How DAOs Can Replace Corporations and Traditional Governments

Corporations lack personal liability, have hierarchical structures, and keep business practices closed. Traditional governments are inefficient and can be monetarily influenced by corporations. This results in corruption and tyranny in both entities. I think that if we properly utilize the technology behind Bitcoin, we can start to replace corporations and traditional governments with DAOs. (Distributed Autonomous Organizations). DAOs are inherently more efficient than both and are incorruptible. In order for this to happen, we need to lay the proper foundation for the DAO ecosystem. I will outline the steps that I think should happen to make this a reality.

The Bitcoin Core developers should implement the sidechain proposal.

Adam Back’s sidechain proposal would mean that anyone could create a new cryptocurrency pegged to bitcoin. You could move bitcoin in and out of that blockchain and wouldn’t have to worry about there being a price difference between the two. Users would get all of the features that altcoins could offer without the speculative pump-n-dump pricing and the pre-mining fundraising model. Useful altcoins could be re-done as sidechains. With every new sidechain, Bitcoin would grow more credible, less volatile, and more useful as a virtual currency as opposed to gaining volatility and losing marketshare to an altcoin. Some people call this idea “Bitcoin Maximalism”. Yes, proof-of-work isn’t perfect. Yes we can do better, but we have to move forward. We have to work with what we have. There are bigger problems to solve and Bitcoin has already proven to work as a dependency.

We need a decentralized stock exchange

Some people are concerned with the idea of sidechains because it makes pre-mining obsolete. How then are they supposed to fund their DAOs? Traditional corporations IPO on the federal stock exchange. DAOs should IPO on day-one on a decentralized stock exchange. That means creating tangible cryptostocks that relate to their valuation in BTC and fluctuate in value with the valuation of the DAO just like traditional stocks. Unlike traditional IPOs that involve investment banks, the federal government, lawyers, and endless paperwork, putting your DAO on a decentralized stock exchange would be simple. Just decide how many shares you want and release. Anyone with cryptocurrency can buy shares.

Reliable distributed storage has to be solved

DAOs have no central point of failure. In order for that to happen, we need a distributed storage foundation in place for them operate on. There are some distributed networks that have sprung up recently, but their distributed storage model isn’t robust enough because the miners who store data aren’t incentivized. Of all of the current projects, I think IPFS and its sister protocol Filecoin are making the most progress.

We need a programmable, turing-complete blockchain

DAOs are by their nature incorruptible and trustless since their by-laws are programmatically encoded into smart contracts. Bitcoin has a scripting language but it is purposefully not turing-complete for security reasons. We need a programmable, turing-complete blockchain to create smart contracts. Ethereum seems to have made the most progress with this, although they keep thinking up company-sized ideas to dedicate resources to. I think they should focus on making a programmable blockchain since that’s what holds the most promise.

A thin wrapper around all cryptocurrency

The sidechain proposal will make it easier to think about exchanging value between cryptocurrencies since it’s all bitcoin under the hood, but you would still have multiple currencies in your wallet with different use-cases. This is suboptimal, ideally you would only think about your currency as one balance of e-money and the rest would be abstracted away, even the name (Bitcoin). There needs to be a thin wrapper around all cryptocurrency such that we think of it as e-money. Just as we think of all the different WiFi protocols as simply WiFi or all the different mail protocols as simply Email. There could be a package manager built-in to wallets for feature sets that a user could use to add features to their e-money. Want faster transactions? ‘bpm install lite’ Want your transaction history to be private? ‘bpm install zero’. You could turn these features on or off at will. All blockchain interaction would be wrapped.

Universal identity system

During the recent 2014 mid-term elections the topic of voting was once again on the minds of Americans. With congressional and presidential approval ratings at an all-time low, many believe that voting, particularly on the federal level, has lost all relevance. Mass amounts of money are poured into campaigns from corporations and traditional voting systems are dated. They are easily hacked, require physical presence, lots of paperwork, and a government backed proof of identity. In this digital era, its becoming harder to convince our generation that voting still matters. We need an online, decentralized voting system. It doesn’t have to be completely Sybil-proof, the current government backed model certainly isn’t, just Sybil-resistant. If we can bring voting to the internet, DAOs will flourish with internal, decentralized voting systems. There are many different ideas on this that haven’t been implemented and we could use some experimentation.

Towards the DAO ecosystem

The world will see an explosion of countries in the coming years with their own novel governing bodies. I personally would like to live in a country that runs as a liquid democratic DAO. The San Francisco Bay Area would be an excellent candidate. Governing DAOs can interact with other DAOs to enact the votes of its citizens in as trustless a process as possible. Without all of the evil associated with corporations, we can create a world of much more freedom. If we’re able to successfully construct an ecosystem for DAOs to flourish, we’ll finally have a chance to fight the evil associated with the current institutions in power. We can fundamentally restructure society using the blockchain. The current systems we’ve created won’t go down easily, we need to create efficient alternatives that will slowly make them less and less relevant. Death by a thousand cuts.


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