Dialogue Colony: DAO has almost become synonymous with voting, but this is not desirable
In the long run, DAOs will become the dominant form of organization in the world.
Cather Insight------Focusing on the development trends and dynamics of overseas markets, it conveys the thoughts and actions of frontline practitioners internationally, while also building an entry point for Chinese readers to understand overseas markets.
Recently, the first event of Cather Insight, hosted by Chain Catcher, invited Jack du Rose, the founder and CEO of the established DAO project Colony, to share insights on "How Far Are We from the Explosion Period of the DAO Track?" Jack du Rose shared with the community users the latest developments in DAO, where the breakthroughs in the industry lie, and when the DAO track will see an explosion, among many other valuable insights. The full text is organized as follows.
Chain Catcher: First, please introduce Colony.
Jack: Colony is one of the first projects built on Ethereum, starting in 2015. We have always been focused on developing the most powerful, flexible, practical, and user-friendly DAO framework. Through Colony, people around the world can easily form communities online, raise funds, collectively manage resources, and coordinate towards a common goal without needing to trust each other.
Colony currently operates on xDai and supports the following features:
- Organizing community members into departments or teams with entry barriers.
- Managing a token treasury and applying budgets to different teams and projects.
- Supporting various payment methods.
- Customizing member rights distribution based on the specific circumstances of the organization, such as influence gained through governance participation.
- Raising funds through token sales, donations, or revenue.
- Providing various decision-making mechanisms to adapt to different use cases and arbitrating disputes when disagreements arise.
- DAOs can transact with other contracts on the same chain; if your DAO needs to manage another protocol or interact with DeFi, Colony can help you achieve that.
In summary, decentralization is the governance philosophy of Colony. We believe voting is undesirable, so we strive to avoid it whenever possible. Since every organization is different, Colony adopts a modular design, meaning organizations can insert extensions and operate as needed, providing them with the tools they require.
As we are close to completing the Colony Network smart contracts defined in the white paper, expanding based on community needs will be a focus of our future work. Additionally, with the release of Colony's 2021 roadmap (https://blog.colony.io/roadmap), Colony will change the world's understanding and perception of DAOs.
Chain Catcher: Where do you think the biggest innovation and value of DAOs lie? What are the main obstacles to large-scale application?
Jack: The innovation and value of DAOs lie in enabling people from all over the world to work together and effectively manage shared resources without needing to know or trust each other. However, unfortunately, DAOs have become synonymous with voting.
So far, the DAO projects we have seen (such as Moloch, Aragon, and DAOstack) are still in their early stages. They only allow users to vote on funding proposals and, in some cases, interactions with smart contracts. But this should not be the way most organizations operate, nor should it be the way companies function.
We need to clarify that the purpose of a company’s existence is to reduce the transaction costs of producing goods and services by providing an alternative to market pricing mechanisms. In other words, companies hire personnel or purchase equipment because there is a threshold where, when considering the 'transaction costs' of finding and managing these suppliers, internal production is more efficient than paying external suppliers.
Transaction costs include clarifying needs, finding suppliers, receiving and comparing quotes, negotiating contract terms, managing deliveries, invoicing and accounting, quality control, dispute resolution, and so on. DAOs have no choice but to coordinate supply through market mechanisms.
Therefore, an effective DAO framework must reduce the transaction costs of market supply mechanisms. Unfortunately, with the exception of Colony, all other DAOs increase transaction costs; their complex decision-making processes and the requirement for token holders to vote on every decision made by the organization are absurd and completely unscalable.
In light of this, Colony has decided to address these issues by using a combination of methods. We allow DAOs to scale by creating multiple teams and sub-teams and by not requiring symbolic votes on every decision. Instead, we quantify individual expertise by using influence proportional to the value contributed to the DAO, thereby granting individuals administrative power.
Moreover, in Colony, voting is a last resort. Our governance operates through "lazy consensus"; in a proposal, as long as no one opposes it, the proposal will automatically pass after a safe delay. In other words, if you see a proposal that you agree with, you do nothing. If you find something you disagree with, you can raise an objection and force a vote.
Chain Catcher: Many DeFi projects and organizations are adopting DAO infrastructure. In your view, what stage is the development of the DAO track currently at? What are the main application scenarios?
Jack: I believe the development of DAO infrastructure is still in its early stages. Colony is the most advanced and powerful DAO framework to date. Many early adopters of DAOs are using Aragon and Moloch, but teams on these platforms often reach out to us, actively seeking ways to move to DAOs because they realize these frameworks are too simplistic to do more meaningful things.
We have seen a variety of use cases in the market. Perhaps the most obvious are DeFi protocols and DApps that need to manage their funds and smart contracts, Venture DAOs like The LAO and Metacartel Ventures, and startups looking to incentivize contributors. There is even a large mainstream NGO creating a DAO for humanitarian work in developing countries.
However, one of the use cases I am most excited about is DAO teams in gaming. We can imagine a world where there are large MMORPGs, where all items and resources in the game are NFTs, and different categories of player characters have different skills to collaboratively mine resources, craft items, and sell them in the game, with the income going to their gaming company/team.
Chain Catcher: Nowadays, various hot tracks like DeFi, NFTs, and gaming are constantly emerging, but the DAO track seems to have limited heat. How do you think DAOs can break through the current situation? Where are the breakthrough points?
Jack: DeFi, NFTs, and gaming are all much simpler than DAOs. They are easier to build and understand. DAOs are more complex and diverse, so they require a longer development time to create a better user experience.
The breakthrough point for DAOs may be similar to that of NFTs. NFTs brought artists into the cryptocurrency space, while DAOs will bring freelancers from around the world into the cryptocurrency space, helping them find valuable work in projects, thus granting them direct decision-making power. Decision-making power means dignity, and dignity is a human right.
Outside of resource-rich countries and regions, it is challenging for talent in many parts of the world to receive appropriate compensation. DAOs will distribute equal rights to talented workers.
Chain Catcher: Some argue that the most revolutionary innovation currently lies in venture capital DAOs, such as The LAO, which has become a very influential venture capital institution. How do you view the development prospects of venture capital DAOs?
Jack: I believe venture capital is an excellent application scenario for DAOs. So far, most cases have been successful; simple DAO mechanisms like Moloch are sufficient to support venture capital. However, there are still many issues that need improvement, and Colony may provide solutions in the future.
Chain Catcher: The Chief Legal Officer of Agarons stated in an interview with Decrypt that DAOs are one of the perfect tools for managing token assets like NFTs. How do you understand this statement? What new forms might emerge from the combination of DAOs with NFTs and DeFi?
Jack: Regarding NFTs, we lean towards research in gaming types. I believe DAOs are easy-to-use tools for tokenizing portions of shares in a basket of NFTs. There is still a long way to go for art-related NFTs to become truly meaningful; they are currently in a significant bubble and have weak infrastructure. For example, the actual data related to all NFTs cannot yet be stored in a consistent manner. But these are changing over time; the utility of NFTs will increase, and NFTs will become more legitimate commodities while deepening their effectiveness in DeFi.
Chain Catcher: In March of this year, the Wyoming Senate Committee officially passed a DAO bill that allows the public to create an entity actually called "DAO" and organize affairs using various legal documents, legal agreements, or smart contracts. How do you view the significance of this bill?
Jack: Although I am not a lawyer, I do have some interest in these areas. The Wyoming DAO law is an important step, but it is only effective for specific types of DAOs, and the number of participants in a DAO is limited. This may not be a suitable bill for DAOs, as there could be thousands of token holders in a DAO. Many individuals and groups are doing significant work in different jurisdictions to facilitate the integration of DAOs with real-world legal systems.
However, in the crypto space, DAOs as a technology have not been well understood, and there is still a long way to go between technological maturity and regulatory understanding.
Chain Catcher: In the long run, what do you think the ultimate form of DAOs will be? To what extent can they replace existing organizational operating models?
Jack: In the long run, DAOs will become the dominant form of organization in the world.** Just as social media has democratized media, allowing everyone in the world to access information and participate in discussions instantly, DAOs will help people gain job opportunities and democratization in ways that are currently unimaginable.
Moreover, the process of creating a DAO will be faster, easier, and more convenient than dealing with governments and lawyers when creating a company in the real world. It is akin to the difference between creating a blog on Medium.com and creating a physical newspaper.
In the future, work may not be what we think of today; it could be your favorite application or game, where you earn the success and corresponding value of the organization by creating ways to generate value for the application or game.
