The State of DAOs

Since 2016 and the fall of the DAO project, spotlights on DAOs have silently faded until 2019, when it started to gain traction again. During this period of what we call the ‘winter of DAOs’, there was and there still is a general sense of trauma revolving around DAOs and the idea of decentralizing organizations with the help of smart contracts.

In the ‘Beginners Guide to CBDAO’ article, we have explained the term DAO, in layman’s terms, to be an organization which is governed and managed by all members as opposed to having a select few entity or individual(s) governing and making executive decisions indefinitely.

However, this definition does not do justice to the overall concept of DAOs. There exists some room for debate as to what exactly a DAO is and how it operates. Philippe Honigman from DAObase states that each of the words in the term DAO, “can be interpreted in many ways, spawning different definitions of DAOs with emphasis on one aspect or another”.

For instance, the word ‘decentralized’ in the term ‘DAO’ may contain varying meanings as the word does not fully indicate or consider the level of decentralization used on its consensus protocol (these levels are described in the Beginners Guide to CBDAO article). Honigman (DAObase) describes the word ‘decentralized’ to have two varying meanings when it comes to DAOs and these are:

• The DAO is decentralized because it runs on a decentralized infrastructure.
• The DAO is decentralized because it’s not organized hierarchically around executives or shareholders, and it does not concentrate the power around them.

As such, it is not right to assume all DAO projects to be completely ‘decentralized’ and ‘autonomous’.

So what exactly is a DAO and how can we better describe the term?

To be able to better understand the term, we will have to briefly learn about the history of DAOs and how they emerged. The concept of DAOs were first introduced by Dan Larimer back in 2013 as he was describing Bitcoin to be a ‘Decentralized Autonomous Corporation’, whereby its shareholders would be the holders and its employees would be the miners.

For something to be considered a ‘DAC’, it must have the following measurements met:

• A DAC must not depend upon any single individual, company or organization to have value.
• A DAC cannot control a private key because it cannot hold secrets. Its operation must be entirely independent of any actors with secrets.
• A DAC must not depend upon any legally binding contracts or laws such as copyright or patents.

DAOs work in the similar sense that:

• It should not depend upon any single individual, entity or organization to have a value.
• Its operation (governance) must be independent of pressures from an individual, entity or organization.
• It should not depend upon any legally binding contracts or laws.

Now that DACs were a ‘thing’, the blockchain community moved on to discuss about how these DACs could be governed better. Here’s where Vitalik Buterin (Founder of Ethereum) first introduced the idea of a resource-democracy voting mechanism, while he was still working as a writer on the Bitcoin Magazine.

“We can use some kind of resource-democracy mechanism to vote on the correct value of some fact, and ensure that people are incentivized to provide accurate estimates by depriving everyone whose report does not match the “mainstream view” of the monetary reward.” — Vitalik Buterin

As such, an incentivized governance protocol was first introduced for DACs. Ever since, many different types of consensus protocols have emerged and DACs have evolved to become DAOs.

Philippe from DAObase explains that as of today, there are two dominant types of DAOs — protocols and collectives.

“Protocol DAOs enable interested parties to make collective decisions regarding the critical parameters of a crypto-network based on an open-source protocol: blockchain protocols such as Tezos or Decred, financial protocols such as Compound, DeversiFi or Maker.

Collectives are closer to traditional organizations: They have a smaller number of active members and a wider range of activities than protocol DAOs. 1Hive, dOrg, or MetaGame are examples of collectives that use DAOs to be more transparent, more open, more flexible and fairer towards their members than usual corporations.”

He further indicates that “there is no such thing as a pure “Decentralized Autonomous Organization”. DAOs are imperfectly decentralized, very moderately autonomous, and hardly comparable to organizations in the traditional sense”.

DAOs are less a thing than a gradual, dynamic process. — Philippe Honigman

Here are two videos you should watch to provide yourself with a better understanding of the term. In these videos, Aragon and DAOstack both try to explain what a DAO is and how they operate. Notice that there is a difference in their tone and explanation of the overall concept of DAOs. Aragon explains it to be a ‘fight for freedom’ in decentralizing what can be and should be decentralized whilst DAOstack describes it to be more of a ‘collaborative experience’.

https://www.youtube.com/watch?v=AqjIWmiAidw

https://www.youtube.com/watch?v=25wtmzBG1Yg

If you are still unsure about DAOs, it is recommended that you read the following articles which comprehensively covers the concept and definition of DAOs.

What can we do with a DAO in 2020?What is a DAO? An attempt to clarify a complex ideaBootstrapping A Decentralized Autonomous Corporation: Part IDAC RevisitedHow the term DAO applies to Coin Breeder

Coin Breeder DAO (CBDAO) can be seen as a hybrid of the protocol-type and the collective-type of DAOs, whereby it functions just like a traditional organization with the ability to make collective decisions regarding the critical parameters of the crypto-network ($BREE token) with an open-source protocol (the $BREE token smart contract).

As Philippe explains above, “there is no such thing as a pure “Decentralized Autonomous Organization”. This statement can be similarly applied to CBDAO in the sense that complete ‘decentralization’ and ‘autonomy’ can’t be met due to the nature of the $BREE tokenonomics — e.g. determining farming rates for each governance asset (an off-chain oracle and manual review is required). However, attempts to reach pure ‘decentralization’ and ‘autonomy’ are in the scopes of our roadmap and it should be noted that it is indeed one of our core priorities (roadmap can be viewed here).

CBDAO’s Role in Researching DAOs

CBDAO will serve as the ultimate sandbox for DAO and blockchain researchers, developers and users to proof-test and experiment various consensus protocols on DAOs. Our main focus will be in experimenting consensus protocols and voting mechanisms to solve existing challenges and vulnerabilities in regards to governing DAOs (some of the issues have been outlined here). CBDAO will be publishing quarterly reports on these experiments, highlighting what we have learned and how things could be improved. Our ultimate goal and mission is to provide a wide range of fundamental reference points for future researchers and developers to save their time and risk less on experimenting and proof-testing various consensus protocols on a DAO. CBDAO will evolve with the community as we collectively experiment, learn and grow together.

Original Article Can Be Found On: https://medium.com/@coinbreeder/the-state-of-daos-1aecba88d9ed