Just DAO It! A Brief History of Decentralized Organizations

Most animals have an innate tendency to organize themselves into groups with fixed & often hierarchical roles. Humans are no exception; such structures have been a key feature in the development of our societies– whether for better or worse.

Even in bodies with the most egalitarian intentions, power more often than not ends up concentrated in the hands of a few. Such imbalances can lead to a disconnect between those who are governed and those who do the governing– between what leaders decide and what the people actually want. This is true even in the case of governments that ostensibly rule with the consent of the majority; official actions can be opaque and unreflective of the public will.

The concentration of power is even more apparent when it comes to corporations and other private entities. Most companies don’t even make a pretense of inclusive decision-making; power is exercised by a small, centralized leadership whose decisions direct the lives of their employees, their customers, and the wider world. This is particularly true in our increasingly monopolistic age.

In recent years, a new kind of organization, designed to solve this seemingly insurmountable problem, has been gaining visibility and popularity. Decentralized autonomous organizations, or DAOs, were conceived to level the distribution of power by distributing it fairly among members. Their design has been touted as a new paradigm for organizations of all sorts.

But does the reality match the promise? Let's dive into a brief history of the concept...

In the Beginning: DAO Prehistory

It all started in the mid-1990s when the first building blocks of the DAO concept appeared in a report by David Ronfeldt, a researcher at the RAND Corporation.

The report – Tribes, Institutions, Markets, Networks (TIMN) – introduced the notion of multi-organizational networks: “small, scattered, and autonomous groups” spread across jurisdictions. Such groups, he wrote, could support the growth of “distributed, web-like global enterprises” and “virtual corporations.” Today, researchers believe that Ronfeldt’s ideology informed the structure of both the early Internet and the modern DAO.

The origin of the phrase “Decentralized Autonomous Organization” derives from  Decentralized Autonomous Corporation (DAC), a term that made the rounds in cryptography forums around the time Bitcoin was invented. In theory, DACs would use tokenized shares to reward shareholders– just as today’s DAO members hold tokens.

DAOs in Practice: The Early Days

Vitalik Buterin coined the term in 2013. Three years later, the first official DAO was formed– a crowdfunding platform aptly (and succinctly) dubbed The DAO.

It was one of the most hotly anticipated launches in years. Fundraising efforts yielded 12.7M ETH– at the time worth roughly $150 million – to launch the project. But just one month after The DAO went live, hackers exploited a vulnerability in its code, absconding with one-third of its funds. The incident was so disruptive that Ethereum’s core team decided to implement a hard fork that restored most of the stolen funds and split the blockchain (and the community) in two. By September of the same year, the $DAO token had lost virtually all of its value.

The DAO hack was a major setback for the decentralized space. To many in the outside world, it appeared as though DAOs had failed as a proof-of-concept. The exploit also raised legitimate questions about accountability and governance processes– specifically around how to correct flaws in DAO protocols and manage liability.

Some, however, saw The DAO’s collapse as an opportunity to build tools and structures that could enable more secure, flexible, and effective iterations of the concept.

The launch of The Aragon Network in 2016 is a case in point. Aragon was designed explicitly to make it easy for anyone to create and manage a DAO without a legal framework. MolochDAO and MakerDAO, for their part, introduced structural innovations that helped make it easier for devs to build DAOs. Later, tools like Snapshot and DAOhaus emerged to make DAOs more user-friendly. These developments, among others, sparked a Cambrian explosion in the DAO ecosystem.

Better DAOs for a Better Future

The experiences of the DAO pioneers led to the development of new and better tools and resources for building them. And while DAOs still aren’t quite the “holy grail” of organizational structures that Vitalik Buterin envisioned, they are perhaps the closest thing to truly decentralized organizations that we have.

The decentralized community deserves decentralized tools, but it hasn’t always gotten them. That’s why we decided to structure Tally Ho as a DAO. Tally Ho is a truly public wallet, created by and for the Web3 community. It is completely owned and operated by its users. And there are no restrictions on who can join, so everyone can help shape Tally Ho’s future. Above all, no centralized authority can coerce action without the consent of the group.

DAOs are not a panacea. Many people who’ve worked in them will tell you that the experience can be borderline chaotic. Still, if properly designed, DAOs hold out the promise of providing all community members with a chance to participate in decision-making processes. And because DAOs are built on smart contracts, the code that runs these processes is publicly visible and auditable at all times.

As the world becomes more familiar with the tools to create and manage DAOs, these organizations will continue to proliferate, uniting communities of individuals with common ideas, values, and visions. DAOs can allow people to organize their efforts based on openness, transparency, and decentralization: the core values of blockchain technology.

Click here if you want to be part of Tally Ho’s DAO. If you’re a dev who’s interested in building the Tally Ho ecosystem, we’d love to work with you. Or if you just want to chat, head to our Discord server to join the conversation. Tally Ho!