Problem: Every once in a while, I scroll through my old published and unpublished blog posts to see what I was thinking at a particular moment in time. This post is heavily inspired by what Dark Star argued in his April 20, 2021 post on Mirror, Substack vs. DAOstack.
In it, he argued the following:
Here in our dimension, we are in the midst of a wave of venture investing in the creator economy. Companies building new platforms for writers, artists, and other makers are closing huge rounds from A-list investors. These investments are driving much-needed product innovation. Even more importantly, they are increasingly providing the financial subsidies necessary to transition people from employment to independence. But these platforms depend on brilliant creators, and they depend on the users who are loyal to them. Without their buy-in, none of it works, at least, not for long. It’s quite possible that the decentralized ownership model enabled by DAOs and DeFi can perform as well or better as the venture one, while providing those stakeholders with a seat at the decision-making table and a piece of the pie. Why not an OnlyFans owned by the performers? Why not a Clubhouse governed by the influencers?
What if every business, product, or service you used was owned by the community?
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Solution: Throughout COVID, the rise of decentralized autonomous organizations (DAOs) revolutionized the thinking for how businesses could operate. Proponents argue that by leveraging blockchain technology and smart contracts, DAOs have the potential to transform the traditional hierarchical business structure into a more transparent, open, and participatory model.
For those who don’t know what a DAO is, here is a quick description of it.
Transparency and Trust: DAOs operate on a decentralized ledger, ensuring transparency and reducing the need for intermediaries. All transactions and decisions are recorded on the blockchain, enabling stakeholders to participate actively, fostering trust among participants.
Inclusive Decision-Making: DAOs allow for decentralized decision-making through voting mechanisms that empower community members. This inclusive approach increases engagement, accountability, and responsiveness to stakeholders' needs, ultimately leading to better decision outcomes.
Efficiency and Scalability: Smart contracts automate key processes such as fund allocation, governance, and resource management within DAOs. This eliminates the need for middlemen, streamlines operations, and ensures greater efficiency and scalability.
Global Collaboration: DAOs are not bound by geographical constraints, allowing a global community to participate and contribute. Decentralized collaboration widens access to diverse talent pools, expertise, and resources from around the world, fostering innovation and accelerating growth.
Resilience and Security: DAOs leverage blockchain's decentralized architecture, making them resistant to single point failures. This distributed nature reduces the risk of system failures, cyberattacks, and corruption, ensuring the security and robustness of the network.
So what would it look like for a business to be run completely decentralized, especially a creator economy business?
Potentially this could (1) provide financing without intermediaries allowing for final inclusivity outside of the banking industry. (2) potentially foster a vibrant and engaged community by incentivizing participation and contributions. For example, reward mechanisms such as token-based economies and governance rights could motivate stakeholders to actively contribute their skills, knowledge, and resources. (3) create a well-defined governance structure that outlines the decision-making process, voting mechanisms, and dispute resolution mechanisms.
However, that doesn’t mean that it would be easy. Dark Star ends his post on Mirror with the following:
Decentralization doesn’t eliminate the hard problems. It doesn’t wish away wars over values; hierarchies of professional vs amateur; the challenges of developing and nurturing talent. And, token-based governance isn’t necessarily going to reach the best or most ethical solutions. But the participatory purpose of a DAO makes the debates around these issues transparent. They make them a matter for the community. Instead of having ‘management’ struggle to accommodate different constituencies, the costs/benefits tradeoffs are born by the community directly and managed by the community itself. DeFi, by reducing the transaction costs and creating the infrastructure needed to operate such a system finally enables true community-run organizations.
Contributed by: Michael Bervell (w/ some AI help!)