Decentralized Autonomous Organizations

on

By Paul Kohlhaaspaulkohlhaas@gmail.com

“[A DAO] is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that

the automaton itself cannot do”V. Buterin (2014)

“It is a new breed of human organization never before attempted. The DAO is born from immutable, unstoppable, and irrefutable computer

code, operated entirely by its members”The DAO (2016)

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What is a DAO?• Distributed across the internet without

centralized authority • Allows human organization and

intervention without third-party trust• Governance and rules enforced via

incorruptible code and smart contracts• Risk/reward schemes with programmable

incentives• No formal legal or physical representation• Ownership via cryptographic tokens fueled

using Ether

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DAO Quadrant

Source: V. Buterin (2014) https://blog.ethereum.org/2014/05/06/daos-dacs-das-and-more-an-incomplete-terminology-guide/

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Digix DAO

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The (slock.it) DAO

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Use case: Overview• Building the «Standard DAO Framework»?• Establishing industry standard, however, many models will

emerge• Organized via slockit.slack.com, reddit and github• Open source code freely available

Three entities:1. Token Holders (Investors)2. Contractors (Service Providers)3. Curators (Auditors)

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1. Token Holders• During Creation, anyone

can send ETH to The DAO and become Token Holder

• Token Holders have the right to vote on proposals

• They can receive rewards generated by output of the Contractors

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2. Contractors• DAO is essentially software and

cannot produce anything• Contractors submit proposals for the

deveopment of products or services• Proposals are in plain English backed

by a smart contract that defines the exact relationship (deliverables, responsibilites, parameters)

• Contractor is bound to the immutable smart contract, Token Holders can ‘pull the plug’ anytime unless otherwise specified in the contract

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3. Curators• Solve problem of completely

anonymous transactions within DAO and 51% attack

• Nominated by Token Holders• Curate the Contractor

address list• Confirm that published

contract matches source code of deployed contract

• Confirm identity of entities

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DAO

Token Holders

Normal Economy

Contractor A

*No traditional jurisdiction*Governance by code*Transactions in cryptocurrency

*National and international jurisdiction*Governance bound to laws*Transactions in fiat currency

1. Proposal Build X at cost of Y

Contractor B

Contractor C

3. Vote & AcceptDAO accepts parameters of proposal A

2. Extends Proposal Crypto Economy

Curators

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Curate ETH Address list, check proposals

Users

ETH/$$/ETH 4. Contract

Commencement5. Product/Service Delivery

ETH/$$/ETH

Source: Own illustration

Splitting The DAO

The DAO

DAO 1 (55%)Accept A

DAO 2 (40%)Reject A

DAO 3 (5%)Payout

DAO 1.1

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Proposal A

DAO 1.2 Rewards?Proposal B

DAOs as Decentralized Fund Managers• DAOs present the emergence of an entire new class of participatory

financial assets• A venture capital firm is not a venture capital fund. The firm manages the

funds it is entrusted with.• The DAO in itself is not a fund. It is software that manages the funds it is

entrusted with.• Instead of the Fund Managers getting significant share of profits, all profits go to

the Token Holders Distribution of wealth• The DAO produces and manages unique tokenized assets which represent

investor holdings and their rewards. It allows people to come together, and vote on how resources will be allocated and benefits gathered.

• Similar to a VC, the DAO continues to exist after the ETH is spent to manage the assets it now owns

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Future of DAOs• Governance Models• Governance Interfaces

• Boardroom• Futarchy

• Legality of a DAO • DAO Splitting/Sharding• DAO ICOs and Token Trading• DAO, Blockchain and Artificial Intelligence

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Q&A

• Resources• Reddit

• r/ethereum• r/ethtrader• r/thedao

• Github• https://forum.daohub.org/• Medium

Contactpaulkohlhaas@gmail.com074 078 6005Skype: paul.l.kohlhaascharitychain.org

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