The WelderDestiny Compass

Decentralized Autonomous Organization - Issue #053

Wednesday, January 31, 2018 / Perth Australia / By Niekie Jooste

In this edition of "The WelderDestiny Compass":

  • The Decentralized Autonomous Organization
  • What Is A DAO?
  • Why Would I Care?
  • Only For Tech Heads?

The Decentralized Autonomous Organization

OK, so this name has seen a lot of evolution within this e-zine. From Independent Digital Enterprise, to Digital Autonomous Organization, and today we have: Decentralized Autonomous Organization!

This evolution in terminology is clearly a sign that we are still on the frontier of this new future that is evolving, in real-time, in front of our very eyes. For now, terminology is the least of our concerns. Trying to get a jump on the competition in understanding what it is that is moving towards us, is a much more important issue. We would ideally like to get there before the landscape is crowded.

We started on this journey because we were concerned with the future of human jobs due to the rise of the machines, but now we are excited that those very same pesky machines may actually hold the answer for the future of jobs. What is particularly pleasing is that the answer is not to turn half the population into a group of second class zombie citizens that are reliant on the dole and social security handouts to survive.

I for one am very excited to be living in a time where the potential for change is so great, especially the potential for positive change.

We have looked at DAO's a few times before. In particular in The WelderDestiny Compass edition 46, and then again in edition 49. Given that I believe that DAO's will have such a big impact on the jobs landscape going forward, I have decided to firstly wind back again, and take another look at what DAO's are, and then in future editions we can more closely explore how such organizations could unfold, and how we could potentially benefit from them personally.

If you would like to add your ideas to this week’s discussion, then please send me an e-mail with your ideas, (Send your e-mails to: or complete the comment form on the page below.

Now let's get stuck into this week’s topics...

What Is A DAO?

A decentralized autonomous organization (DAO) is an organization that has these characteristics:

  • It is not owned by any central person or body. In essence it is owned by the community that invests time and energy into it. If interest is lost, so that the community around it no longer supports it, then it dies. The biggest obstacle to DAO's is in getting the community established and big enough to reach a critical mass. Once this happens, it is "off to the races!"
  • Community members contribute their own efforts and in return receive benefits from the interaction. Typically these benefits would be in terms of payment in the DAO's "currency". There are typically called "tokens". These tokens are the currency on which the DAO operates. Some community members develop "applications" that form part of the DAO. These are the "tech heads" in the DAO. As other community members use these applications, they would pay a fee to do so. Part of this fee is returned to the developers for their efforts. Some community members provide the computers and computer power to enable the DAO to run. These community members are typically called the "miners" or "minters" in the system. In exchange for their expense in capital and electricity, they are remunerated in tokens as well. The number of roles within the community is limited only by people's imaginations, and what the programmers can manage to program.
  • The basis of the DAO is that it runs on a set of "ground rules". In fancy speak, these rules are "contracts" within the system. All interactions on the system are governed by these rules. In essence, the rules are what governs how the tokens are doled out to the different community members, and what outcome will happen in response to an action on the system. The idea is that any action by a community member will have a predefined outcome. An outcome that is not only predictable, but an outcome that nobody can manipulate. The idea being that people can interact with each other without actually knowing each other, because the transactions are rule based, it is rather difficult for one party to rip off another party. This allows financial transactions to take place between people directly without having a trusted third party intermediary such as a bank, or other large company involved. This is a very important aspect of a DAO, because the "trustless" nature gives rise to the ability for each community member to keep control of their own information and data as far as they want. Privacy is therefore not dependent on the organization running the platform, but is a responsibility of each community member. If somebody let's their password get in the wrong hands, it only compromises their own security, not that of the whole community.
  • The basis of the security is cryptography and decentralized databases and file storage, rather than the current model of centralized databases and file storage hiding behind firewalls. We all know how unsuccessful the centralized database model has been from a security perspective. These get hacked on a regular basis, so it is clear that such a model for security needs to be given a re-think.

In short, as long as there is enough value flowing through a DAO so that there are enough active community members both using the DAO's services, and also supplying those services, then the DAO can thrive. By their very nature, some DAO's will have smaller communities while others will have larger communities. The smaller communities will be where more specialized actions and activities are taking place. Welding based DAO's will probably not be all that big, unless they use some larger DAO's that service much wider communities as a basis.

Why Would I Care?

Besides being a rather interesting concept, why would you care about all this? The short answer is that it my be worth your while financially.

An interesting aspect of DAO's is that they are built around game theory. Game theory is a field of study that has not been around that long, but it has grown in importance rather quickly. It was apparently "invented" in 1944 as a concept. It started being applied in the 1950's in economics, but in the last decade or two it has come into its own in many different fields.

In essence the ideas around game theory are based on what rational individuals would do if they acted purely out of self interest. In the case of DAO's, the idea is that the "rules" on which the organization is based are put together in such a way that as long as everyone works in their own self interest, then it will serve the bigger community.

In other words, it is all about getting around the idea that communities need to act in an altruistic way. A community that can only operate as long as everyone is altruistic will ultimately fail, because the scammers and crooks in the world will just rip everyone off. If the community is designed in such a way that the whole community benefits when each of the members acts in self-interest, then the community will have a much better chance to succeed.

In other words, you would care, because you could make some money out of it, or receive some product or service in a cost effective way in return.

Here is the important bit: The early adopters will tend to have an advantage once the DAO gains momentum and gathers a large community. It would be worth your while to keep an eye on these developments, and see where you can get involved and contribute and benefit, as soon as possible. Once the crowd arrives, it will become more difficult.

Only For Tech Heads?

To answer this question, let us look at what is currently the oldest DAO. The oldest DAO is actually bitcoin. In essence, bitcoin is a DAO bank. It is not owned by anybody.

There are programmers that work on the code, and in return they make some good money from bitcoin.

There are miners that operate the computers that run the system to maintain the blockchain, and in return they receive bitcoin.

There are users that use bitcoin to purchase goods and pay in bitcoin. As part of these transactions, they pay fees that make their way to the miners.

If you wanted to get involved in the early days of bitcoin, then you would have needed to understand enough about computing to set up a bitcoin mining operation. There were no bitcoin exchanges where you could easily exchange fiat currency for bitcoin, so you either had to mine it, or meet some shady characters in a parking lot somewhere to get some bitcoin. In other words, the beginning is always difficult, and built by the tech heads.

If you now want to get involved as a user, it is a relatively easy matter to change your fiat currency for bitcoin via an on-line exchange, and then transfer your bitcoin to a private "wallet" from where you can transfer bitcoin to other parties in payment for goods or services. The operative term here is "relatively easy". There are still many glitches in the system, and user friendliness needs a lot of work, but it is getting to the point where most people can operate these digital wallets.

It is important to recognise that the so called "wallets" are just pieces of software that allow you to interact with the blockchain and allows you to access the bitcoin that is associated with your "secret code" on the system. In essence it is like using an internet browser to access your bank account, and make electronic transfers. Instead of logging into your bank's platform with a password, you log into your "wallet" with a secret code.

The difference is that there is no centralized bank that is the custodian of your information. The information is freely available to everyone, but the ability to access the "private" information is limited to you as holder of the "secret code" for your bitcoins. It is the "secret code" that allows you to decode some of the encrypted information that is associated with your bitcoins.

In the same way, as other DAO's grow, that offer services like YouTube, (already there!) AirBnB, (busy being built) UBER or Facebook, they will build software through which to access the system. As the DAO matures, this software will become user friendly. You will not be able to see the difference between software running on a blockchain, or software interfacing with a company such as YouTube, UBER or AirBnB.

In other words, once we are far enough down the road, working on a DAO platform will be just as easy as surfing the internet. So, if you are computer challenged, take heart!

Yours in welding

Niekie Jooste

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