The previous entry is here.
It is difficult to give a precise definition of DAO. Let us assume that an organization with the following characteristics is DAO.
The decision-making targets of DAO are listed as follows:
- Quantity and quality of product and services
- Participation and exit of members
- Update policies and conflict resolution
The decision-making methods of DAO have the following characteristics:
- There is no centralized institution or individual.
- Members make their own decisions separately.
- Decisions are automatically aggregated and applied to the system.
For now, use these characteristics instead of a definition.
It is easier to grasp the feel of the DAO with concrete examples. The Bitcoin cryptocurrency is issued by people or companies called “miners” worldwide. There is no central bank or government agency that controls the total amount of bitcoins produced. Nevertheless, its operation = the production and exchange of bitcoins persists and will continue to withstand attacks.
Bitcoin does not have an automatic coordination system for resolving disputes or determining update policies. Stakeholders are discussing and voting outside the system. In Bitcoin, there is no enforcement mechanism to implement the outcomes of decisions. Members who are dissatisfied with the voting results will split the system (hard fork) on their own and start a new one.
Many people now buy and exchange Bitcoins through traditional centralized corporate organizations called “exchanges.” Initially, Bitcoins could be transferred directly by their owners without exchanges. There was no need for a centralized exchange. In recent years, decentralized exchanges have sprung up. A peer to peer mechanism has been created to find parties to trade with without exchanges.
The DAOs functioning at the moment are mostly related to such virtual currencies. Nevertheless, essentially, many of the tasks that an “organization” is capable of doing can be decentralized, and the development of such technology is underway.
The definition and characteristics of DAO are too abstract, and participation is still irritable. r/place, a 2017 experiment, is an excellent place to get a feel for what DAO can bring.
r/place is a system that allows sharing a white canvas on the web, and everyone can draw one pixel of color on it separately. The system is not particularly collaborative, there is no guarantee to get a meaningful image. Nevertheless, the animation becomes complex when we try it, with a tug-of-war between cooperation to draw a significant shape such as a portrait or a flag and activity to destroy it.
In r/place, coordination is achieved by letting everyone view a single picture. Anyone can overwrite the pixels drawn by others at any time without permission. A DAO with extremely simplistic governance might work like this.
DAO-based virtual land systems typically use their tokens to trade land. The computation employed by r/place in the backend is not decentralized. Thus, r/place is not a DAO. It is, however, an illustration of the panoramic glimpse of what is supposed to happen in DAO.
Many DAO-based virtual land systems try to mimic reality and encourage speculation (i.e., rising land prices) by forcing the land to be scarce. A design that utilizes the fact that participants can create any amount of land in virtual space would have more potential.
Text: Asaki NISHIKAWA