Are DAO’s the Future of Standardization?

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With the increased adoption of blockchain technologies across a wide array of business and societal functions, the notion of Decentralized Autonomous Organizations (DAOs – pronounced “dows”) are now becoming more of a reality versus a far-flung idea of the future.

In the simplest of terms, DAOs are member-owned communities without centralized leadership. They rely on a construct whereby members (who attain “shares” in the community by means of some form of contribution) establish a continuously evolving set of rules for the organization through vote-based decision making. The rules of the organization are captured in smart contracts, which autonomously execute those rules and/or decisions. Once up and running, DAOs operate in a continuous flywheel of proposal (by members), decision (by voting among members) and execution (smart contracts implementing the decision).

The overarching promise of DAOs is that they provide a construct to bring different organizations and people together in a highly transparent and democratic matter. In the simplest terms, they offer the potential of taking much of the human element out of multi-stakeholder collaborations such as standards development. Depending on perspective, that can be a good thing or bad thing. Below are some pros and cons of how DAOs could re-shape standards development activities:

Pros:

  • Creates a truly democratic process — anyone (or any entity) who contributes the appropriate “shares” can join the community and vote on its decisions. As shares can even be rewarded for contributions, DAOs also nicely support meritocracies.
  • It forces communities to focus on decisions and actions, not discussion. This would help to address a key challenge of many multi-stakeholder collaborations: all talk, no action.
  • Decisions get executed efficiently by smart contracts versus being reliant on humans (member volunteers or staff) to implement actions. This solves the common problem of groups working toward decisions, but then seeing no follow-up actions taking place.
  • Blockchain technology provides a tamper-proof, transparent audit trail of decisions and actions. It also provides a built-in mechanism of tracking a group’s decisions over time (thus eliminating the habit of many groups of regurgitating the same topics over and over)
  • DAOs are inherently asynchronous, which can help facilitate truly global collaborations.

Cons:

  • As DAOs essentially create pure pay-to-play schemas, they could create an imbalance in decision making and participation (i.e., those who can afford the most shares call the shots)
  • While it can also move a group away from progress and decision-making, discussions around potential decisions and actions can help decision-makers understand the perspectives (and concerns) of their peers. This important step could become underserved in a DAO.
  • The actions taken by smart contracts are atomic, meaning there’s no real way to reverse them. While humans can sometimes introduce friction to action, they also bring the benefit of introducing thoughtful pauses to steps of consequence.
  • Having to condense all of the decisions and actions of an organization into machine-readable code could be challenging — and potentially not efficient for smaller-level decisions.
  • DAOs ignore the simple fact that humans enrich the collaboration process. Yes, at times they can slow things down, but person-to-person interaction can also stimulate new ideas, innovation and, perhaps most importantly, progress.

All in all, DAOs represent a very interesting potential direction and evolution of multi-stakeholder communities such as standards groups. They’re certainly worthy of further exploration and consideration.

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