The Future of Work could be DAOs

What is a DAO?

The term ‘decentralized autonomous organization’ also known as DAO was coined by Vitalik Buterin, one of the cofounders of Ethereum. DAO is a voluntary organization with core functions that are automated by smart contracts to finance projects, govern communities and provide incentives using Web3. Ironically, the concept of DAOs was found relevant when Bitcoin had challenges to address the block size issues, and due to its ‘decentralized nature’, it was hard for the Bitcoin community to agree on how to go about in addressing the block size debate as the Bitcoin ‘mining’ community were incentivized to support bigger blocks, with the Bitcoin ‘developer’ community more focused on increasing Bitcoin’s block capacity with SegWit.

A DAO is a virtual entity that can have a certain set of members having rights to spend the entity’s funds and modify its code -to manage assets, build protocols and vote on community matters without the need for underlying legal or traditional banking setups. Members of a DAO have ownership in the organization via its token, which often simultaneously acts as a right to govern the DAO. Though it is still early in the evolution of DAOs, it has surpassed 1.6 million in membership?in December 2021, up 130-fold from just 13,000 members in January 2021.

MakerDAO was the first real use-case of DAO, which created a stablecoin (token whose value is pegged to the US dollar) by leveraging the power of three tokens: DAI (stable), ETH (collateralized) and MKR (govern). DAI was issued as a debt and required ETH as a collateral. In this use-case, the governing token (MKR) gave users voting powers and incentives to make the right decision on certain risks parameters and iterations on product roadmap. MakerDAO’s governance model has been adopted by many protocols, with Tron DAO’s algorithmic stablecoin (USDD) recently shifting gears towards a hybrid model with improved transparency to avoid a possible collapse like Terra Luna.?

Why create a DAO?

· Growth incentive = give DAO equity for usage, referrals, social media activity

· Collective action = resource building, advocacy, co-marketing, standard creation

· Status systems = private communities with public display of membership

· Labor equity = share financial upside and governance with platform workers

· Liquidity = package assets to be traded on crypto exchanges, e.g. IP rights

· Investment = find, fund, and promote winners together: startups, tokens, NFTs

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DAOs impacting the Future of Work

The traditional way to make money was “work-to-earn,” but the future of income is “X-to-earn” — listen to earn, play to earn, learn to earn, create to earn and so on. Hence, DAOs expand the various types of opportunities to earn income, particularly for content creators, with people being able to discover new job opportunities based on their on-chain history, ownership, and reputation.?Smart contracts will automate a big portion of a DAO’s core function, leaving work that is clearly defined, functionally specialized, and well captured through ‘bounties’. ?

The Gig economy will have a huge impact on the future of work as people now have more flexibility in their employment by embracing a more creative and efficient work life, taking on short-term work at will or need. However, during the pandemic, Gig economy workers struggled with a shared set of challenges: insecurity, anxiety, low wages, and high costs. A DAO has the potential to change that. Gig workers worldwide can create a DAO to serve their own interests and even issue their own token, wherein each worker can hold and use for governance purposes. As a result, workers can gain as much flexibility as they want with the algorithm running the DAO structured towards the needs of the workers themselves, rather than a centralized corporation.

The Gig economy could also take advantage of DAOs through a “contribute-to-earn” model wherein DAOs will reward Gig workers based on the value they bring to the project. This means that everyday actions that are valuable to a network will be turned into income-earning opportunities, which in turn could make “yearly” performance reviews irrelevant as workers get instant gratification, rewards and credibility through their ‘proof-of-work’, which is voted and governed by DAO members.

DAOs still have a long way to go!

DAOs could just be this bright new future for how people organize each other, come to a consensus and coordinate activities toward shared goals. ?However, most DAOs are currently relying on a mix of Web2 software that was not optimized for DAOs. Twitter co-founder, Jack Dorsey, recently announced his new vision for a decentralized internet layer by leapfrogging from Web 3 to Web 5, which will focus on returning ownership of data and identity to individuals instead of venture capitals. As we saw with Web1 to Web2, these dramatic changes do not occur overnight and there will be multiple technologies that bridge Web2 to Web3 to eventually Web 5 -to enable wider consumer adoption and make solutions easier to use.

Hence, it would be wishful thinking to assume that every single member in a DAO will be able to make a living through the “X-to-earn” model as it’s all about “rewarding value where it is created”. Creators will need to find audiences, game players will need to achieve outcomes, and bounty-hunters and contributors will need to create an impact.?It’s still ambiguous how DAOs will operate within the world of Web3 to “incentivize collaboration” as some members might go after short-term gains at the expense of the long-term survival of the DAO (especially if they are members of multiple DAOs). Many DAOs are also realizing that their financial resources are dwindling as the bear market continues to drain their treasuries. Although teams need resources to continue building, the temporary effects could cause even more sell pressure in a market struggling to stay afloat -which in turn could lead to DAOs dumping their tokens to ensure the longevity of their protocols. Therefore, it is critical for token and governance incentives to be structured in a way that mitigates for all these potential issues.?If not, DAOs could end up simply being a buzz word in the Web3 world.