DAOs as the future? Hard pass, thanks – TechCrunch


Just like yesterday, exchanges like Coinbase seem to have opened the eyes of the traditional economy to the benefits that cryptocurrencies offer as an asset class.

Cryptocurrencies and other decentralized technologies have created applications that promise to create true social value by providing an automated way to establish trust, but monopolize trust as a service. It costs much less than traditional intermediaries (banks and governments).

Based on the decentralized revolution, positive thinkers are already discussing the next big breakthrough that can guarantee trust at the organizational level, Decentralized Autonomous Organization (DAO). However, while the problems that DAO can solve are real, DAO advocates misunderstand the nature of these problems and provide tools that do more harm than profit.

Decentralized applications are built on smart contracts. This is an algorithm that runs when certain conditions are met, thereby automating general decision making. Smart contracts create trust by guaranteeing predictability. When a predetermined set of actions occurs, the token will be paid.

By bundling DAOs with a set of smart contracts, enthusiasts can create what’s called a smart “organization” where business decisions such as inventory management, cash management, pricing, and even employment are made. We see this as the next logical step in the trust building process. Based on the given input.

As an extreme example, consider Amazon’s third-party resellers. The business is based on a few simple inputs, such as the level of interest in different products, the cost of raw materials and production at different facilities, and shipping costs. Based on these pre-determined inputs, determining the value of a business investor needs to be very easy, and DAO eliminates managers from making bad or self-interesting decisions. To do.

Business owners are constantly making decisions that may not be optimal from an investor’s point of view because they are opaque at best and are done too often for personal gain. For example, the decision to switch to a higher cost manufacturer could be a hedge against product returns based on poor quality. Or it could be because the new manufacturer is the owner’s cousin.

With DAO, a set of smart contracts makes all the decisions and allows you to run your entire business without any humans. If a particular product line is not for sale, production will automatically decline and prices may drop until inventory is reduced. As sales increase, so does production. As production costs go up, so do prices. It then benefits DAO investors who make investment decisions based on pre-configured (and pre-approved) smart contracts.

However, this great reliance on smart contracts to solve small problems continues to be influenced by what advocates call the edge case, which is misleading. What if the manufacturer strikes or catches a fire? It’s hard to imagine smart contracts that expect better than human managers when it’s safe to resume orders with them.

That’s why companies use traditional contracts in addition to smart contracts. In reality, the business world is far more messy and expensive than you can predict with a set of smart contracts. Of course, DAO can continue to keep humans (as employees or consultants) to solve this kind of edge case, but hopes humans will be called in to clean up the clutter of smart contracts. I doubt if there is any.

Decentralized finance has created value by more effectively validating quantifiable economic decisions. This is successful because the automated trust mechanism for simple (or complex) transactions has simple metrics (economic value) to measure the profits of decision making.

But, not to mention organizations and communities, there is a big difference between resolving transaction trusts and creating relationship trusts. People get financial value from transactions, but they also get other different kinds of value because they are part of relationships and organizations. Being part of an organization, we draw a sense of place, and from this sense of place, we ultimately draw a sense of ourselves.

The sense of place derives from a network of interactions that are constantly being renegotiated with each other and within the group. And in organizational relationships, you should always weigh competing values ​​in decision making. You have to do something that doesn’t make sense financially, but is it more likely that someone will help me in the future?

Pierre Bourdieu described these values ​​as a whole as a field, emphasizing that each person’s field is structured differently based on the accumulated historical and cultural context. According to Bourdieu, mastering these relationships requires an intuition, which he called the “sense of the game,” rather than a universal algorithm.

This game feel distinguishes between visionary and good businessmen. And more importantly, it separates good people from good managers. For me, the ultimate proof that DAO can replace an existing flawed business organization is when smart contracts can be determined to be a good time to give employees a holiday. If you are a DeFi enthusiast, it should be your challenge.

DAOs as the future? Hard pass, thanks – TechCrunch Source link DAOs as the future? Hard pass, thanks – TechCrunch

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