Businesses are exploring alternative ways of organizing themselves. Some of these alternatives are rooted in community models. One such promising approach gaining attention is decentralized autonomous organizations (DAOs), said to offer a more engaging vision for the future of business and governance.
DAOs proved rather a fad a few years ago, with several unsuccessful attempts to use community models to buy a copy of the U.S. Constitution and purchase football clubs.
DAOs, as organizations governed by automated rules and collective input, eliminate the need for traditional management structures. They are designed to empower those who are most engaged in the venture, offering a unique opportunity for brand marketers to engage their audiences and operate in a more agile manner. Imagine a campaign or a product development process where your most dedicated fans help shape every decision, making them feel truly involved and empowered.
The question is: is it a fantasy?
The concept is often greeted with questions from C-suite executives asking, “where are the case studies?” or “who else is doing this?” But what is becoming clear is that models can’t blossom in today’s hierarchical, institutional, closed systems (albeit crumbling due to irrelevance). DOAs will only emerge fully once the crypto revolution is in place and the current corporate model sees that system as a competitor. That time is not yet here.
Decentralization largely derives from the characteristics of blockchain networks, networks of consensus mechanisms that validate and record each new transaction, providing an immutable history of events. Importantly, DAOs offer transparency and stakeholder engagement that conventional corporate models lack.
In February of this year, investor Balaji Srinivasan suggested that a DAO could buy 23andMe and fully decentralize the data, “Nothing stored on a central server, 100% on user hard drives”. His idea was that a group getting together to make this purchase would be preferable to a private equity firm acquiring the data, which could, in turn, lead to a national security risk.
Healthcare data is one thing, as is digital entertainment, or collectibles. But what about physical property? If individuals can no longer afford a home independently and fractional or shared ownership is the only course of action, why not do it as a DAO? If you have a new business idea, why wait for the banking institutions to lend to you at a crippling interest rate when you can apply to somewhere like Prop House – an open invitation for all on-chain communities to bid for funding and build the world they want to see?
The biggest brands in the world should be taking this idea seriously as a way to engage not only their fan communities but also their younger employees. This year, Gen Z is due to overtake Boomers in the full-time workforce, and hardly any corporations know how to fully engage and motivate them. More importantly, by the end of this decade, the oldest of Generation A will be entering the world of work, too. It is not for brands to immediately take action right now. However, they should plan to incorporate a DAO ethos into what they offer users and employees five years from now.
The regulatory challenges are undoubtedly significant, but there are also signals of change. For example, last month, the Law Commission of England and Wales published a paper on DAOs, exploring options for legal reform that could clarify their status and facilitate their adoption. The paper introduces the concept of a spectrum, covering everything from pure DAOs to hybrid arrangements to digital legal entities. While DAOs may seem like a far-fetched idea, the business that embraces this emergent participatory approach, over the closed corporate system, will be at the forefront of a new era of business innovation, inspiring others to follow suit.
