The Boundaries of Dao - What organizations and products can be called Dao?

Today, there are two pieces of news related to Consensys , which is half of Ethereum . One is that it raised $ 450 million in Series C funding , with a valuation of $ 7 billion; the other is that MetaMask is going to release a Dao . Metamask is undoubtedly half of Consensys.

I feel it is a bit strange that these two pieces of news were released at the same time. The target of the C round of financing is a centralized company, and the release of Dao is to establish a decentralized organization.

After Opensea released its listing information, it was widely condemned within the industry, and a large number of decentralized competitors emerged in the industry.

A reasonable explanation is that Consensys aims to be a centralized company, but at the same time, it meets the industry's demand for decentralization by releasing a Dao. The two are a hedge.

What I really care about is, are the DAOs released by consensys truly centralized autonomous organizations ?

What I want to ask is, where are the boundaries of an organization like Dao, and what kind of organization can reasonably be called Dao?

I think the answer to this question can be inspired by the 1991 Nobel Prize in Economics.

  Inspiration from Coase

The famous economist Coase invented the concept of "transaction costs" and deduced from it why companies are born and how the size of companies is determined.

Coase said that it is the comparison between transaction costs and organizational management costs that determines the boundaries of an enterprise. Things with lower transaction costs should be externalized more; things with lower management costs should be internalized more.

(Coase is a more rigorous scholar than other "mathematical economists". He did not use mathematical formulas to describe it, such as if: transaction cost > management cost: internalization, else: externalization. Because there is no axiom to define cost.)

To make it easier for everyone to understand, let me give you an example. An example that almost everyone in the cryptocurrency circle can understand is cloud computing. Before 2010 , I worked in a company with a server room, built my own email system and office system, and even some business process-related operating systems. Now all these things are outsourced to AWS, Alibaba Cloud, and Microsoft. This is because the price of doing these things in the market is much lower than the cost of the company's own internal construction.

  What is the value of Dao's existence? What force determines the emergence of Dao as an organizational form?

I think Coase's theory can explain the value of Dao, and Dao's supporters do not need to go beyond the scope of Coase's theory to beautify Dao.

The core of Dao is that with the two things, smart contracts and tokens, the cost of forming organizations between strangers is greatly reduced.

The largest cost is finance-related costs, including financing, asset management, and financial expenditure decisions.

The most classic example is Constitution Dao, which raised more than 40 million US dollars from completely strangers from all over the world in a very short period of 6 days . This is something that traditional corporate organizational models cannot do at all.

The second largest cost is the cost associated with the decision-making of the Dao organization.

In traditional enterprises, decision-making costs, including the love-hate relationship between the three major groups of shareholders, management and employees, generate huge decision-making costs.

But with the help of smart contracts, complete strangers can make decisions through voting, which is undoubtedly a great improvement in the organization's ability to act.

A classic example is banklessDao . Bankless invests in several projects every quarter, and all of these decision-making processes are basically reached at near zero cost.

According to Coase's theory, because of the two technologies of smart contracts and tokens, the management cost of strangers forming "organizational power and behavior" is greatly reduced, which is lower than the transaction cost of purchasing these "power and behavior" in the market, thus forming a unique organizational model, a decentralized autonomous organization - Dao.

Individuals can reduce the market transaction costs of selling their own labor, finished products, or semi-finished products by joining Dao.

This is the value of Dao, and it is also the theoretical basis for Dao to be different from traditional corporate organizations and become a new organizational model.