Wed Feb 19 2020 18:38:56 GMT+0100 (Central European Standard Time)

DAO's are terrifying and inevitable

I think that blockchain is really interesting, it enables new things and one of them is DAO's, decentralized autonomous organization. One of those platforms where it is possible is on Ethereum.

Blockchain

Ethereum is a blockchain and in theory, it is impossible to stop as long as a few computers are connected to each other and run the same software. They don't need to trust each other to keep it running. That means to stop a blockchain in the world, it must be made illegal at the same time around the world and still, it will be nearly impossible to stop.

So with a blockchain, you can send money, which is the same as Bitcoin. The difference is with Ethereum you can upload some code to the blockchain which is then stored permanently. That code can do anything, the platform is Turing complete, which means any logic can be implemented. It is called a smart-contract, but it has been agreed that there is nothing smart about it, but it was for a lack of a better word. But here is the key, a smart contract can receive, transfer and hold money all controlled by code.

So if you combine a piece of code that can be programmed however you like, it can control money and you can't stop it even if you tried? That is what a DAO is, a decentralized autonomous organization.

Previous known DAO's

We have seen DAO's before, there are lots of examples of bad underworld organizations. Their problems have always been money. Once people discover you are doing shady stuff, it is very difficult to transfer money. Another problem they have is, if you take out their leader, the organization often halts. None of these problems exists on DAO's on Ethereum.

Privacy and transparency on blockchains

With blockchains, every transaction is public, which has caught many bad people that thought Bitcoin was anonymous. That is changing with algorithms like ZKSnarks, very simply explained it is math that makes a group of transactions impossible to tell who send it, only that it was one of these X many accounts. This enables privacy on Ethereum. You can even try it today on https://tornado.cash/

What is awesome about DAO's?

A lot of great things can be archived by DAO's. Right now there exists software to easily make DAO's, one of them is called https://aragon.org

It gives the freedom to people to connect around the world about a common cause. Members can donate money to the cause and the DAO can for example give voting rights to decide how that money is going to be spent.

Example of a small local DAO

Imagine that you want to have a playhouse made on a playground. You create a DAO with voting rights and functions to only pay out money to a contractor that has been decided on by a majority. You can then tell everyone to join this DAO with money if they also want to see this happen and they can be sure you do not run with the money. Somebody proposes a contractor and a vote is started. If a the majority votes yes, then work is started and half the money is paid out by the Smart Contract. You also made a function that will only pay out the rest of the money when the work is done. The smart contract then hires a third party auditor, who received a small commission, to judge if the work is done.

The playhouse is built, money was transferred, nobody had to trust anyone to not run away with the money or forget to transfer it, a auditor oversaw the work and everything was programmed to follow certain rules. Easy and transparent for everyone.

So what is terrifying about DAO's?

But you can also imagine what these tools give for people that want to do bad things?

  • an anonymous tool
  • that can not be shut down
  • that can be secret and encrypted
  • it can hold money you can't seize
  • you can not put the leader in jail to stop it working
  • it can be programmed to make decisions on its own
  • it has money to make those action happen

That sounds terrifying and like a bad Hollywood movies, one particular called Eagle Eye. A movie where a computer has gone rogue and decided to execute the government because it decided that was best. Luckily our main character figures it out and stops it. The computer is then decommissioned of course.

The first thing could happen in a DAO and the problem is that a DAO can not be decommissioned at will, not if not programmed to do so.

But without money, nothing is going to happen. The thing is that Ethereum Marketcap right now is 30 Billion dollars, there is a lot of money flowing and it is only growing.

DAO's are the future

It is no doubt that DAO's are the future. It enables so much and allows people to collaborate with less friction and more transparency. There are no doubt challenges still and these kinds of terrifying DAO's are likely not there today because the programming is still really complicated and the privacy is in its infancy on Ethereum. There is also many ways to cheat a DAO by faking majority. However, we need to be aware, both of the good possibilities and the bad ones.

In theory, there could be a good DAO that would pay out more money than bad DAO's, making the incentive for the members of the bad DAO to rat of the bad DAO. Everything is not lost! :)

Tags: #ethereum

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