Blockchain technology has started to gain attention across various industries, and the corporate world is no exception. One of the most revolutionary applications of blockchain technology is the possibility of running a company without a central authority, i.e. a CEO.
Traditionally, in every successful organization with millions in revenue, billions in market cap, and present globally, you may have observed one thing they all have in common – a powerful and charismatic CEO.
A CEO (Chief Executive Officer) is the hierarchical head of the company and is responsible for a majority of the company’s decisions. Steve Jobs of Apple, Bill Gates of Microsoft, and Mark Zuckerberg of Meta (formerly Facebook) are all examples of successful CEOs who have led their respective companies into the future.
But in recent years, thanks to blockchain technology, a new trend has been observed that is gaining traction across different business models. And that is DAOs (Decentralized Autonomous Organizations). They are organizations completely different from traditional businesses with their own unique business models.
DAOs have given the company the power and possibility to run without the need for a CEO.
But how is that possible? In every organization, there is usually a body of people (generally a board) that is responsible for making business decisions that are in the best interest of the company. But without a board, the company tends to fall apart as decisions cannot be taken properly.
DAOs have given the company the power and possibility to run without the need for a CEO
So what makes DAOs so special that they can, not only survive but, thrive without a CEO?
As we look into answering these questions, let’s first look at traditional business hierarchies and understand how they are different from DAO hierarchies.
Traditional business hierarchy
The hierarchy of a traditional business company typically follows a pyramid-shaped organizational structure, with a clear chain of command and authority. Most businesses start with a board of directors and executive officers at the top of this pyramid.
The board of directors is responsible for overseeing the company’s operations and making strategic decisions. They are elected by the shareholders of the company. Whereas the executive officers are the top-level management of the company, including the CEO, COO, CFO, and other senior executives. They are responsible for implementing the company’s strategy and managing its day-to-day operations.
This is followed by the middle management and supervisors – department heads and other managers who oversee specific areas of the company’s operations, such as sales, marketing, finance, and human resources. They also include individuals who are responsible for managing teams of employees and ensuring that work is completed efficiently and effectively.
Finally, we have the staff who carry out the company’s operations, such as salespeople, accountants, customer service representatives, and other workers.
In this hierarchy, decision-making and authority flow from the top down, with the board of directors setting the company’s overall strategy, and the executive officers and middle management carrying out that strategy. The supervisors and staff carry out the day-to-day operations of the company under the guidance of the managers above them.
But thanks to DAOs, we don’t need this traditional hierarchy anymore.
What are DAOs?
A DAO, or Decentralized Autonomous Organization, is a digital organization that operates based on pre-defined rules encoded as computer programs called smart contracts. It’s an organization that is governed by its community of members or token holders, rather than by a central authority.
It’s an organization that is governed by its community of members or token holders, rather than by a central authority.
In a DAO, decisions are made through a democratic and transparent process where token holders can propose, vote, and implement changes to the organization’s rules and operations. The rules of a DAO are stored on a decentralized blockchain network, which means they are publicly accessible and tamper-proof.
One of the key features of a DAO is that it operates autonomously, using what we call smart contracts, without the need for a central authority or intermediary. This means that it can function without the need for a traditional hierarchy or management structure, and it can run 24/7 without interruption.
By using blockchain technology, a company can create a distributed ledger that records all the transactions and decisions made by stakeholders. Anyone can access this ledger with permission, allowing for transparency and accountability, which are essential for a company’s success.
Why DAOs beat traditional hierarchy?
In this day and age, employees and unions are revolting over decisions made by the board and executive officers. More importantly, people are starting to realize that decisions that affect many are taken by very few. This has started a new revolution where CEOs and board members are put on the stand every time they make any bold or new decisions that affect the lives of thousands of employees.
Thanks to DAOs, there are a wide set of advantages that brings power back to the people. But how exactly are DAOs attempting to solve the problems brought upon by traditional businesses?
- Decentralized decision-making: In a traditional hierarchy, decisions are made by a centralized authority, such as a CEO or board of directors. In a DAO, decisions are made by the token holders who vote on proposals, which are then executed automatically through smart contracts. This decentralized decision-making model ensures that all members have an equal say in the organization’s operations.
- Transparency: A DAO is built on a blockchain network, which means that all transactions and decision-making processes are transparent and publicly accessible. In a traditional hierarchy, decision-making is often opaque, and information is only available to a select few.
- No central authority: In a traditional hierarchy, a CEO or board of directors holds the ultimate decision-making power. In a DAO, there is no central authority or single point of control. The rules are pre-programmed and enforced by smart contracts, which operate autonomously based on the consensus of the community.
- Incentivization: In a DAO, members are incentivized to contribute to the organization’s success through tokens, which represent ownership and control of the DAO. Members are rewarded for their contributions, such as proposing successful initiatives or identifying vulnerabilities in the DAO’s code. In a traditional hierarchy, employees are typically incentivized through salaries and bonuses.
As you can see, DAOs are programmed to create a flat hierarchy within their company in such a way that decision-making power is distributed throughout all the stakeholders of the company no matter how big or important.
How you can build a DAO from scratch
Running a company using DAOs (Decentralized Autonomous Organizations) requires a shift in the traditional hierarchical structure of a corporation. DAOs are digital entities that operate autonomously based on pre-programmed rules and are governed by their community of token holders.
To create and develop a successful DAO, you should try and follow the following steps in order. This is the basic process to launch your own Decentralized Autonomous Organization!
- Define the purpose
- Choose the blockchain
- Create the smart contract
- Launch the DAO
- Community building
- Governance and decision-making
Overall, building a DAO requires technical expertise, an understanding of blockchain technology, and a commitment to creating a decentralized and transparent organization. However, there are many resources and communities available to help guide the process.
Running a company using DAOs requires a shift in the traditional hierarchical structure of a corporation. DAOs operate autonomously and rely on the community of token holders to govern the organization.
It’s important to remember these above steps and also keep in mind that taking power away from a traditional pyramid hierarchy does not automatically make a company more successful. However, if run right, a DAO can have a lot more success and stability!
Successful DAOs in the past
There are several successful DAOs (Decentralized Autonomous Organizations) that have emerged in recent years. Here are a few examples and how they became successful:
- MakerDAO: MakerDAO is a decentralized lending platform that allows users to borrow a stablecoin called DAI using their cryptocurrency as collateral. MakerDAO is governed by a community of token holders who vote on proposals and changes to the platform. MakerDAO became successful because it provided a unique solution to the problem of volatility in the cryptocurrency markets, allowing users to access stable liquidity.
- Uniswap: Uniswap is a decentralized exchange (DEX) that allows users to trade cryptocurrencies without the need for a central authority. Uniswap uses an automated market maker (AMM) system that sets prices based on supply and demand, rather than relying on a traditional order book. Uniswap became successful because it provided a more accessible and decentralized alternative to centralized exchanges like Coinbase or Binance.
- Aave: Aave is a decentralized lending and borrowing platform that allows users to lend and borrow cryptocurrencies without the need for a centralized authority. Aave is governed by a community of token holders who vote on proposals and changes to the platform. Aave became successful because it provided a more accessible and decentralized alternative to traditional lending platforms, allowing users to access liquidity from anywhere in the world.
- Compound: Compound is a decentralized lending platform that allows users to lend and borrow cryptocurrencies without the need for a centralized authority. Compound is governed by a community of token holders who vote on proposals and changes to the platform. Compound became successful because it provided a unique solution to the problem of liquidity in the cryptocurrency markets, allowing users to earn interest on their idle assets.
Successful DAOs provide unique solutions to problems in the decentralized ecosystem, are governed by a community of token holders, and provide more accessible and decentralized alternatives to traditional financial services.
Is the future CEO-less?
Running a company without a CEO using blockchain is still a new concept, and there are several challenges that need to be addressed. For example, there needs to be a consensus mechanism to ensure that decisions are made efficiently, and the company’s stakeholders must agree on the rules and regulations that will govern the company.
Blockchain technology has the potential to revolutionize the way companies are run, by enabling a decentralized approach to decision-making. While there are several challenges to overcome, running a company without a CEO using blockchain can lead to increased transparency, accountability, and efficiency.
What ideas do you have for your next big thing? Do you think you can make it into a DAO? Let us know in the comments!