Decentralized Autonomous Organizations (DAO) is an organization that is completely defined online with all its rules and regulations written in smart contracts. It can hire humans to do the work it cannot do itself and can pay them through their internal capital. The tasks can be defined by participants in the DAO through votes. As Don and Alex Tapscott have mentioned in their book Blockchain Revolution, DAO can increase speed and reduce costs for businesses such as the expense of searching for talent, contracting, coordination and building or rebuilding trust.
DAO is a heavenly state for the preachers of open-society and the everything-transparent enthusiast. Where autonomy removes the labor of menial tasks from the periphery, the DAO attacks the core and removes the hierarchy, bureaucracy, and red tape from above. On the outset, it is a much needed and desirable state for all. But a deeper look can reveal the inherent dangers and consequences of DAO in practice.
Let’s take a step back and see why we would like to replace the existing centralized systems – almost everything we do in our daily lives is centralized, from bank accounts to government taxation, from immigration to police, from money transfers to real-estate deeds and from personal wills to the entire democratic process. The current centralized system offers multiple disadvantages like privacy concerns, corruption at all levels or simply deceit and accidental or intentional loss of data (someone wiping off the entire bank’s database). To avoid these problems and improve upon them, we seek DLT (Distributed Ledger Technology) with blockchain, where we can trust the un-trusted through algorithmic consensus verified by a cryptographic proof/work. DAO is a mechanism to realize this approach but it can backfire by the virtue of its very design that we all strive for. For example, in case of a fraud or default, how do you make someone responsible when DAO has unknown creators? If we consider DAO as a property and punish it, then why would the participants of DAO be punished for the crimes they have never committed (a bug in the code?). And how about the sociological underpinnings that arise because of DAO, as described by T. Gillespie in Relevance of Algorithms, such as patterns of inclusion, cycles of anticipation, evaluation of relevance, promise of algorithmic objectivity, production of calculated publics and entanglement with practice.
Let’s look at some examples for businesses, governments and criminal organizations.
For business, it has a strong positive case in general, where the whole organization would be working as a self-organized swarm system (as we have flocks of birds or schools of fish in nature) where autonomous parts/roles of the organization can contract the work out to individual participants and workers on blockchain and bind them through smart contracts. For example, we can see an example of a bank giving a loan to build a house – it can contract the house building work to multiple contractors from painting to labor and from carpenter to blacksmith – once the individual players satisfy the state/work requirements, the money would automatically release to their respective accounts. We can place a complete supply-chain of our products on blockchain (as one company Provenance is doing). While it offers great transparency and financial fiduciary oversight, it can expose business secrets and cost margins to public in open, it can also attract hackers and malicious users to trick the system for corporate espionage and data breach.
For governments, DAO is a hard case to prove either way. On the one hand, it is good to remove the bottlenecks and disadvantages of a closed-centralized system and offer transparency, but on the other side, there are a lot of things in governments that cannot be open, i.e. those related to state secrets and strategic and military advances over enemies. Carrying out these processes though DAO will call for unwanted attention from both friends and foe.
For criminal organizations and drug cartels, DAO is the best thing that comes from the sky. They can maintain the loosely coupled control they all want (in case of arrest) so others can carry forward the organization and it would make it very hard to prove any wrong doing by a specific person in the eyes of court. In the paper, Ring of Gyges, the authors have presented a case of Crime-As-A-Service and it is pretty much a clear strategy to do illicit activities on blockchain using DAO and be less vulnerable to existing policing and law enforcement systems. We have the examples of SilkRoad, DAEMON, Beaver and other Darknet marketplaces that would deal with illicit drugs and criminal activities without the fear of getting caught. Far greater surveillance and regulations are needed for DAO when it comes to criminal activities.
One thing that stands out is the jurisdiction of DAO. Businesses, governments and crimes operate in certain geography with their own local laws and rules; one thing might be illegal in one place and completely legal in another place. DAO by design is a borderless organization and it would be a challenge to keep it under law for adjudication. We need to define a universal law for DAO before we can move further.
I’ve recently published a book — Introduction to Blockchain with Case Studies and it’s available from Amazon worldwide, Gufhtugu Publishers in Pakistan and here is my Urdu Book (بٹ کوائن، بلاک چین اور کرپٹو کرنسی) on the subject as well.