The Web3 community is hard rooted in profound optimism. The increased opacity in this technology makes it possible to envision a world where everyone is required to succeed and survive. People praise Web3 as the panacea of saving the planet from failing institutions, privacy violations, and also new ways for people to interact with each other. Humans are inherently social creatures that form groups for business and cultural purposes. The ability for us to connect deeply with each other in groups is difficult through traditional social media and almost impossible to deliver shared common goals. It is impossible not to keep evolving our organizational forms with all the advancements surrounding us. To keep these networks alive requires new ways of thinking about what it means to work together when we are often so far apart, thus tech giants are actively developing their virtual workplace and metaverses for mass adoption. People keep seeking ways to stay aligned with each other and construct nonstandard ways of self-organizing and governing, filling the gaps currently lacking in societal interaction. While Web3 is not able to solve these problems overnight, it is believed that the world has more tools than ever before to address the coordination problems we are facing today. As such, collaborative internet native groups like decentralized autonomous organizations (DAOs) become the answers to that space.
In 1977, the first limited liability company was established in Wyoming and the federal government and many business owners took many years to accept and legalize the concept of organization of ownership and business. Surprisingly, Wyoming again serves as the legal birthplace of this new type of enterprise and officially recognizes DAO as an official business entity. Shared agreements act as the glue holding people together even when they are not aligned. DAOs represent the most histrionic transformation in governance, structure, and asset management business in our modern lives, that deliver common goals, shared narratives, economic incentives, and flexible management and mobility. The question is always about what DAOs are useful for and which types of pursuits are things that people want to do over the long term. Let's begin our discussion on why DAO is important.
True representation of meritocracy
A typically heard word in the space of cryptocurrencies is meritocracy. Meritocracy guarantees that work of value yields an equal value which exists in a system that rewards members strictly based on a contribution towards common goals. However, we can rarely see such a match of compensation in the workplace and most laborers are being extracted or exploited from their work. Societal norms keep instilling the message to us that we have to stand on our own line and introduce youngsters to the term "social ladder" which makes them accept being extracted after graduation and line up for a promotion after years of exploitation. In terms, those who get promoted will keep taking advantage of the future generation and further reinforce the predatory profit motives and mindsets. The system for traditional companies is, therefore, inhuman as a hierarchical system of revenue earnings becomes more important than quality social prosperity. Advantaged actors often increase wealth without contributing to such a system, so leading meritocracy becomes impossible.
In a DAO, it allows the coherent organizational governance let members/workers compensate fairly based on contributions and reward them with tokenization of labor hours and expertise. Each task is clearly rewarded with specific tokens and allocated by the blockchain, based on computer-generated code rather than individual authority, resulting in a meritocratic reward and governance system. DAOs utilize smart contracts to facilitate governance and coordination in pursuit of a common goal. Such an approach allows the company to operate the business without centralized governance and ensures workers receive fair rights and benefits. As such, DAOs present a clear path to coordinating meaningful labor opportunities and equal representation, directly leading to true meritocracy reshaping the future of businesses.
Enhances customer participation
Increasing numbers of brands are considering adopting the DAO model. They publish NFTs and tokens to their customers and directly promote them to stakeholders of the brand DAO. Every DAO member has unique privileges to propose and vote on various product or service features, shaping the future of the organization. Members submit proposals for improvement and changes they wish to see from their beloved brands. This delivers the voice of the customer directly to product development teams which makes the decision-making process not restricted and privileged to the boardroom. The brand DAO envisions a collective organization managed and owned by its members with all of them having a voice. Both customers and the board members can have a say through the stake in the DAO, thus simultaneously improving customer sentiment and brand mensuration. By empowering the DAO members, they get a sense of belonging and in turn enhance the loyalty of the customers. DAOs, therefore become a supertype of customer engagement and customer involvement in the company.
Promote open-source development
Information in business is always kept private and assigned with monetary right ownership. It is common to see traditional companies hiring programmers purposefully designing products so the users are unable to repair or modify them. They fear project direction being influenced by communities or code and roadmap are on display for competitors, thus keeping information silos. Such locking technology is a form of suppressing valuable information that could be used to improve systems and conditions for all. This exclusionary behavior inhibits innovation by design, prioritizing proprietors' need to generate value and prohibiting competitors from piercing their monopoly. Fettered access to information hampers the advancement in nearly every field like business, science, health care, and even entertainment. While selfish and conservative corporations are keeping everything for themselves, DAOs break down the wall and restore all the freedom to innovate, empowering individuals to contribute to societal and technological advancements.
Everything in a DAO is recorded on a blockchain and stored in smart contracts, which are transparent and public. Such a model creates an open-source framework that eliminates the need to involve a third party for permission, simplifies the process, and promotes unbiased knowledge, work, and wealth. DAOs evolve around a shared mission that inspires our members to value the significance of their work. In the DAO, all information required to understand the mission goals and objectives is openly available to all. In this connection, DAO can provide an effective and efficient distribution and message amplification channel for all its members, allowing the missions to be contributed to, and updating the open forms in real-time. Other businesses, like Netflix and LinkedIn, have strong records of being producers of open-source projects, which provide a powerful retention tool and strategic recruitment for top-tier engineering talents.
Nonetheless, it is questionable what missions of the DAO are truly valued by society, and are those missions well suited to an organizational structure that inherently involves a semi-democratic process of decision-making. The governance of corporations and businesses is mostly based on executives, boards of Directors, and activist investors. They did it because of efficiency and did not involve their system of decision-making by having every member or even some large percentage of members of an organization have a direct stake in decision-making across a wide array of decisions. They reckon the process of inclusion and democracy is inefficient and slows down the reaction to the volatility of change. There is certainly something interesting about the alternative the DAO offers but still, the majority is wondering where the best place for this semi-democratic governance process to actually come into practice.
Eventually, no DAO is perfect and we will keep seeing more progress in creation, development, and enhancement. In Web3 there is no expert and no one knows where Web3 will go. The fact there are so many start-ups out there that developing DAO tooling right now shows just how complex those mechanisms could be. All the questions are still open for anyone to answer. There will be more for us to explore on this topic and let's embrace an open and optimistic mind on these transforming ways of interaction between one another.