If you’re anything like me, you might be impulsively suspicious of claims that digital technologies such as cryptocurrency and blockchain can produce radical decentralization, personal empowerment, and assuage the wounds of capitalism.
However, the latest string of letters to emerge from the depths of the blockchain universe — DAOs, or Decentralized Autonomous Organizations — might have something to offer to those interested in advancing the power of labor, specifically when it comes to employee ownership.
When worlds collide
DAOs are a little difficult to define because they are still an emergent phenomenon, but for simplicity’s sake, they are organizations that are managed entirely through blockchain technology. They provide an accessible form of decentralization and transparency which, in certain ways, could scale more easily than traditional organizations.
“The amount of governance innovation happening in DAO-land is not something I’ve seen anywhere else,” Nathan Schneider, a journalist, author, and professor of media studies at the University of Colorado, Boulder, told Shareable. “It feels, in some circles, like a social movement, where people feel like they are really involved in a new thing that is helping to remake the world as they understand it.”
The social movement Schneider describes is a result of two distinct worlds colliding — those of blockchain technologies and worker cooperatives.
“There’s this flourishing of people who haven’t come from a cooperatives background, they haven’t come from this political analysis about the balance of power between labor and capital or anything like this. Most of them have come with, “Hey, this is some cool technology, what can we do with it?’” Richard Bartlett, co-founder of Loomio, told Shareable.
The amount of governance innovation happening in DAO-land…feels, in some circles, like a social movement, where people feel like they are really involved in a new thing that is helping to remake the world as they understand it. — Nathan Schneider, professor of media studies at the University of Colorado, Boulder
This, Bartlett said, is producing a lot of fruitful questions: How do you actually engage people? What do you do with their attention span? What happens if you try and get 1,000 people to vote every day?
One DAO advocate, who blogs and runs a podcast as the Blockchain Socialist, and who requested anonymity due to concerns about workplace retaliation, told Shareable that these questions may be opening doors for socialist-style co-op innovation among tech communities that are traditionally seen as more libertarian and right-wing.
“I’ve been actually very surprised that a lot of these crypto-type people are very open to listening to me,” he said. “Because of this emergent synthesis of cooperatives and DAOs, these people are straight up asking: are DAOs socialist? They created DAOs, they realized it was kind of like cooperatives, and then they realized that cooperatives are kind of like socialism. So then they pause and look at each other and they’re like, ‘are we doing socialism right now?’”
Can these two communities — technologists and community organizers — join forces and bring real democracy to decentralized, disruptive technologies?
And on the flip side, could DAOs — with their secure, flexible, scalable systems of creating value and distributing ownership-authority within a co-op — bring worker ownership into the mainstream?
Maybe so — but it’s important to begin this conversation with a grain of salt.
Big changes — maybe?
Before we get more deeply into the potential benefits of DAOs, it’s important to take a step back and critically examine the track record that blockchain technologies have — because it’s not always a very comforting one.
Cryptocurrency, for example, has been lauded as a revolutionary force in decentralizing and democratizing finance. NFTs (non-fungible tokens) are similarly lauded for giving new power to individual artists and musicians working online.
However, the decentralization rhetoric coming out of the blockchain world can feel a bit bloviated when you consider a new study which just revealed that the top 10 percent of NFT traders account for 85 percent of transactions and trade 97 percent of all assets, and that 10 percent of buyer–seller pairs have the same volume as the remaining 90 percent.
And the recent craze around NFTs is a compelling example of how blockchain technology is being co-opted and corrupted by the nefarious forces of capital in ways that are not only antithetical to prosperity — but which only do more to increase scarcity and enclose digital commons.
It’s hard not to recoil at the idea that we have anything to gain from this world in the face of headlines such as: “A Metaverse mega yacht that just sold for $650,000 is the most expensive NFT sold in The Sandbox virtual world.”
As with all new technology-based systems, DAOs come with a lot of hype. It’s important that we keep this in mind as we attempt to see through the smoke and mirrors to explore the real benefits that DAOs could potentially impart to those interested in employee-ownership.
One of the key benefits of DAOs is the flexibility in organizational structure that they allow. Because these organizations live entirely on contracts made through blockchain systems, the same systems that power cryptocurrency, they have a lot of room for creativity.
Keeping in mind that cryptocurrency is still pretty novel, and states are still playing catchup when it comes to regulating these systems, the idea with DAOs is that you can design your organization or write your contracts with much more flexibility than traditional legal entities — subject to the laws of the states that they reside in, of course.
“You can get together with some friends to do something, and rather than just paying out money in dollars, you can make your own currency and try to make it valuable and set the rules for how that currency works,” Schneider told Shareable. “And maybe it’s not just a currency, maybe it’s also for governance — maybe it’s just governance votes. Or maybe it’s just things you use to access the service that you share. You can write the rules in a pretty profoundly flexible way.”
In order to understand how DAOs work, we have to understand the idea of digital tokens. It might help to think of a token as a sort of coin — a unique bundle of data that represents some kind of value, and that is tracked on distributed ledgers, including blockchain.
In cryptocurrency, tokens are assigned monetary value. NFTs use tokens to assign value to digital assets, such as works of digital art, and stamp them as unique.
With DAOs, the idea of a digital token is expanded to the point where it could represent basically anything, including, importantly, a vote.
This is really where things can get exciting for folks in the worker cooperative world. It opens up a whole new realm of possibility in terms of coordinating decentralized, democratic governance.
“You’re able to basically make a democracy within a workplace much, much more achievable and much, much more easy to do,” Joshua Davila, a blockchain solutions architect currently writing a book on blockchain cooperatives, told Shareable.
On a purely logistical level, DAOs make voting easier. In a traditional cooperative, for example, “you need a quorum of over 50 percent of people to show up at the meeting,” Davila said. But with DAO technology, there are fewer barriers to achieve a quorum, because you can vote from anywhere that has an internet connection. “You’re able instead to facilitate a very, very reliable system for voting and for applying democratic principles over a digital space.”
Remote voting by organizational boards using electronic communication, such as email or even phones, is subject to regulations that are different from state to state, and are changing rapidly, but DAOs are a powerful new tool for this process.
DAOist businesses are already here
According to Jason Prado, chief technologist at the Driver’s Cooperative, DAOs are an important development that may offer new possibilities for investment or “better forms of organization.”
The Driver’s Cooperative is a driver-owned ride-hailing cooperative in New York City. They are currently exploring the DAO framework as a potential path to building their platform and becoming a more sustainable business.
The Driver’s Cooperative currently has thousands of drivers on their platform but are hoping to grow to tens or hundreds of thousands as well as to expand beyond New York City.
Their aim is to grow their democratically owned and governed platform to the scale of an Uber or Lyft, which would make them the largest worker-owned federation in the world.
“As we do that, how are we going to scale decision making? How are we going to scale these notions of ownership?” Prado told Shareable. “When we’re talking about platforms that have tens of thousands of workers on them and then hundreds of thousands or millions of customers who also maybe should be included in the concept of ownership — we don’t have existing structures that have scaled successfully to that level.”
Opolis is an example of a member-owned digital employment cooperative currently utilizing DAO technology. Opolis helps independent workers access high quality group-rate employment benefits like healthcare insurance, (crypto) payroll, and tax compliance, among other things.
Opolis claims that they have overcome all of the challenges inherent within the DAO landscape, but according to Joshua Lapidus, the organization’s executive community steward, DAOs in general need to learn how to “take advantage of cooperatives to find legal footing, increase legitimacy to skeptics, and help us achieve a mass adoption.”
Hidden costs and hoarding power
Another downside of how traditional cryptocurrencies work is that anyone with the most coins or tokens inherently has the most power.
…If you have something for sale, what can stop a malicious actor from buying it up and controlling it? — Jason Prado, chief technologist at the Driver’s Cooperative
“As soon as you allow a token to be sold and it looks something like an investment, then you have a problem where now investors can come in, or capitalists can come in, and buy up that token and have undue voting power on the platform,” Jason Prado told Shareable. “That’s very frightening because you’re playing with fire a little bit. I still think that’s a good idea for lots of businesses because the reality is raising capital is important. But still, if you have something for sale, what can stop a malicious actor from buying it up and controlling it?”
Worker cooperatives, on the other hand, operate on the principle of one member, one vote. This is possible theoretically on the blockchain, but doesn’t always work well in practice because identity is much harder to keep track of in a DAO and there are ways of abusing the network.
DAO enthusiasts claim to be exploring new forms of voting that could potentially bypass these issues.
These include “quadratic voting,” in which the more tokens you use to vote, the less they are worth; and “conviction voting,” in which your time commitment increases the value of your token vote.
The scalability inherent within DAOs — traditionally one of the biggest selling points lauded by advocates of blockchain technology — is also full of wrinkles.
“If you want to use the Ethereum main net for your cooperative and you want to have a lot of democracy — you want to have people voting all the time — it’s probably not feasible. It’s too expensive,” Joshua Davila said. “You’re paying at least like $30 worth of Ether per transaction …When you are voting, that is a form of a transaction. So that’s not very conducive for democratic structures.”
Many of the challenges facing DAOs are purely technological, but others are more social in nature: You can’t always actually code a code of ethics.
Digital technology is not just value-neutral math — it’s designed and applied by actual human beings who bring their own values and ideologies. Algorithms can be racist and sexist. And in this sense, there’s nothing inherent within a DAO that would lead it to having the values that those within any specific organization might hope for it to hold.
Software vs. values
Kei Kreutler, strategy lead at Gnosis, a blockchain technology company, told Shareable that “while many DAOs embrace operating principles or economic relations that resemble digital cooperativism …this does not mean that their software necessarily enforces this organizing form.”
In other words, Kreutler said, “technical decentralization does not necessarily lead to political decentralization of power.”
Technical decentralization helps create censorship-resistant and trusthworthy—that is, consistent—peer-to-peer institutions.
It doesn’t directly inform or mirror distribution of power—that is, less inequality. Active, informal work is required.
— kei 🗝️ (@keikreutler) February 1, 2021
Yet the momentum DAOs have is exciting, Kreutler told Shareable. “A third, ‘autonomous’ social sector, apart from the public and private sectors, emerges more clearly,” she said. “This is my most idealistic take — that DAOs could breathe new life into existing and emerging movements related to civic governance.”
While there is certainly something appealing about the decentralization inherent within DAOs, they’re no substitute for the power that comes with unions, strikes, minimum-wage campaigns, and other forms of labor organizing.
We still need to make sweeping changes to the way our entire economy functions if these technologies will ever stand a chance of contributing to our collective liberation.
As Paris Marx, tech critic and host of the Tech Won’t Save Us podcast, recently tweeted:
“Changing the path of tech development requires much more than building niche alternatives that few people ultimately use. It requires changing the larger structures in which technology is developed so people aren’t desperately trying to find hope in libertarian bullshit.”
Changing the path of tech development requires much more than building niche alternatives that few people ultimately use. It requires changing the larger structures in which technology is developed so people aren’t desperately trying to find hope in libertarian bullshit.
— Paris Marx (@parismarx) December 3, 2021
Perhaps what we really need to be asking is not what DAOs could offer to the world of employee ownership, but rather what employee ownership can bring to DAOs, by injecting democratic and cooperative values into their organizations and projects.
“There already was a decentralized version of the traditional corporation — that was the cooperative,” the Blockchain Socialist creator told Shareable. Though co-ops lack popularity and can be difficult to establish and coordinate, with the advent of DAOs, “people who would have never given a shit about cooperatives are suddenly really, really interested in this. And that is something that should be taken advantage of.”
Check out these related articles:
- A post-capitalist guide to the future: crypto-commoners only want the earth
- Everything you need to know about NFTs with Nathan Schneider and Cory Doctorow
- Acquisition-conversion: the promising new strategy for scaling worker ownership
- The pandemic is helping create a new era of employee-owned companies