No CEO needed: These blockchain platforms will let ‘the crowd’ run startups
Back in May, I wrote about the concept of DAOs, decentralized autonomous organizations capable of running themselves thanks to blockchain technology — no CEO or C-Suite needed. At the time I was writing, there were a few people in the blockchain community testing out the idea but no strong efforts underway. That was six months ago.
As anyone in the crypto space will tell you, six months is a really long time. Today, a market for DAO platforms is emerging, complete with teams, funding, development, and initial implementations.
This is a category worth paying close attention to because it represents the much larger, more powerful shift that blockchains enable. The Bitcoin and alt-coin bull market are fun to watch, but it’s the new business models — and even societal models — that crypto enables that will be the real disruption.
DAOs solve some pretty interesting problems. In today’s centralized organizations, it is difficult and expensive to get large groups of people to work well together to complete a task. Traditionlly, only governments, the military, and global corporations have the money, people, and infrastructure to take on huge projects.
Numerous studies explain the various challenges of coordinating large groups. These include motivation cost (aka “social loafing”), relational loss (you feel less connected), and coordination cost (keeping three people up to speed is a lot cheaper than keeping 3,000 people up to speed).
DAO platforms promise to reduce these costs by enabling the coordination of ever more complex activities among participants. In so doing, they could erode the competitive advantage of a traditional, hierarchical, centralized organization.
DAOs work by turning the current rules that govern businesses into software code, reducing friction in operation. Even better, because they are software, they can be upgraded, modified, and instituted much faster and at lower cost than a traditional reorganization or restructuring.
The reduced coordination costs will have two sets of implications.
First, they will enable an entirely new set of “blockchain-native” organizations to emerge that have a cost structure advantage over traditional, centralized organizations.
Second, they could eventually disrupt the $42 billion enterprise resource planning (ERP) industry, where giants like SAP (20 percent), Oracle (13.9 percent) and Microsoft (9.4 percent) reign supreme, and disintermediate other markets, including lawyers and accountants who are normally involved in a corporate setup process.
A startup might normally need days or week to draft legal documents, assign option or share ownership, begin fundraising, and set up business rules for coordinating efforts internally and externally. With a DAO, you can implement all of that over a working lunch.
Aragon, Colony, and District0x are three of the open-source blockchain projects currently leading the charge in this space.
Aragon’s vision is to make new company setup a plug-and-play experience. It offers any would-be entrepreneur the ability to set up company ownership (via tokens), issue tokens, and raise funds for a project in a matter of minutes. And you can set rules for the new company’s governance by creating rules for which tokens have voting rights and what percentage of tokens need to vote on a motion, project, or rule for it to become law. You can also set rules for token vesting schedules.
Holders of your new company’s token — presumably your employees and investors — stand to benefit financially as the new entity gains traction. Whereas the value created by companies that run SAP accrues to SAP, here the value goes to the token holders who have a direct interest in improving the functionality and efficiency of your company.
You can play around with the Aragon software (available for Windows, Mac, and Linux as well as a web version). The alpha runs on Kovan (and Ropsten) TestNets, and a new version is coming soon, according to the project team.
