Distributed Autonomous Organization "Can you imagine a way of organizing with other people around the world, without knowing each other and establishing your own rules, and making your own decisions autonomously all encoded on a Blockchain? Well, DAOs are making this real. Wikipedia defines DAO (Decentralized Autonomous Organization) as an organization represented by rules encoded as a transparent computer program, controlled by the organization members, and not influenced by a central government. As the rules are embedded into the code, no managers are needed, thus removing any bureaucracy or hierarchy hurdles. Some of today's internet users and the next generations are looking forward to starting social organizations, searching for an answer to: “How can we exchange values in a trusted environment?” Blockchain enables automated trusted transactions and value exchanges, but even so, internet users around the world want to organize themselves in a “Safe and effective way to work with like-minded folks, around the globe”, according to Ethereum Bitcoin is generally considered to be the first fully functional DAO, as it has programmed rules, functions autonomously, and is coordinated through a consensual protocol. Of course, not every DAO has been as successful as Bitcoin. In May 2016, German startup slock.it launched the creatively named “The DAO” in support of their decentralized version of Airbnb. At the time it was a great success with a crowdfunding campaign that raised over $150 million worth of Ethereum. Unfortunately, the code they used in the DAO had certain issues. So inevitably in June 2016 hackers managed to siphon off $50 million worth of Ethereum from the DAO before it was stopped. Even though the fault was in the slock.it code and not in the underlying technology, the hack did undermined some people’s trust in both the Ethereum coin and DAOs in general. But today, due to the explosion of Decentralized Finance (DeFi) during 2020, has led to a rise in renewed interest in DAOs. Now that you have a better idea of what DAOs are, it is important to understand more about their background and characteristics to appreciate the whole picture of what is turning traditional forms of organizing upside down. What Makes DAOs Different? A DAO’s financial transactions and rules are recorded on a blockchain. This eliminates the need to involve a third party in a financial transaction, simplifying those transactions through smart contracts. The firmness of a DAO is a smart contract. The smart contract represents the rules of the organization and holds the Organization’s storage. No one can edit the rules without people noticing, because DAOs are transparent and public. Up to today we are used to companies backed by legal status, a DAO may perfectly function without it as it can be structured as a general partnership. In comparison to traditional companies, DAOs have a democratized organization. All the members of a DAO need to vote for any changes to be implemented, instead of implemented changes by a sole party (depending on the company’s structure). The funding of DAOs is mainly based on crowdfunding that issues tokens. The governance of DAOs is based on community, while traditional companies’ governance is mostly based on executives, Board of Directors, activist investors. etc. DAOs’ operations are fully transparent and global, meanwhile, traditional companies’ operations are private, only the organization know what is happening, and they are not always global. Fully Functional DAOs DAOs need the following elements for being fully functional: A set of rules to which will operate, a funding like tokens that the organization can spend to reward certain activities to their members, and also to provide voting rights for establishing the operation rules. Also, and most important, is a well and secure structure that allows every investor to configure the organization. One potential problem with the voting system is that even if a security hole was spotted in its initial code, it can’t be corrected until the majority votes on it. While the voting process takes place, hackers can make use of a bug in the hole of the code. How Are DAOs Being Used Today? So far DAOs are being used for many purposes such as investment, charity, fundraising, borrowing, or buying NFTs, all without intermediaries. So you can have a better idea, for example, a DAO can accept donations from anyone around the world and the members can decide how to spend donations. Can you imagine being a co-owner of an Artist’s song by just using cryptocurrency on an internet-based organization? In May 2021, Jenny DAO acquired its first NFT, an original song of Steve Aoki and 3LAU. This DAO is a metaverse organization that provides fractional ownership of NFTs. Its members will be able to oversee the purchase of the NFTs and Unicly protocol’s smart contracts control the vault where these NFTs will be added. The Metaverse Is Changing Business As We Know It DAOs envision a collective organization owned and managed by its members with all of them having a voice. Many analysts and industry insiders affirm that this type of organization is coming to prominence, even potentially replacing some traditional companies. Businesses and brands need to stay abreast of current trends that could impact how they engage with consumers and how consumers interact with them. While DAOs are not ubiquitous yet, they do seem to be picking up steam with many creators." by Cathy Hackl https://www.forbes.com/sites/cathyhackl/2021/06/01/what-are-daos-and-why-you-should-pay-attention/
It will never work. If humans could and would follow rules without supervision, then we would all not need a supervisor or boss. Most people get done nothing without supervision or they overstep boundaries without a corporate cop or regulatory cop watching over them. The concept sounds interesting but like communism it makes tons of erroneous assumptions. Most humans don't behave according to what those neat white papers suppose humans to behave.
Think of it as a contract executed by a computer rather than by people. There are no grey areas except for bugs.
Sure, at some point that might be realizable but we are far away from that, many years at best. Currently no employer that employees remotely working employees operates such system of computerized supervision. The mapping of performed work to a quantitative scoring model simply does not exist. Humans still evaluate performed work. It's all centralized because such mapping does not yet exist. I get the point and it makes sense to score performance electronically but we are not there yet. For example, how do you quantify the manuscripts or drafts of an author or writer? How do you quantify programming code quality, efficiency, and productivity? Most software that touches on this issue is rudimentary at best. The problem with this entire crypto and blockchain space is that it offers an operational backbone when the most important component, the decentralized and algorithm based proof of work does not exist and won't exist for some time. How does an algorithm value art, music, basically anything human created?
Lol. “If debugging is the process of removing software bugs, then programming must be the process of putting them in.” Edsger Dijkstra
you're misunderstanding or I'm misunderstanding... imagine you have a contract you sign between two people. the contract says if party A does X, party B must pay Y. Let's say that X = creating a work. Your question is then: "how do we know that X is done?" when challenging the contract. The "answer" in this parlance is an oracle. So you have some arm's length third party that decides. Similar to a judge. These judges are built in to the system and are not used ONLY in the case of a challenge, they are _always_ used. A simple contract could be that "When the price of oil goes above $85, party B must pay $10 per contract. For this option, party A receives $100 up front". To support this contract, the code would be written such that is done today with centralized brokers: they do it against your portfolio, or margin. So you would have to deposit some standard deviation against the price of oil to cover your potential losses and earn interest against it. The price of oil is provided by an oracle that is agreed upon in the contract. The thing is that this entire thing can happen without intermediaries. Peer to peer. The problem of course is that implementation of such a contract will no doubt be buggy and leave no recourse to either party. Theoretically though, it is cyberpunk utopia.
You did not explain how the core is ever supposed to work. Signing an agreement between two parties is always decentralized by nature, already now. How does each member of the party verify that the contract terms are fulfilled? Like a work contract. My point was that this is currently impossible to do and is the most important part. It's easy to sign some contract on the blockchain, even I can implement that in one afternoon. What you describe is like accepting a job offer. That was the easy part. Now comes the delivery of work and the verification that the work meets the agreement and expectations. Your example is an extremely simplified version. Most contracts cannot be validated with a simple if x greater y then z. Also your example would be extremely costly in the economic system overall. The entire point of a centralized system is that can facilitate "trust". If the clearing house ensures there is a bond posted by counterpart A and with B and C and D then A and C and D and B and B and A and so on can freely engage in business. Not so with a decentralized system. Each and every single time a bond must be posted and released in tranches to fulfill a certain contract obligation. But I am sure the monetary and contractual part can be easily solved on the blockchain. I remain highly sceptical about the verification of contract fulfillment. That is currently impossible and will be impossible for a long time.
What does that mean? It says about how MakerDAO works is "To enable the process of borrowing and lending to flow seamlessly, Maker DAO uses the Maker protocol to borrow against collateral. However, unlike traditional loans, which tend to accept fiat currencies as collateral, Maker allows its users to borrow against multiple crypto pairs, which the protocol supports" That does not make any sense to me at all. Let's say I want to borrow with my house as collateral. How does the blockchain or contract monitor the value of my house and hence whether my collateral is still sufficient to service my contract and borrowed loan? It would need to have knowledge of neighborhood sales, changes of nearby infrastructure (new proposed train station, new highway, better school, change in crime rates,....) That is what I am talking about. All those white papers and pundits only talk about how the contract can be agreed upon and that is the easy part. They don't solve the difficult aspect of the transaction. How is the contract subsequently upheld and honored. How is it ensured that the contract is correctly serviced as promised? That is what I don't understand.