What is a DAO? DAO stands for Decentralized Autonomous Organization. But what is it really? Is it just code? Is it a business? Is it a living thing? Smart contracts united?

At the heart of all of these questions was a project started in 2016 and funded by eighteen-thousand people called simply “The DAO.” The DAO was, at the time, the most hyped thing in the crypto sphere. The idea was that a bunch of stakeholders would fund an entity that was essentially a bunch of smart contracts deployed to the Ethereum blockchain. The purpose was to launch a kind of “living” entity that could invest in projects and maintain itself by incentivising the crowd. Humans would still be involved in capacities such as working as contractors hired by The DAO to perform software upgrades, or voting on proposals for other projects to invest in. But essentially The DAO would “live” on the blockchain, move around using the internet and procreate by spawning smaller versions of itself which would be specialized for different use cases.

The funding took place with ETH, and an astounding $50mm was raised by the crowd ($150mm using the ETH price at the end of the funding process). Early proposals started rolling in from projects like “Slock.IT,” a smart contract sharing platform with the idea of putting smart locks on everyday objects in order to allow them to be rented out like those electric scooters you see around town. The hope was that this project would profit from its business-like ventures and return value to the token holders, who in turn would be incentivized to take active roles that would benefit the DAO using their governance tokens.

The structure was a short-circuit to the modern “articles of incorporation” which are invoked to create a business in the United States. It allowed anyone to participate, and the hope was that this democratization and tokenization of the entity would drive us towards a new kind of world where the meritocratic aspects of society were brought to bear against the establishment.

If you happen to be familiar with this story, then you probably know how it ended. There was a loophole in one of the smart contracts that allowed funds to be drained. Someone exploited this loophole and ultimately Ethereum was hard-forked to return the lost funds to the investors at the expense of the hacker. The fallout from this event caused a small group to break away from Ethereum and form ETC, or Ethereum Classic which is still trading today (but at a fraction of ETH’s price).

Now, people have formed many narratives around the events of The DAO. These stories range from warnings about ETH not being immutable, to the fallacy of man trying to rise above all constraints through the use of advanced technology, and invoking fears that at some point a DAO could exist that would be smart enough that it wouldn’t need humans at all. From an evolutionary perspective, I think the analogy of living things being selected based on fitness to their environment rings true. For living things, the necessary components of life are the ability to take something in (like food, water, sunlight) and to be able to reproduce. Living things which are fit tend to propagate more and of course there are constraints about being able to survive and adapt to environmental changes which threaten the abilities to eat and reproduce.

If we suspend judgement for a while and try to imagine that a DAO could be alive, what would that mean? The lifeblood of this synthetic organism would have to be electricity, the DNA would be source code, and the environmental medium would be the internet, of which the blockchain is a subset. So what does our DAO live on? Instead of glucose that fuels our brains, how about cryptocurrency? And instead of creating organic offspring, what about self-replicating code tied to the parent through a merkle tree? Under these assumptions, what does fitness to the environment look like? Well, we know that the code running the DAO would need to be robust and capable of change. For that it does make sense to employ humans. This is not uncommon in nature, where symbiotic relationships are often found between two species. But the last problem may be the trickiest to solve. How will our DAO obtain a steady supply of cryptocurrency with which to fund its operations?

Now this is where it gets really strange. Because the problem that looks like the most difficult might actually be the easiest to solve. Taking a page from “The DAO” playbook of 2016, humans would identify ways to make a profit. With a decentralized autonomous organization as the means of deployment, the wisdom of the crowd might be enough to present and select opportunities to obtain these returns. What do the humans get for their effort? Well they get DAO tokens that are more valuable than they were before, which can be exchanged for more goods and services which increases their consumption. From an existential perspective, and using the logic of Adam Smith, this is the greatest good. What does the DAO get? The DAO gets a steady stream of funds which it swaps for governance capabilities with the participants. These tokens are minted from the source code itself, requiring no other inputs except the DNA-like code which creates them and some electricity.

Imagine if you will, a DAO operating at some point in the near future. It runs a diversified business operation consisting of vending machines and web services, like storage and compute. The vending machines are stocked with whatever the board of directors think people will purchase, and products are swapped out on a regular basis using machine learning algorithms which detect changes in preferences in real-time. The weather is predicted with 95% certainty to be sunny and hot, which implies that cold beverages will be in demand from the humans that purchase from the vending machines. But not all of the purchases are from humans, mind you. Some drones are capable of purchasing and delivering an icy-cool beverage to someone on the beach with a few swipes on their smartphone.

However, there’s trouble in paradise as an unforeseen weather pattern pushes some clouds over the sun. Within minutes the DAO has polled its weather oracle and determined that another town 45 minutes to the south is still sunny and clear. The DAO signals a swarm of autonomous drones to relocate the vending machines to the new city and it pays the drone swarm in real time with a cryptocurrency token stream for each fraction of a kilometer that its GPS system detects that it has been moved to. In the new town, sales jump up as thirsty humans are quenched.

While some of this may seem far-fetched, I think it’s technically all possible right now. DAOs are still in use and have been gaining in popularity again, such as the Maker DAO which can be traded on Coinbase and is well-known for the DAI stablecoin. The DAO pales in comparison to Maker DAO in terms of scale, with current value locked of over $6 billion USD. Think about that, this one DAO is over 100 times larger than “The DAO” in just five years. And The DAO itself was the largest crowd-funded project ever when it was launched. And all the events of The DAO occurred a mere seven years after the Bitcoin whitepaper.

Imagine where we might be in another five to seven years.

Thank you.