What’s a DAO? It stands for decentralized autonomous organization. It’s thought to be the future of the firm. Instead of a corporation that issues contracts with employees, a DAO folds all those contracts into the blockchain using smart contracts. The rules are encoded in software and enforced by software.
Crypto natives are turning to DAOs to figure out how to collectively manage all the assets they collected, and want to collect in both of those earlier waves. This has created interesting new situations.
For instance, the first DAO was conceived as a sort of venture fund on a blockchain. People could buy into the DAO with Ether and receive tokens in return. These tokens granted them membership and the ability to vote on key DAO decisions, such as what it should invest in to make a return for members.
Here’s Olaf Carlson-Wee, who famously parlayed a Vassar sociology degree into a gig as the first employee at Coinbase—and now a crypto hedge fund called Polychain Capital with over $300 million under management—on the idea:
“I like to call these internet sovereign corporations, because I think that sometimes this idea of DAOs or Decentralized Autonomous Organizations, people often think about, sort of a community governance system. In this case, I'm really talking about what might be what you might call like a capitalist entity, where it's actually trying to go out and accumulate capital and then use that capital to actually grow the amount of capital that it's managing, very much in the way that a traditional corporation would.“
From the ashes of The DAO, come DAOs
While the first DAO imploded because of a loophole in its code that was exploited, its vision lives on. Vibrant communities have sprung up in crypto today that organize themselves as DAOs and who pool their collective funds in DAO treasuries. The members then propose and vote on how to spend those tokens.
These community-centric DAOs have now attracted the attention of VCs—the people that the first DAO was supposed to emulate. It seems the VCs themselves recognize that DAOs could make wiser investment decisions than them, and that the utility created by these communities could itself generate outsized returns.
One example is Sushiswap, a decentralized exchange. It’s a DAO with some 60,000 token holders. These token holders had to make a decision when prominent VCs came knocking, asking for a chunk of Sushi tokens in return for cash. Instead of the Sushi founders (who are pseudonymous cartoon characters, with names like 0xMaki) pitching the VCs for the funding, it was the VCs cajoling the community to agree to their terms.
Something similar happened with a DAO called FWB, which stands for Friends With Benefits. It’s been described as a sort of internet Soho House (but without the house), where designers, musicians and the odd famous name, like Linkin Park’s Mike Shinoda, hang out. You have to hold a certain sum of FWB tokens to gain access to the cool channels on Discord, where all the activity takes place.
Some of the world’s biggest name VCs, including Andreessen Horowitz partner Chris Dixon, wanted in on the action. They found themselves pitching FWB holders on a live Discord voice-chat to buy a chunk of FWB, that would value the community at $100 million. The community ultimately approved the sale, and the process sent the token soaring from $10 to nearly $200 in weeks.
Discipline and governance
But all of this proposing, evaluating pitches, and interminable discussing and forum posting seems like an awful lot of work. In fact, much of the participation in DAOs revolves around jumping on Zoom calls (“community calls”), making sure to read forum threads and post thoughtful replies, and checking DMs to make sure you haven’t missed any of your DAO member duties.
If all of the above sounds awfully like the bureaucracy of governing, you’re probably right. At this point, it might be helpful to invoke Michel Foucault (bear with me!) to help us think about this supposedly new paradigm where anyone can be a part-owner, part-worker in a DAO. Foucault told us about “governmentality”, the idea that governing is not limited to governments. Instead, societies are governed by a set of institutions, processes, and other mechanisms that cause people to behave in certain ways. Governmentality is the “game of government”.
The key thing about Foucault’s notion of governmentality is that it’s dispersed. Instead of people doing things only because of coercion by the state or a mega corporation, governmentality explains that people also choose to exert discipline on themselves. When members of DAOs take it upon themselves to participate in governance using their tokens, they are also manifesting the processes of governmentality. Foucault’s explanation around the “disciplinary power” that individuals exert on themselves is instructive here. This critique explains:
“The focus remains therefore on the mundane; on ‘meticulous, often minute techniques’, which control the behavior of a collective. In this governmentalized space, tactics – and not laws – are what is important to observe the relations of power that produce governor/governed identities.”
If we view DAOs and the bureaucracy of administering and governing them through Foucault’s lens, we end up with a picture that looks less like the future of work, and more like the work of governmentality conducted over the internet.
So members of a DAO may not be themselves a government, at least not of a nation-state, but neither are they rebels against government, despite what they would tell you about reinventing work and society on a blockchain. Instead, they discipline themselves, stick to meticulous bureaucratic routines, and become themselves agents of governmentality.