Examining the Nature of Autonomy in DAOs

Traditional Organizations vs DAOs

In a traditional organization, there is usually a hierarchical power structure. However, In a Decentralized Autonomous Organization (DAO), there is usually a flat and fully democratized power structure.

By introducing organizations that are decentralized and autonomous, we can enable self-organizing forms of coordination. DAOs are still going through a chaotic phase, but we are seeing a shift towards such a system, and only a few more building blocks are needed.

Autonomy

If we look at today’s landscape of Internet communities calling themselves DAOs, how many of them are truly autonomous? And how do we define “autonomous”?

One way to test if a DAO is truly autonomous is to have a new contributor join the organization, make contributions, get rewarded for those contributions, and obtain governance power. And if any of those steps (joining, working, getting paid, voting) get blocked by a human, the organization is not truly autonomous.

So we can, in this context of DAOs, define “autonomy” as the organization’s ability to automatically handle changes without the need for any human operators. A truly autonomous DAO should continue working even if its core developers disappear forever, as long as they designed the system correctly in the first place. Because this would enable new members to step in and take over the work handed over by previous generations.

No Leaders and Managers?

There are numerous examples of people in the Web3 space who are saying that DAOs cannot function without leaders. This is wrong. A DAO can function without leaders and managers if it is designed correctly.

The DAO tooling needed for this has not fully matured yet, but we are starting to understand what is needed when designing a DAO that will run autonomously without human leaders/managers:

1. Automatic Onboarding

   Example: Becoming a DAO member by minting an NFT and getting token-gated access to the DAO’s systems.

   
   

2. Open Contribution System

   Example: Any DAO member can submit their work to the DAO’s contribution tracking system. Even the value creation tracking system itself can be automated with tools like SourceCred.

   
   

3. Automatic Contributor Rewards

   Example: After DAO members submit their work to the DAO’s contribution system, the DAO’s code calculates a fair reward based on each person’s contribution relative to the others, and then distributes the reward through a smart contract.

   
   

4. Flat and Fully Democratized Governance System

   Example: Any DAO member can propose changes, and any DAO member can vote on proposals.

Mindset Shift

The experience of working in a DAO is very different from working in a traditional organization. In traditional work, we are trained to take orders from someone higher up in the hierarchy and we also expect them to keep track of the quality of our work and how much time we spend in the office. Traditional bosses and managers also expect you to ask them for permission before working on new project ideas.

This transition seems to be very difficult for some newcomers to DAOs because there is no longer someone there to make decisions and tell them what to do. So what does this mean? Can only self-driven people work in DAOs? If people are unable to make their own decisions, will they face problems working in a DAO culture of autonomy and self-organization?

As explained by Stefen Deleveaux (Govrn), being autonomous requires a mental shift.

You’re not self-reporting your contributions for a boss or manager, you’re doing it for yourself and your peers.

Transparency

When there is no traditional management structure with people higher up in the hierarchy getting paid higher salaries, we need a different way of tracking and rewarding work. As opposed to traditional organizations where salaries are kept private, DAOs aim to make this information transparent and fully public. With tools like Coordinape, a DAO’s members can allocate rewards to their peers, effectively replacing the role of a boss/manager.

Transparency Is Uncomfortable

As Stefen explained, the largest barrier to autonomous contribution management in a DAO is self-reporting your work and making it public for everyone in the organization. And if you come from a traditional organizational culture where you only report to your boss and no one else, this can feel uncomfortable.

In traditional organizations, you might hear things like “We focus on delivering value, no time tracking.” And if you are someone higher up in a hierarchical power structure, you probably have fewer people overseeing the effort you put into your work, which means that you can get paid without disclosing the work you did and the time you put into it.

Transparency Enables Autonomy

To enable autonomy in a DAO, a key building block is making the proof-of-work of each member fully transparent. Once we have a contribution management system that gives everyone in the DAO full transparency into the work of each member, we can start to trust that people are getting fairly rewarded for their work and their time.

SourceCred¹ and Coordinape² were interesting experiments for replacing bosses/managers with a more collaborative and trustless contribution management system, but they can be quite inaccurate in fairly rewarding contributions. The next generation of contribution management systems will probably look similar to SourceCred and Coordinape, but with much more granular details like proof-of-work, time tracking, skill rating, and priority alignment.

What Does the Future Look Like?

Over the next few years, we will start to see more people entering into full-time work for DAOs. They will leave their hierarchical traditional organization and come work for a DAO that can offer more freedom and autonomy. But we first need to build more solid foundations and tooling for enabling autonomous work.

As of 2024, it would be risky for a highly skilled person to invest time into a DAO if he or she would have to rely solely on experimental tools (like SourceCred or Coordinape) for getting fairly rewarded. So if we can establish a more solid system for collecting the contribution data needed for calculating each person’s rewards, working autonomously for DAOs will suddenly start to seem more attractive.

References:

• [1] The CredSperiment: An Ethnography of a Contributions System
• [2] DAOs are Orgs: Moving at the speed of trust in a trustless environment