In the digital world, there is this crazy idea that blockchain networks could one day replace the need for organizations. These are called decentralized autonomous organizations (DAOs). By using smart contracts and distributed ledgers, the idea is that organizations could one day exist and operate without the need for things such as company registration, management, or even an office. What if we could run a business, not just through, but entirely by the internet and its users?
Blockchain has given us something unique. A way of coordinating and agreeing on something in a trustless and even anonymous way. Blockchain enables multiple parties, who don’t even know each other, to come to an agreement without having to compromise on things such as security or placing trust in a third party. This is the principle that gave rise to bitcoin.
I know when I mention bitcoin half the people reading this might switch off, but it’s important to talk about it. It’s a digital asset that can’t be censored or modified unless agreed upon by the entire network. This is the way we can move bitcoin around.
The simplest contrast to bitcoin is our fiat currencies (AUD, USD, etc.) where we put our trust in central governments, reserve banks, and taxation policy to control our money.
So, how does blockchain fit into this?
Well, let’s start talking about what makes up an organization first.
- An organization is a collection of agents each with their own contracts that control their relationships with the organization, each other, and external parties. They have rights, they have obligations and they are subject to a governing body of law, usually the country they reside in.
- Decision-making. We often think of decision making as a leadership function to guide strategy and long-term goals. However, every agent within an organization makes decisions daily as well. There is also an assumption here that decisions made are followed by other agents within the organization.
- Anyone who engages with the organization must be incentivized to do so. This includes employees, contractors, third parties, CEOs, and even shareholders. Naturally, this is usually a financial (salaries) but often there may be humanitarian incentives such as environmental change or social impact.
- There is a fourth element here that is worth noting. Community. Collective alignment of agents via community is critical to successful organizations. Usually, we use tools such as values or visions to align agents. In our case, Capgemini has had the same seven core values for over fifty years and it directly impacts how we engage with each other and external parties.
So, what if there was another way we could achieve these elements?
Many commentators recognize bitcoin as the first decentralized autonomous organization. It’s run by individuals with hardware that coordinate with each other via bitcoin’s public, decentralized blockchain ledger to make collective decisions. Its purpose is to secure the bitcoin network and facilitate the exchange of bitcoins.
- We have a collection of agents running nodes to support the network.
- We have nodes frequently coming together to decide on the current state of the ledger.
- Participants are incentivized via bitcoin rewards. Miners receive a reward for producing valid blocks that are used to record transactions.
- Finally, it’s been able to unite strategists, economists, developers, politicians, and future thinkers. There is a community that finds purpose and fulfillment in contributing to the bitcoin blockchain and challenging social norms on how we understand and use money.
Bitcoin is just the beginning. There are many DAOs currently exploring new business models. By leveraging smart contracts these organizations can execute more complex functions such as voting, fundraising and even running peer-to-peer marketplaces.
Many DAOs are currently exploring decentralized finance and rapidly expanding into multi-billion products. For now, DAOs exist as smart contracts through the internet but rely heavily on specialist individuals or teams to perform manual tasks that cannot yet be automated. With advancements in AI and IoT however, future DAOs could even integrate smart property governance and integrate with smart vehicles, safety deposit boxes, and even buildings.
The internet continues to be the most significant development of the last century. As we continue to see a convergence of physical and digital assets, perhaps the business world itself might one day become virtual.
Subject Matter Expert
Capgemini Invent – Future of Technology, Australia