Votermedia Finance Blog

September 11, 2016

Introduction to DAOs (Distributed Autonomous Organizations)

Filed under: Uncategorized — Tags: , , — Mark Latham @ 9:07 am

To prepare for my next post “How DAOs Can Use Votermedia”, here is some background for those unfamiliar with Distributed Autonomous Organizations:

DAOs are a new design for an online organization, which requires little or no centralized controlling power (like a CEO, board of directors, or even a legal regulatory environment). Instead, DAOs are based on software code that distributes control widely among many participants, who may play roles similar to (but more powerful than) shareholders in a for-profit corporation or members in a co-op. Most of the software code is recorded in a blockchain, which also serves as a ledger of cryptocurrency transactions.

Existing corporations and co-ops, by contrast, tend to concentrate power centrally (e.g. in a board of directors), especially as they grow large. Boards may claim to be accountable to all those who can vote to elect them, but existing governance designs seem to let boards concentrate power in themselves through various techniques (explored throughout the votermedia project).

The first DAO to be created, known as “TheDAO”, raised an eye-popping $150 million worth of Ether (a Bitcoin competitor) from investors in its May 2016 initial offering. It was designed like a venture capital fund that would invest in projects approved by majority vote of investors. However, it attracted the attention of expert hackers who soon found a bug in TheDAO’s code, and siphoned off about $50 million on June 17.

Fortunately the code prevented the hacked funds from being traded during an interim period, which gave the Ether community enough time to design and execute a “hard fork” in their blockchain, reversing the hack’s transactions and refunding all investments in TheDAO back into Ether. So TheDAO no longer exists, but many observers and participants are anticipating and planning “new, improved” DAOs.

From my perspective working on governance reform, DAOs are an exciting innovation. They open a big door to experimenting with many possible governance reforms. In my next post I will reach out to share ideas with designers of new DAOs.

Background Reading:


1 Comment

  1. […] I posted an Introduction to DAOs (Distributed Autonomous Organizations). Today I released a 7-page white paper How DAOs Can Use […]

    Pingback by How DAOs Can Use Votermedia | Votermedia Finance Blog — September 12, 2016 @ 10:43 am

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