refer to an entity comprising multiple people acting towards a common goal , rather than a legally registered organization.

● A DAO source code is deployed in a blockchain with smart contract capabilities like Ethereum—arguably always a public blockchain.

● A DAO’s smart contract code specifies the rulesfor interaction among people —although it is unclear to which extent there may be other governance mechanisms that can affect or overrule such code.

● Since these rules are defined using smart contracts, they are self-executed independently of the will of the parties.

● The DAO governance should remain independent from central control: e.g. some definitions specifically refer to self-governed (De Filippi and Hassan 2018), self-organizing (Singh & Kim 2019), peer-to-peer and democratic control (Hsieh et al., 2018).

● Since they rely on a blockchain, DAOs inherit some of its properties, such as transparency, cryptographic security, and decentralization." ([2])


Discussion

Primavera de Filippi:

"The use of the term “decentralized autonomous organisation” or DAO is now fairly established in the blockchain space, yet there are still many misconceptions and unresolved issues in the discussion around the term.

(1) First of all, with regard to the “decentralization” aspect of a DAO, it is unclear whether decentralization only needs to be established on the infrastructural layer (i.e. at the level of the underlying blockchain-based network) or whether it also need to be implemented at the governance level (i.e. the DAO should not be controlled by any centralized actor or group of actors).

(2) Second, it is unclear whether a DAO must be fully autonomous and fully automated (i.e. the DAO should operate without any human intervention whatsoever), or whether the concept of “autonomy” should be interpreted in a weaker sense, (i.e. while the DAO, as an organization, may require the participation of its members, its governance should not be dependent on the whims of a small group of actors).

(3) Third, there are some debates as to when the community of actors interacting with a smart contract can be regarded as an actual “organization” (independently on the legal recognition). For instance, it is unclear whether the mere act of transacting with a smart contract qualifies as an organisational activity, or whether a stronger degree of involvement is necessary, such as having a governance model or collective interactions amongst participants.


The latter has triggered important discussions in the blockchain and legal field, as regards whether a DAO could be considered as an entity separate from the human entities that operate it (i.e. as a legal person) or whether it can only be considered as an entity when it is identified as such by the law (i.e. the law should identify a DAO as a legal person for the DAO to be considered as such). Yet, the common understanding today is that the “autonomous” nature of a DAO is incompatible with the notion of legal personhood, as legal personhood can only be established if there is one or more identified actors responsible for the actions of a particular entity. The discussion on whether a DAO should be recognized as a legal person has important implications in the legal field, as it can determine the extent to which a DAO can be considered as a separate legal entity from its human actors, and therefore the extent to which these actors can be shielded from the liabilities of the DAO." ([3])


As a network, the DAO is in fact a state, and it needs democratic governance

Read the full article here: Why Networks Are States That Need Democratic Government

Curtis Yarvin:

"What's the right lesson for the decentralization community to learn from the collapse of the DAO?

Perhaps the simplest lesson is that even decentralized networks need governments, and have governments. Every network is a state. Every state has a government.

In Dijkstra's terms: decentralization theater considered harmful.

Decentralization theater means any system that produces not decentralization, but the appearance of decentralization. Security theater is the enemy of real security; decentralization theater is the enemy of real decentralization.

A network without decentralization theater is one that admits:

  • any network is a digital state with a central government.
  • any new state is born at war with full emergency powers.
  • limiting and/or eliminating governance is a slow, hard task."

(https://urbit.org/blog/dao/)


TheDAO

= TheDAO is a specific project within Ethereum, not to be confused with the general concept of Decentralized Autonomous Organization ; it's a crowd-run, computer-managed distributed investment fund

URL = https://daohub.org/


Definition

1. Ryan Shea

"The DAO is a digital pool of funds that is governed by code. Anyone can contribute funds to the pool to purchase voting power in it, and a quorum of shares is required to release funds to support select projects, just like with Kickstarter. This “group fund” was implemented on a digital currency platform called Ethereum and recently raised $150 million from hundreds to thousands of backers." ?(https://blog.blockstack.org/simple-contracts-are-better-contracts-what-we-can-learn-from-the-dao-6293214bad3a#.ce3g8vvb9)


2.

"The DAO model answers the question "How can revenue be generated within a purely decentralized environment" by aligning the incentives of real world Contractors with the incentives of a DAO." (https://slock.it/dao.html)

Discussion

The $50m Crisis

Ryan Shea:

"Last week, cryptocurrency security researchers identified vulnerabilities in both the code that governs The DAO and in the Ethereum programming language (Solidity) that The DAO was written in. This week, it was discovered that an attacker was exploiting the bugs in The DAO and managed to withdraw over $50 million worth of Ether from the fund.

In order to avert the disaster of a $50M loss, the Ethereum core developers have presented a proposal whereby the withdrawal would be reversed and the code of the contract would be replaced with a simple contract that would allow the original funders to recover their funds." (https://blog.blockstack.org/simple-contracts-are-better-contracts-what-we-can-learn-from-the-dao-6293214bad3a#.ce3g8vvb9)


More Information