Before the end of this decade, we will see DAOs bigger than entire nations states.
When you reduce them to their basic principles, DAOs are simply a new way to coordinate humans.
We have tribes, villages, cities, nations states, federations (USA/USSR/EU) and corporations.
These simply are ways to cooperate for humans, some with the aim to live together (tribes to federations) without the need to kill each other, others with the aim to create value and distribute it (corporations).
This, it turns out, is what made humans the undisputed rulers over less coordinated and intelligent animals.
There are animals which coordinate better, such as bees or ants, but their limited individual intelligence makes the collective intelligence they create, limited in scope: they are great in surviving millions of years (which we may fail to achieve) but don’t expect bees to ever come up with a computer.
DAOs are Decentralized Autonomous Organizations, and if this means nothing to you, take it as a good sign: every hugely impactful advancement in human history is too big to grasp at first.
Remember when the internet was supposed to be a better way to send faxes?
DAOs are like companies and nations states at the same time.
They seem to have the capability to coordinate human effort without the need for a hierarchical structure in which the profit generated percolates down to the base (employees) after being unevenly distributed to the top levels (CEOs, investors, managers and so on).
In DAOs the profit is immediately absorbed by the tokens and the value distribution happens instantly, it’s like an instant dividend.
In both cases the token holder have the option to exchange them for other crypto or even fiat to use to buy real stuff.
The tokens are like shares but, unlike shares, they are:
– extremely liquid: you can sell them any time, 24/7.
– distributed since before the project is even launched, and not just at the IPO event.
Tokens also give governance right to every token holder.
They can also be internal money one may use to buy the services of the platform.
Also, they may act as rewards points and cash-back: every time you use the platform, you get some of them.
They are interesting marketing tools, as we have seen in this last years via reverse airdrops (tokens given for free to the broader user base of crypto to attract attention and distribute ownership).
Perhaps the most important realization is that DAOs are internet native coordination tools.
Corporations were born centuries ago and simply adapted to the internet.
We have learned that native always wins.
What I am describing is a new technology (crypto) which is finding its first real-world use cases, and I think we are not ready for what’s to come, because it is simply too big to conceive.
DAOs will become bigger than nations states because their flat architecture, permissionless on-boarding makes them insanely scalable.
Nation states don’t really scale over a certain size: bureaucracy quickly becomes a problem with highly inefficient effects and also, well, you need land to grow, so unless you go to war there’s not much space for scaling.
The issue is, again, technical: the amount of data a nation state creates has somehow to be synthesized for the decision makers.
We don’t expect a prime minister, for instance, to read every single publication about the pandemic before taking a decision.
That information is digested and simplified, and often it loses its original meaning.
The issue is “information bandwidth”, in which information is squeezed and deteriorates on its way to the top.
Corporations suffer the same limitations: once they get too big we see how hard it is for them to adapt to the local environments, so usually they force a global model by sheer force (think Uber/Airbnb which ended up being banned in several places).
In DAOs information travels differently, in a very similar way it does in distributed networks, and this makes them probably better suited for human coordination at a scale we’ve never seen before.
Ghandi famously wanted India (huge) to be based on the self-contained concept of a village (small).
DAOs are in some regards close to this approach: a small Discord channel is often like a village in itself, but perfectly integrated in the main server.
Does it mean DAOs will rule everything and everyone? Probably not.
We still have tribes and villages today, which often are better tools for its members’ happiness than huge cities.
Cities are just stronger, they are not necessarily better.
What I am saying is that now we have a new tool at our disposal, and we may try to use it to solve problems we could not solve before because too big for the existing systems.
Maybe even climate change: nations states completely failed to coordinate on this one and since the outcome is the complete annihilation of human societies, I think it’s fair to say we need a new way to tackle this problem.
Who knows, let’s give it a try.