Exploring the role of DAOs in society
Emily Furlong
November 3rd, 2022

The emergence of DAOs (decentralized autonomous organizations) challenges fundamental assumptions around how individuals can come together to cooperate towards a shared goal. Innovation in the field of human association might seem surprising, but the modern limited liability corporation is also a relatively new concept at only a few hundred years old. For most of history, economic activity was carried out by individuals and families operating in social networks. The role of the modern corporation as a primary agent (and employer) in society is even younger - in 1800, around 80% of individuals were still operating as free agents, not employed by a corporation.

In the time since their rise, corporations have come to hold a foundational role in many societies, acting as providers of stable work and income for most individuals. In countries that have strong social provisions like sick leave, health insurance, and parental leave, many of these are administered through corporate employers. 

DAOs offer a promising path forward in enabling large-scale shared ownership and coordination of individuals, thereby disrupting the traditional corporate model of employment. In their current form, DAOs require workers to operate as self-employed individuals, thereby completely removing the ‘employer role’ from the equation, enabling workers to freely design their labor and commitment, but often taking away employer-based social provisions. 

Reimagining the future of work

Doing work within a DAO can take various forms, and in many ways, DAOs invite us to reimagine the future of work. Task-based and project-based work is common within DAOs, but many contributors also work on a part-time or full-time basis in a manner similar to salaried employees. In addition, governance participation and delegation can be considered work, as it requires voters to research and inform themselves before making a decision. 

By enabling participants to engage in a variety of different ways with lower commitment than is typical in traditional employment, DAOs are able to provide more flexibility and self-directedness than most employers.

However, the downside of this flexibility is that DAO workers must take on more risk by foregoing the benefits of traditional employment. The role of corporations in many societies has evolved to act as a provider of stability and mediator between an individual and social benefits such as health insurance and unemployment protection. 

This role cannot be overstated in many European countries such as Germany. Employees benefit from protections against arbitrary termination, unemployment insurance in the case of layoffs, parental leave, health insurance contributions, and retirement contributions. In addition, employees holding permanent contracts have vastly increased leverage when it comes to financial matters like applying for a mortgage.

Unfortunately, this means that in its current form, DAO work is unrealistic for those unable or unwilling to take on such risks. DAOs may inadvertently exclude whole groups of people if they don’t examine the role they play in providing stability and security to their workers.

DAOs as employers

There are several different ways in which we may imagine DAOs could offer more security to their workers. There is likely not one right answer, but a combination of tools that can be used depending on the DAO and the type of working relationship between the DAO and worker.

First off, it must be said that if a DAO wants to facilitate the same exact benefits as a traditional employer, it must have legal entities in the countries in which it has workers, or operate through third-party legal entities to provide employment. This might seem ludicrous and antithetical to the DAO mission, but it could be a realistic scenario for some organizations. Whether this is an attractive and feasible situation depends on a few factors.

As was clearly laid out by Vitalik Buterin in his recent post, there are some organizations that rely on decentralization for censorship resistance and credible neutrality. For these kinds of organizations, employing workers via traditional legal entities is likely neither desirable nor possible.

Other types of organizations may not be as dependent on legal decentralization, and could consider operating a state-recognized organization. In fact, many organizations on the DAO spectrum have both a traditional corporate entity and a DAO, allowing regular workers to be salaried employees if they choose.

DAOs providing employment-like benefits

Assuming that becoming recognized as legal entities by governments is neither possible nor desirable, DAOs could voluntarily implement and fund internal policies related to vacation, parental leave, health insurance contribution, notice periods, sick leave, etc. for their contributors. While these benefits may not flow through regular legal entities or be government recognized, they can approximate the types of benefits and stability that traditional employment provides.

This is more straightforward to do for part-time or full-time regular contributors, but may be more challenging for the task- or project-based workers. If someone is a full-time contributor to a DAO for a period of time, it is easy to imagine how that DAO might facilitate regular payment even during sick leave, parental leave, or vacation time. Project- or task-based workers are likely to spread their time across several DAOs or even DAOs plus offline work, so their working structure looks a lot more like self-employment.

In this case, DAOs can financially compensate for the additional risk taken on by workers. This is typically seen in self-employment - those working freelance charge significantly higher hourly rates than a comparable salaried employee earns. This model is what is typically seen in DAOs, but it is worth exploring alternative configurations of benefits in order to attract the widest variety of workers. 

DAOs as states providing social benefits

This brings me to a final consideration of the role that DAOs can play in society. As communities grow larger, stronger, and more networked, we can come closer to the vision of a network state, in which individuals belong to a “highly aligned online community with a capacity for collective action that crowdfunds territory around the world”. 

Instead of DAOs playing the role of the corporation in a society where social benefits are distributed via employers, DAOs can begin to play the role of the state distributing the social benefits. 

Workers could do work within organizations that are nested in a network state, and as part of that receive social benefits from the state. This model could support benefits for task- and project-based workers independent of which organizations in the network they do work for. For example, all workers within a network state might receive vacation and parental leave allowance, insurance against loss of work, and sick leave.

Instead of relying on traditional financial providers for loans, workers in a network state could apply to DAO lenders that are able to accurately assess the earning potential and risk profile of applicants. Some network states may provide universal basic income or similar programs in order to secure the livelihoods of their members. While the idea of the network state is still in its infancy, it is worth further exploring this path as a possible future for the evolution of DAOs.

DAOs are emergent

DAOs are an emergent phenomenon and are in a state of rapid evolution - there is no a priori definition of a DAO or set of DAO rules. We are already seeing DAOs behave more like a cluster of similar organizations than a clear-cut category. As these organizations adapt and evolve, it is important to make decisions about their nature based on first principles and practical experience, rather than assuming a certain set of rules or practices must be followed top-down by all. As such, we mustn’t assume that a specific model of employment is the best or the only way ‘to DAO’. I’d like to invite us to think critically about how we structure DAOs so as to include the widest variety of people and models of work.

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