Slock.it’s The DAO swept the crypto-community in a blaze, raising almost 25 million USD worth of ether in a bit more than a week, positioning itself as the world’s 2nd largest holder of ether on the planet, overtaking the Ethereum Foundation itself.
And rightly so. At least two very intensive years have gone by in cryptoland since DAO’s enjoyed their first Wikipedia entry, without actually existing outside of visionary minds and overladen blockchain forums. It is safe to say that millions of enthusiasts around the globe counted the days, minutes and seconds down to the moment until they’ll be finally allowed to see one in real live. We felt about DAO’s the same way normal people feel about unicorns and UFO’s, and at last, contact is established, disclosure may begin. 
And who could have blamed us? The idea of an organization without the need of headquarters, which exists almost outside of physical space, unseizable by force, which doesn’t belong to any individual or group, and which has the ability to execute itself and self-regulate, would have sounded almost religious just a few decades ago. The bewildering implications of this new potential form of human organization seem to the contemporary mindset almost as alien as the landing of a flying saucer on the lawn of the Whitehouse, albeit less photogenic.
baby steps precede the quantum leap
“[A DAO is] a decentralized network of narrow-AI autonomous agents […] which divides its labor into computationally intractable tasks (which it incentivizes humans to do) and tasks which it performs itself. It can be thought of as a corporation run without any human involvement under the control of an incorruptible set of business rules. These rules are typically implemented as publicly auditable open-source software distributed across the computers of their stakeholders”
In contrast, The DAO’s initial modus operandi isn’t very far from that of a shared stock company, at least for now. It’s source code, however, was written in the most flexible way possible in order to allow future governance proposals to be plugged in at ease. The DAO’s seeders made it clear that this is only the beginning and that “The DAO can call its newContract() function to migrate to a new, DAO v.2.0 model”, updating and continuously evolving its governance model.
Nevertheless, for the time speaking, The DAO’s organisational structure sounds quite familiar. It has shareholders, whos voting power is determined solely by the amount of capital they’ve invested in the company, and who elect some sort of board of directors and decide on the allocation of resources, with the main end of maximizing return on investment. Judging by its framework and company goals (Provide a return on investment to the DAO and its members, Benefit the decentralized ecosystem as a whole.), The DAO could currently be pretty well defined as an ethereum-powered, publicly held investment fund.
Yet, despite its initial classical, and quite corporate structure, The DAO might already be the most participatory for-profit investment fund in history (at least in the history of investment funds handling above 20M USD).
Even at this early stage, all major decisions are made through shareholder votes, while the board exists mainly to prevent majority attacks and to verify the identity of submitters of investment proposals. Compared to the privilege packed dictatorship of managers, handling most of public investments around the world, this alone should be regarded as revolutionary, and solves a real industry problem, providing an elegant solution for startups struggling to fundraise their ventures using traditional methods.
VC’s are not always interested in promoting the cutting edge of decentralization for obvious reasons, IPO’s bear the risk of corrupting a startup’s vision, and equity crowdfunding is still legally problematic in most parts of the world. Establishing a publicly held crypto-investment fund, specifically designated to the decentralization industry, is a very big step in the right direction and can’t by no means be underestimated, even though its governance model is still in the MVP stage.
The next step in The DAO’s evolution could and should include a more meritocratic governance model, which would ideally have a considerable weaker link between invested capital and decision-making power, shifting its distribution of influence significantly towards The DAO’s contributors, based on the value they’ve added to the organisation in form of improvements and their past successful decisions.
Such an arrangement wouldn’t only prevent majority attacks, making The DAO’s curator board mostly redundant, but would also insure that the DAO’s decisions stay aligned with its community’s value system, and that influence couldn’t accidentally be sold out to an external investor with potential malevolent intentions.
The Backfeed Protocol could serve as such a governance scheme, and in fact, we at Backfeed are already working on our first governance proposal for The DAO, which will be submitted to its review very soon. We’re about to publish the full proposal before long, but in short, its main aim is the introduction of a sybil resilient reputation scheme into the system, which will be based on mutual evaluations of contributions, including but not limited to capital investments. Such a reputation score is member specific and not transferable, in contrast to tokens which serve as the DAO’s transferable store of value which can be bought and sold like any currency or investment instrument. According to our proposal, voting power will be mainly determent by reputation and less by tokens, ensuring that influence stays in the hands of the community and can’t be captured through potential malicious attacks.
We firmly believe that such a governance model wouldn’t only be safer, but also produce better and wider business decisions, ensuring that the brightest minds of The DAO’s community will be heard and compensated for their input, rather than being overwritten by vast concentrations of monied influence.
So then, The DAO is alive, as its campaign slogan so adequately states, and like all living things it will be subject to evolution and hopefully give birth to a multitude of fertile offspring; and who knows, if we all pull on it together, our UFO-unicorn might just be among them.
