From autonomous cars to autonomous organisations.

The idea of Decentralised Autonomous Organisations (DAO) was born when Christoph Jentzch had the vision to create an entirely autonomous organisation. In early 2016 he delivered on this vision and published his code on the Ethereum blockchain.

The concept was that the project would be a medium for crowdfunding. Backers would buy shares (or tokens) in a company by using Ether, the blockchain’s native cryptocurrency. Backers had voting rights proportional to the amount of shares (or tokens) purchased. This way, the DAO could raise capital to fund it’s operations.

After the end of the fundraising process and the formation of the DAO, individuals start submitting proposals to access funding from the DAO’s capital to fulfil a project. This could translate to an individual offering to edit code for the DAO, building and selling Ethereum based products or even doing non-profit and charity work. Potential takers (think of them as contractors) offering their services stated how much they are going to get paid and whether they will give part of the money generated back to the DAO.

After proposals have been submitted, it was up to the shareholders (token-holders) to vote if a particular proposal would go forward or not. When the conditions of the contract are fulfilled the DAO would pay the contractors and any profit coming back in the organisation would be proportionally distributed back to the token-holders (think dividends).

What started off as an idea became insanely popular raising over $150 million in Ether which makes it the most successful crowdfunding project in history.

Of course this concept is not a panacea for corporate governance. I will follow up with another article focusing on the complications and weaknesses of this model followed by the fail-safe mechanisms and protocols introduced that somehow compromise its totalitarian autonomy. I will also share my thoughts and opinions on whether corporate governance as we know it today is at risk of being disrupted.

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