Understanding DAOs and the Future of Work
Decentralised autonomous organisations are complex governance models that stretch across the worlds of finance, governance, and more — and are altering the employer-worker relationship.
May 17, 2022
Tech
Future of Work
DAOs. Decentralised autonomous organisations. Even if you’re familiar with the term, and many are not, you may be unsure what it means, or you may vaguely associate it with cryptocurrency. So let’s start with a definition before we dive into their role in the future of work.
Their roots extend to the early days of open-source software, so perhaps it is unsurprising that DAOs (usually pronounced to rhyme with “cows”) now play a key role in the borderless, decentralised world of crypto. But it’s overly simplistic to lump them in with crypto alone, or even the broader world of decentralised finance (DeFi).
“People want to think of DAOs as brand-new entities,” says Anastasia Kinsky, Head of Programmes & Content at Global Digital Finance. But she says it’s more helpful to think of the DAO as a model for governance — a new way to coordinate, measure and reward contributions to complex ecosystems. DAOs take myriad specific forms, and while many are DeFi products, the concept will increasingly be applied in other sectors of society.
In one sense, everything you need to know about DAOs is right there in the name. They are decentralised; they are self-sufficient; and they operate toward particular goals, as organisations always have. One trait worth noting is the extent of that decentralisation — all decisions in DAOs are, at least in theory, made by participants or owners. Additionally, the term refers to systems built on blockchain technology. Networks of computers execute protocols built into self-executing smart contracts in order to make DAOs function as intended.
Another characteristic of DAOs, Kinsky points out, and one that will surely pose regulatory challenges, is their borderless nature. For good or ill, she says, “We now have a 24-hour workday, with people in the U.S. partnering with people in India, Thailand, and so on.” The potential issue here is that the regulatory world still tends to function on a nation-by-nation basis, as do global organisations. Many experts believe DAOs will only be fully optimised when nation-states agree on multilateral regulations and standards.
To understand the potential of DAOs as they impact work, it’s helpful to expand one’s time horizon. While the corporate employment model — a powerful entity paying dozens, hundreds, or thousands of workers to perform well-defined tasks, and in return exercising control over many aspects of their lives — dominated the 20th and early 21st centuries, it is hardly inevitable. As recently as the late 1800s, most craftspeople would have found it preposterous to work only for a single customer.
Leaders are fully aware that in recent years, the all-powerful corporate employer model has been eroding. Consider the gig economy, portfolio careers, and digital nomads. Thirty years and a gold watch has been dead for some time, replaced by rapid growth in self-employment, virtual corporations and leveraging a global, connected talent pool.
Moreover, the skilled workers who swim in that pool have newfound power, and they’re not afraid to exercise it, as The Adecco Group’s Resetting Normal research demonstrates. No longer content to show up at a prescribed time to perform tasks for eight hours, they demand geographic autonomy, freedom to bring their entire selves to the workplace, and even a voice in their company’s stance on global issues.
Bottom line: Hierarchies and the bright lines that once separated internal from external in business have faded. These trends, already well underway (and accelerated by pandemic lockdowns), will be further enabled with the expansion of 5G networks.
Think of DAOs as a coordination layer suited to this new paradigm. They offer distributed, not centralised, decision-making; flat, not hierarchical, structures; and transparent, not gated or curated, information flow.
Their roots extend to the early days of open-source software, so perhaps it is unsurprising that DAOs (usually pronounced to rhyme with “cows”) now play a key role in the borderless, decentralised world of crypto. But it’s overly simplistic to lump them in with crypto alone, or even the broader world of decentralised finance (DeFi).
“People want to think of DAOs as brand-new entities,” says Anastasia Kinsky, Head of Programmes & Content at Global Digital Finance. But she says it’s more helpful to think of the DAO as a model for governance — a new way to coordinate, measure and reward contributions to complex ecosystems. DAOs take myriad specific forms, and while many are DeFi products, the concept will increasingly be applied in other sectors of society.
In one sense, everything you need to know about DAOs is right there in the name. They are decentralised; they are self-sufficient; and they operate toward particular goals, as organisations always have. One trait worth noting is the extent of that decentralisation — all decisions in DAOs are, at least in theory, made by participants or owners. Additionally, the term refers to systems built on blockchain technology. Networks of computers execute protocols built into self-executing smart contracts in order to make DAOs function as intended.
Another characteristic of DAOs, Kinsky points out, and one that will surely pose regulatory challenges, is their borderless nature. For good or ill, she says, “We now have a 24-hour workday, with people in the U.S. partnering with people in India, Thailand, and so on.” The potential issue here is that the regulatory world still tends to function on a nation-by-nation basis, as do global organisations. Many experts believe DAOs will only be fully optimised when nation-states agree on multilateral regulations and standards.
DAOs and the world of work
To understand the potential of DAOs as they impact work, it’s helpful to expand one’s time horizon. While the corporate employment model — a powerful entity paying dozens, hundreds, or thousands of workers to perform well-defined tasks, and in return exercising control over many aspects of their lives — dominated the 20th and early 21st centuries, it is hardly inevitable. As recently as the late 1800s, most craftspeople would have found it preposterous to work only for a single customer.
Leaders are fully aware that in recent years, the all-powerful corporate employer model has been eroding. Consider the gig economy, portfolio careers, and digital nomads. Thirty years and a gold watch has been dead for some time, replaced by rapid growth in self-employment, virtual corporations and leveraging a global, connected talent pool.
Moreover, the skilled workers who swim in that pool have newfound power, and they’re not afraid to exercise it, as The Adecco Group’s Resetting Normal research demonstrates. No longer content to show up at a prescribed time to perform tasks for eight hours, they demand geographic autonomy, freedom to bring their entire selves to the workplace, and even a voice in their company’s stance on global issues.
Bottom line: Hierarchies and the bright lines that once separated internal from external in business have faded. These trends, already well underway (and accelerated by pandemic lockdowns), will be further enabled with the expansion of 5G networks.
Think of DAOs as a coordination layer suited to this new paradigm. They offer distributed, not centralised, decision-making; flat, not hierarchical, structures; and transparent, not gated or curated, information flow.
Powering change
What does it all add up to? As a harbinger, Kinsky points to John Lewis & Partners, the UK’s largest employee-owned business, in which workers enjoy a share of profits and a say in how the company is run. John Lewis is not yet engaging with DAOs, but its structure hints at ways that DAOs could impact employers. Here are some of the changes DAOs will bring or accelerate:
Variety and options.
Individuals will have a stake in multiple DAOs, strengthening the creator economy/gig economy.Greater autonomy.
As noted, DAOs continue to reduce the importance of geography in the work world. And the craft model of selling services to myriad clients will replace the concept of a single, fulltime employer for many.
Greater decision-making power.
Contributor/owners may use their DAO tokens to vote on governance and other decisions.
Multiple revenue streams.
DAOs have given rise to the concept of “X to earn,” which replaces the age-old “work to earn.” In DAOs, participants may be rewarded by working in the traditional sense; networking in order to grow the DAO; learning; or even playing. Experts believe individuals will participate in multiple DAOs, performing various functions.
Freedom to do more fulfilling work.
A great deal of rote, repetitive work is now being automated, freeing contributors to be the most creative and useful versions of themselves and allowing them to spend more time on high-value activities. Workers will offer their talents to many different for-profit, nonprofit- and not-for-profit organisations according to their internal compass.
Key takeaways: DAOS and the Future of Work
DAOs are young; both their potential and their drawbacks have yet to be fully explored. And as they mature, they will surely come in conflict with the nation-state-driven regulatory environment. But in an increasingly digital world, experts believe DAOs offer notable improvements over the traditional corporate employer-employee relationship. “People are demanding more power in their jobs and in their lives,” Kinsky points out. “DAOs offer a transparent, equitable way to bring this about.”