In July 2021, the blockchain-based collective PleasrDAO paid $4m for a very special album by Wu Tang Clan. The legendary New York hip-hop group produced just one copy of Once Upon a Time in Shaolin as a statement about the devaluation of music. The CD was originally bought for $2M by businessman Martin Shkreli, but after he was convicted of securities fraud, the album was seized by a federal court and re-auctioned.
Now, this unique item that was once owned by an individual is the property of the 78-member PleasrDAO community. As well as minting the ownership deed as an NFT, PleasrDAO is also exploring ways to share the masterpiece with the world under the conditions of sale, which prevent the album from being distributed publicly until 2103, except via limited exhibitions or listening parties.
The latest chapter in the extraordinary story of Once Upon a Time in Shaolin highlights the power and potential of decentralized autonomous organizations (DAOs) to transform how groups of people can manage and fund new ideas and initiatives.
How DAOs Work
While the internet can bring together individuals with similar interests from around the world, questions of trust still raise barriers that inhibit deeper collaboration on related projects. Establishing a formal organization around a shared goal, especially one that includes a treasury element, too often requires an off-putting leap of faith by interested participants.
A DAO creates that trust by using blockchain technology to enforce an organization’s rules and manage its finances. Smart contracts encoded on an open-source blockchain facilitate a more transparent and efficient form of organizational governance that is accessible to anyone with an internet connection. DAO members can view its rules easily, but they cannot be changed or transgressed without the approval of the community.
By enabling instant borderless capital formation where the rules are determined by the participants, DAOs are a safer way to collaborate with strangers over the internet. Current estimates suggest that there are more than 2,000 DAOs on Ethereum – the largest blockchain with smart contract functionality – and a further 2,000 to 10,000 across other blockchain ecosystems.
As more people recognize and harness their power, DAOs will complement, improve and potentially disrupt traditional institutions like corporations, non-profits, NGOs, and governments. This is because DAOs have four key advantages over existing forms of organizational governance:
- Inclusivity
Anyone can join a DAO by acquiring tokens, which typically provide access and voting rights. Active involvement is not required but is often incentivized with bounties that reward members additional tokens. Members can also choose to delegate decision-making to other DAO members.
- Transparency
Every action and transaction within a DAO is public. The governing rules are set in open-source code that cannot be changed without the consent of other members. All financial transactions require member consensus to proceed.
- Open Governance
All decisions in a DAO are determined by its community and the process is often as simple as one token, one vote. However, the community can agree to any form of governance – from plutocracy to holacracy to a republic – and then encode those rules.
- Sovereignty
DAOs work across national boundaries and markets. This permissionless approach breaks down barriers that previously kept people from collaborating and allows communities to unite in formal collectives around global interests and issues.
We’ve taken a brief look at DAOs in this article. Next, we’re going to look at DAOs that are already making an impact across the globe. Stay tuned for part 2 where we look at DAOs in action and what is needed for them to succeed.
About AIKON
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