Can DAO replace Federal Reserve or whatever central bank you have in your country?
To be honest we were tempted to say ‘..whatever shitty central bank..’ in the title because for the majority of countries it is unfortunately true. A central bank is just one of many state or public institutions human beings established and delegated decision making rights to in order not to starve to death or kill each other. In some places having those institutions in place did not help because when you have such control and power in your hands it is very difficult to avoid abusing the power without even noticing it or thinking that it is all for the good reasons. Today, as part of Canary Academy initiative, we’ll try to ponder if DAO is a legitimate turn in the evolution of governance institutions that can help us break through the current mire.
First off, DAO stands for Decentralised Autonomy Organisation and it is just a form of the existence of an organisation and nothing else. Organisation is a number of agents (people or other organisations or maybe artificial intelligence in the future) who pursue common interests thus they need coordination. Examples of the organisation is a commercial corporation, a government, a charity fund, an army or a band. Some are extremely complex (a country’s government), some are very simple (band).
DAO is the same abbreviation as Plc or Ltd which indicates the form of the organisation also implying who owns the organisation and how decisions are made. So, for example, in future Coca Cola Plc may well become Coca Cola DAO. Thus when you see TitleOfProjectDAO — it indicates the form of the organisation.
As soon as agents get together to pursue common interests they need to establish some rules, ways of working to coordinate their actions in order to progress otherwise it will be a mess. One of the most important areas where they need to agree is how decisions are to be made and this can take different forms either stemming from the cultural and religious heritage or from the buoyancy of reckless youth or from whatever other values you put in the first place. For example, if we look at how the countries are ruled — there are so many variations but the most notable are monarchy/dictatorship (the decisions are ultimately made by ‘just because they were born like that’ Queen or King or by a self-appointed dictator), democracy (the decisions are made by the elected officials elected by the representative bodies whose members are elected by the public) — there are different variations of those that differ in details and authenticity (raise a hand who can relate to a ‘fake’ democracy) and things are often mixed, i.e. monarchy is maintained as a homage while the decisions are made by the elected parliament. But we are not here to list all possible forms though. In corporations the governance is based on the charter and organisational hierarchy — shareholders have certain decision rights and liabilities as well as the management board and managers below have their remits of accountabilities where they are expected to make decisions.
Central banks in this sense can be compared to the corporations — they have key stakeholders (the ruling body — i.e. monarch, parliament, president, dictator) and the organisational hierarchy which is far too often dependent on the ruling body. Thus the central bank monetary policy is quite susceptible to arbitrariness of the few people. Ideally, the key stakeholder and the management of the central bank should make decisions based on the long term sustainable benefits for the economy. In reality the decisions are made based on the certain interest of certain people (e.g. keep the power by pouring extra printed money on the electorate accelerating the inflation and laying foundation for the problems in future, fund certain initiatives to make rich friends richer etc).
There are many reasons why the things turned out the way they turned out. One of the key ones — administration cost. Ideally every person who is impacted by certain activity should be able to express their opinion on how this activity should be performed. It is often called a direct democracy. This was practiced in certain ancient countries and is still practiced in some places (e.g. Switzerland). If you imagine a big country like India or United States till recently you’d have struggled to propose a way to involve everyone in making decisions pertaining to the tax rates, government expenditures or overall state budget approval and then also what should be the key interest rate and how much additional money they should print. It hasn’t been possible physically thus the decisions were made by the representatives, few human beings which have their own biases and interests and ways of looking at the world which might have evolved since they were elected. And there was nothing left for us other than just trust them to make wise decisions for the benefits of all.
DAO is a form of the organisation where the decisions can be made by involving unlimited number of agents ensuring 100% authenticity of participation (i.e. zero or close to zero space for manipulation) at minimal or zero costs. All this thanks to the blockchain — an enabler of permission-less and trust-less relationships. Moreover, DAO can also eliminate the temptation to revert/adjust implementation of the decision if someone does not like where the result of voting is going, since it is possible to lock the implementation in the smart contract before the voting and link it to the outcomes of the voting.
Imagine that in the near future the EarthBankDAO puts forward the proposal to increase the interest rate by 0.5%, by 0.25% or keep unchanged. It is locked in the smart contract which interacts with the smart contracts of EarthVoteDAO and EarthMoneyDAO. People of the earth vote via EarthVoteDAO depending on how many EarthVote tokens they own and stake. 0.25% increase wins and the outcome triggers changes in EarthMoneyDAO settings which increase the cost of minting Earth payment stable currency (oh, wait for our next article!) thus leading to lower supply, lower inflation, lesser investments in the meaningless pump & dump degen projects. And NO ONE can do anything about that. You might be a President of the Galaxy but you cannot influence this process. This is what DAO is about in essence.
There are many things yet to be sorted out. Obviously there will be a huge resistance from the existing elites. But they will embrace eventually. We do not think that DAO will actually eliminate elites. If the history goes the way of introducing weighting into voting (i.e. not just based on the wallet but based on the volume of the governance tokens in that wallet) — which makes sense as the certain level of intelligence is required to earn the governance tokens and if you do not have many then it tells something about your ability to make good decisions. Please do not get pissed! Who knows what future holds? Ideally the governance tokens should be also earned via good social behaviour or valuable contribution to the society. Enter EarthKarmaDAO — when you do something good to others they can trigger EarthKarma Tokens minting in your favour, i.e. they appear in your wallet which you can exchange for the EarthVote tokens to be able influence decisions on Earth. So there will be intelligence elites — both rational and social/emotional — who might not still be able to overweight the rest of the population just purely because of the number of others. But just in case, start to treat others with respect and dignity already today and maybe you become eligible for EarthKarmaDAO tokens airdrop.
Disclaimer: Please note that none of the above DAOs exist (yet) and are product of the theoretical discourse. Do not try to find and buy tokens of any existing projects based on the possible similarity of the titles used in this article.
