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What is a DAO?
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What is a DAO?

 
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About this page: Here we explore the conceptualisation of a DAO so we may inform DAO design and practice. The following conceptual foundations serve to inform the creation of our mapping framework so we may capture “the paths towards becoming a DAO” and provide a resource for DAO designers
Audience and objectives of this doc
 
Summary
We delved into the question of 'What is a DAO’ and frame 5 conceptual lenses that enable us to leverage the existing body of research on coordination and organisations:
The five lenses:
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DAOs as Organisational collectives DAOs as multi-agent systems, with interconnected instances of decision-making, where agents attribute decisions to a collective entity (the DAO) and where declarations, statements, references (i.e. speech acts) describe what the entity is or does.
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DAOs as Entities DAOs in a specific point in time, represented by the communication processes between their agents (human and non-human).
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DAOs as Process DAO as the constant process of change and evolution of a collective (towards certain goals and informed by a specific culture or ethos).
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DAOs as Communication DAOs as communication events (human and computer language) between DAO agents.
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DAOs as Cultural Systems DAOs as complex adaptive systems of emerging, and being (re)created as informed by an Ethos (exemplified by a set of DAO qualities) resulting in a Socio-Cultural System.
 
Combining the above lenses with a study with 150+ participants on the convergence of DAO-defining qualities, we offer the following definition:
DAOs are collectives that exhibit organisationality, expressed and evolved through communication events and processes, and shaped by an Ethos that highlights (quotes taken from participant statements with 64%+ approval in our study):
  • Decentralised power: no single source of authority.
  • Autonomous: self-sovereign, not bound to an external coercive force.
  • A common goal, vision or set of values that are (being) worked towards.
  • A shared treasury controlled by a decentralised voting mechanism.
Conceptual foundations proposal:
Before the what, we need to understand the why
Put simply, Decentralised Autonomous Organisations (DAOs, for short) are changing how organisations are defined and thought about. Recently DAOs have taken near-centre stage in Forbes articles (Forbes, 2022), at the World Economic Forum (WEF Agenda, 2022), and most famously at the recent Sotheby’s Auction (BBC news, 2021) where a DAO raised nearly $50m in an attempt buy the US Constitution.
Across these articles, there is no universally agreed definition on what is a DAO. Some examples of definitions are:
  • “Member-owned communities without centralized leadership. A safe way to collaborate with internet strangers. A safe place to commit funds to a specific cause.” - Ethereum.org
  • ”Collectives that use automation and crowdsourcing to make decisions” - The Economist
  • “An entity that seeks to replicate the decision-making activities of a traditional organization without the traditional structures and costs of an organization” - Forbes
These definitions illustrate a common issue: DAOs have become a meme, one used to describe everything and nothing.
In this conceptual exploration we ‘grab the bull by the horns’, directly addressing the tension between the practicality that a common definition could provide and the richness enabled by diverse metaphors for DAOs.
While an exploration on the different perspectives for how DAOs are designed could well include a broader arrange of lenses (e.g. legal, economic, etc.), we focus our research on elucidating the telos of DAOs (end, fulfilment, completion, goal or aim) so we may provide a conceptual foundation to build upon.
Pre-history of DAOs
DAOs have inherited a rich narrative from social movements and organisations across history. Organisational theorists, Samer Hassan and Primavera De Filippi pointed out (in their paper on Decentralised Autonomous Organisations) the abundance of references for decentralised organisations that precede DAOs (Shubik, 1962; Beckhard, 1966; Freeland & Baker, 1975).
More broadly, multiple ideas associated with DAOs have been present in narratives that preceded them, as Nathan Scheinder (2014) points out: “The urge to decentralize and autonomize has informed social movements since the 1970s”. Some key examples of preceding narratives and the ideas associated with DAOs are:
  • Co-operatives and stakeholder capitalism (documented since 1769): distribution of ownership amongst providers of labour and multi-stakeholder governance (as opposed to governance exclusively by shareholders).
  • Digitalisation and Process Automation: eliminating cumbersome or repetitive tasks, using software to facilitate processes.
 
The evolution of the concept of DAOs
One of the first reference to Decentralized Autonomous Organisation (DAO) can perhaps be attributed to computer scientist W. Dilger (1997) describing a multi-agent system in an internet-of-things (IoT) environment. However, Dilger's framing is different to the definitions that have followed, as it's centered exclusively on non-human agents interacting with each other through digital signals.
The modern usage of DAOs has a strong human element in it, as it describes interaction and coordination between people. This human coordination aspect of DAOs has been picked up by Hassan and De Fillipe (2021). They suggest that the modern meaning of DAOs can be traced back to the earlier concept of a Decentralized Autonomous Corporation (DAC): ”The DAC concept was used mostly informally in online forums and chats by early cryptocurrency enthusiasts, using both “decentralized” and “distributed” autonomous corporations interchangeably. It was only in 2013 that the term became more widely adopted, and publicly discussed in a variety of websites (D. Larimer, 2013a; D. Larimer, 2013b).”
Further, in A Prehistory of DAOs, Kei argues that by 2014, DAOs were described as “a capitalized organization in which a software protocol informs its operation, placing automation at its center and humans at its edges”. Kei then further adds “by the time a DAO went from theory into experiment, the community largely reframed the term DAO to indicate “unstoppable”, or censorship-resistant, businesses”.
The unstoppable or censorship-resistance quality went on to define the first generation of DAOs, the first of which was The DAO - an investment organisation that raised $150 million (DuPont 2017).
From this beginnings, the industry has faced a growth explosion and has increasingly diversified, now including DeFI, NFTs, and other verticals. As more people have flocked into the space and new organisations started, there was a multiplication of how to define a DAO.
Can we converge on a definition?
DAOs have evolved to encompass a multitude of entities, and, as a result, have had a spectrum of definitions. Yet there is certain momentum to place all this variety under the same umbrella, the word DAO. We'll aim to bridge theory and practice to provide a conceptual foundation to meaningfully study and operate DAOs.
 
DAOs as coordination mechanism
Across different definitions, DAOs have come to be associated with a broader exploration of coordination between (autonomous) agents who seek to satisfy certain needs and aspirations.
Formally, we use the following definitions:
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Coordination: ”managing dependencies between activities“ - Malone and Crowstone (1994, p. 90) Agent: ”a system situated within and a part of an environment that senses that environment and acts on it, over time". For example, a person, an AI, or an animal. - derived from Franklin, S., Graesser, A. (1997)
At the intersection of politics and economics, different arrangements have been identified to “solve problems of ‘coordination’ (between the firm and its financiers, employees, suppliers, and customers)" under the framing of types or varieties of capitalism.
Following this line of inquiry, 4 idealised forms of coordination were established by Schneider, B. (2013):
  • Hierarchy: command-based coordination
  • Network: trust-based coordination
  • Coordinated: negotiation-based coordination
  • Liberal: market-based coordination
While these are idealised concepts, they seldomly exist in isolation, thus different institutions use them in different combinations and proportions.
 
Coordination at the organisational level
The literature on organisational studies has covered coordination arrangements such as networked organisations, traditional hierarchical organisations, gig-economy (marketplace) organisations, and self-managed organisations, amongst other labels that use different combinations of the coordination arrangements mentioned above.
DAOs inherit this history but, as the name implies, are conceived as a distinct type of organisation: Decentralised Autonomous Organisations.
Faced with this claim, we can see two approaches:
  1. examining the distinctiveness claim of DAOs to assess whether DAOs are indeed a new organisational form (that leverages new coordination mechanisms or leverages them in a new way)
  1. examining what conceptual parallels can be made to leverage existing theoretical foundations in the organisational studies literature to aid our understanding of DAOs
Over time, the study of DAOs will likely cover both approaches. For our present undertaking, we work under the assumption that DAOs have become a popular concept and are likely to remain so irrespective of whether we define them theoretically as a distinct form or not. As such, we'll focus on the second approach (bridging conceptual tools to better comprehend DAOs) and will, at a later date, examine further the theoretical divide between DAOs and other organisations.
 
DAOs as (problematic) organisations
To build parallels and bridges, we begin with a formal definition of organisations:
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Organisations: Puranam, P. et al (2014) identified the following consistent features across multiple definitions of organisations:
  1. ”a multi-agent system with
  1. identifiable boundaries and
  1. system-level goals (purpose) toward which
  1. the constituent agent's efforts are expected to make a contribution”
 
From the point of view of traditional organisations, DAOs are inherently problematic, as Organisations “are simply not conceivable without reference to workable identities and boundaries” (March and Simon, 1958, as cited by Schreyogg and Sydow, 2010, p. 1253). But in DAOs, boundaries are fuzzy, as exemplified by this conversation between two participants of a recent event at DAO Camp:
Person A: "How many people are in your DAO?” Person B: "Well... " [both participants laugh] Person B: "hard to say but perhaps 8-12 at the core, and then maybe 20-30”
Fluid membership and fluid degrees of contribution lead to patterned, subjective rather than clearly identifiable boundaries of membership. This gives rise to the picture of DAOs as constantly in flux, constantly changing.
Additionally, system-level goals can be less identifiable (or purposely not be defined), creating the feeling that the organisation is going in different directions instead of heading towards a common goal. While constituent agents may be anonymous or pseudonymous, they can also challenge the notion of contributing towards a common goal (e.g. lurkers or malicious actors).
Comparing the classical definition of Organisation and the description of DAOs, it looks like DAOs depart from the pattern as they have fluid boundaries, don't always have system-level goals and might have agents who actively work against the system-level goals and can, by design, continue being members of the organisation. Thus, strictly speaking, trying to fit DAOs into a traditional definition of Organisation becomes indeed problematic.
Fortunately, the definition of Organisation has also proven problematic for studying other social collectives (e.g. is the hacker collective Anonymous an organisation?), which has led to a new concept proposed Ahrne and Brunsson (2011): Organisationality - a more gradual differentiation, than the traditional, binary classification as either organisations or non-organisations.
 
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Organisationality ”Organizationality depends on the degree to which social collectives fulfill the minimum criteria of what constitutes an organization (see also Ahrne and Brunsson, 2011). Our notion of organizationality draws on the idea that social collectives are ‘organizational’ on the basis of three criteria:
  • second, these instances of decision-making are attributed to a collective entity or actor (King et al., 2010);
  • third, collective identity is accomplished through speech acts that aim to delineate what the entity or actor is or does (‘identity claims’; see Bartel and Dutton, 2001).
This conceptualization emphasizes that the formation of collective identity (see Gioia et al., 2013; Hardy et al., 2005; Schultz and Hernes, 2013) is a key component of organizationality, especially (but not only) in fluid social arrangements.” - L. Dobusch and D. Schoeneborn (2015)
 
Leveraging Organisationality, we can comfortably apply the three criteria to refine our definition of DAOs and differentiate them from, for example, groups or communities in social media that have no instance for decision making.
Conceptually, we conclude that DAOs are social collectives that exhibit organisationality. Contributors in DAOs are interconnected and communication is used to coordinate actions. The definition of organisationality also mentioned the concept of a collective identity. This collective identity is visible through the ideals that DAOs embody. We refer to them as the Ethos.
 
The D & A in D.A.Os: the Ethos
DAOs are infused with specific ideals in their name (e.g., decentralised, autonomous) and the associated values (e.g. permissionless, trustless, transparent, etc). These ideals are not fixed in that every DAO has the same ideals. But there exists a larger set of ideals, and every DAO is striving to live according to a subset of ideals taken from this larger list given the individuals interpretation of these ideals and aspirations to live according to them.
These ideals and values shape how DAO members coordinate their actions, how goals are defined, and what is incentivised (or not). For example, in a DAO tasks are frequently not distributed by a small set of agents (i.e. leaders and managers), but self-assigned by contributors (opt-in).
In sum, there's a set of ideas and values that qualify DAOs. And in cases, the pursuit and activation of these qualities become the explicit goal of the DAO, as is the case with RnDAO, Aragon (as stated in their manifesto), and others.
Because of the cultural significance of these DAO qualities (ideas and values) we refer to them as an Ethos:
 
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Ethos: ”The characteristic spirit of a culture, era, or community as manifested in its attitudes and aspirations" - Speake, and LaFlaur (2002) Note: a shared ethos facilitates a shared identity, in turn facilitating organisationality.
 
This leads us to expand our framing of DAOs to include both:
  • DAOs as collectives with some degree of organisationality
  • and DAOs as the pursuit of an Ethos (represented through a set of DAO qualities).
 
Before we dive into the specific Ethos of DAOs, however, there's a further paradox we must bridge: as we talk about these qualities of DAOs, we're talking about a constant pursuit, not simply a static reality. How can we address this temporal component?
 
DAO as entity and process
We aim to enable DAO and community designers and strategists to leverage and apply our research outputs. It is therefore imperative to be able to describe a DAO at a specific point in time, and compare it with other DAOs (or the same DAO in the past or future). In sum, we need the ability to assert ‘what is’ at a specific point in time: the DAO as an entity at a specific point in time.
Alas, DAOs truly come alive over time, they are constantly changing and (re)inventing themselves. Numerous ‘DAOs’ are heavily influenced by the idea of Progressive Decentralisation, whereby they start as messy communities or centralised organisations and over time adopt decentralised and autonomous organisational processes (e.g. governance processes leveraging blockchain technology to provide censorship resistance and enabling token holders to make proposals, vote, and transfer funds transactions without trusting any single individual to facilitate or execute). Additionally, DAOs are often seen as evolving entities, with a MetaGovernance process that can enable a DAO's policies to evolve. As a consequence, any meaningful description of a DAO also needs to frame it as change and transformation: the DAO as a process.
In essence, we need to bridge both the need for concreteness in the entity (how a DAO is at a point in time) and the process (how a DAO is changing over time) as well as the mechanisms and principles for evolving itself.
Here, we can leverage the concept of metaphors or lenses, as a well-tested conceptual tool in the study of organisations (and we'll check for applicability to the concept of organisationality along the way).
 
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Metaphors as a tool to conceptualise DAOs As FrameWorks Institute sets out, “Metaphors give us a new mental framework for thinking and talking about a topic...and can open up dead-end conversations and repetitive debates”. Metaphors are “useful ingredients in efforts to shift the interpretational frameworks that people access and employ in processing information”, including of DAOs (Erard, 2012). By using metaphors to “fortify our understandings of abstract or culturally innovative phenomena” we can advance ideas and avoid rebutting talking points that halt progressive change (Erard, 2012).
 
In his seminal work on Images of Organisation (last edition 2006), Gareth Morgan provides eight different metaphors to map organisations.
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Morgan's 8 metaphors for Organisations “Each of the eight metaphors that Morgan presents in his book incorporates a group or cluster of organisational theories, as described below:
  1. The machine metaphor encompasses theories such as Taylor’s scientific management, Weber’s bureaucracy and views of organizations that emphasize closed systems, efficiency and mechanical features of organizations.
  1. The organism metaphor depicts organizations as open systems that focus on the human relations and contingency theories.
  1. The brain metaphor focuses on the cognitive features of organizations and encompasses learning theories and cybernetics.
  1. The culture metaphor emphasizes symbolic and informal aspects of organizations as well as the creation of shared meanings among actors.
  1. The political system metaphor encompasses stakeholder theories, diversity of interests, and conflict and power in organizations.
  1. The psychic prison metaphor draws from psychoanalytical theories to examine the psyche, the unconscious, and ways that organizations entrap their members.
  1. The flux and transformation metaphor emphasizes processes, self-reference and unpredictability through embracing theories of autopoiesis, chaos and complexity in organizations.
  1. The instrument of domination metaphor draws from Marxist and critical theories to highlight exploitation, control and unequal distribution of power performed in and by organizations.”
(Örtenblad et al, 2016)
 
The challenge for us is one of selecting the right metaphor (e.g. do we refer to DAOs as organisms or as machines or as communities or as... ?)
 
Metaphorical requirements of DAOs
An effective metaphor describes or represents an abstract target through a more concrete, detailed, and easily understood source. For example, conceptualising an organisation as a machine (Tsoukas, 1991: 566) creates the image of various moving and interconnected knobs and bolts. Everything needs to work smoothly together for the machine (and hence the organisation) to run.
Given our paradox of DAOs as an entity (at a specific point in time) and as a process (the evolution of said entity), we need to seek a balance between the fluid, changing nature of an organisation (orienting us towards the flux and transformation metaphor) with a more ‘tangible’ view of an organisation as a mechanical, almost fixed entity (orienting us towards the machine metaphor).
And given our conceptualisation of DAOs as organisational collectives (rather than traditional organisations), we need to check for the compatibility of the selected metaphor with open and loosely defined boundaries and the three key characteristics of organisational collectives.
Although Morgan's metaphors provide a rich tapestry to explore organisation, “many of Morgan’s metaphors refer to entities (e.g. machine, organism, brain) whereas one of them refers to processes (flux and transformation)" (Jermier and Forbes (2016) and Schoeneborn et al. (2016) as quoted by Örtenblad et al. (2016)).
Schoeneborn et al. (2016) explored how to bridge this paradox of the organisation as both a process (changing, abstract) and an entity (fixed, concrete). Their research led them to highlight the value of conceptualising Organisations as Communication to resolve the paradox.
DAOs as Communication
”When I imagine an organization I have in mind [...] an interlocking network of communication processes” (Taylor, 2003: 12)
 
Communication serves as the main mechanism to create (shared) meaning and achieves all three base criteria for organisationality: reference the existence of a collective (i.e. make identity claims), decide as a collective and attribute said decisions to the collective, and generally portray what the collective is or does.
And communication also serves as a key mechanism to achieve other properties of organisations, such as defining system-level goals and coordinating to achieve them.
Specifically, conceptualising DAOs through communication provides us with great properties:
  • Communication events and processes are observable phenomena, they can be described and designed (e.g. through direct action, facilitation or nudges). Hence, this metaphor provides us with a great level of concreteness to map DAO journeys and inform future DAO design choices.
  • Equally, the communication metaphor enables us to describe a specific point in time while also acknowledging that the organisation is re-created at every moment by agents engaging in said conversations. If the communication were to stop, the organisation would cease to evolve and exist as an entity, as it is through communication that the organisation is created and transformed.
 
Importantly, we use a broad definition of communication to include:
  • Communication through technology-mediated process: use of code and algorithms as mediators in a communication process (including reacting to a post without words, signing into a tool, etc.) and the use of tokens, avatars, etc. to communicate notions of value, ownership, status, etc.
  • Communication through systems: both communication processes (such as defined workflows, processes, rules and systems) and communication events (events and gatherings that might have taken shape).
  • Communication between agents: including autonomous and non-autonomous entities (e.g. humans, other organisations, and algorithms or tools).
  • As well as anonymous or pseudonymous communication (enabled through technology).
 
Using DAOs as communication, we can thus look at the patterns of communication in a collective e.g. communication events, communication processes, and generate a picture of the entity 'as is' (communication events and processes in the moment) and the way it is changing (the implications of said communication).
 
Let us now leverage these foundations to explore how Ethos comes into play in DAOs.
The role of Ethos in DAOs
Monge and Contractor (2003) propose complexity theory to explain the evolution of communication networks.
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Monge and Contractor (2003) define a complexity system as a network of agents, each with a set of attributes, who follow rules of interaction, which produces emergent structure (p. 241).
From this parallel, we can follow that DAOs, as communication networks, are subject to the principles of complex systems, including emergent structures. And hence leverage the seminal work of Donella Meadows to showcase the extraordinarily important role of Ethos in the unfolding DAOs:
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Places to Intervene in a System (in increasing order of effectiveness):
9. Constants, parameters, numbers (subsidies, taxes, standards).
8. Regulating negative feedback loops.
7. Driving positive feedback loops.
6. Material flows and nodes of material intersection.
5. Information flows.
4. The rules of the system (incentives, punishments, constraints).
3. The distribution of power over the rules of the system.
2. The goals of the system.
1. The mindset or paradigm out of which the system — its goals, power structure, rules, its culture — arises. Donella Meadows (1999)
 
Ethos represents the number one point to intervene in a system. Hence Ethos directly shapes the emergent patterns and structures that we see in DAOs. And, as we shall see next, the Ethos of a DAO directly informs design choices for goal setting, the distribution of power, information flows, and more. Simply put, Ethos shapes DAOs.
 
Describing DAO Ethos: the pursuit of DAO ‘Qualities’
 
While the concept of a DAO took shape in the 2010s the associated values and ideals, the Ethos of DAOs has deeper roots as we've seen in our section on the prehistory of DAOs. By 2022, as adoption has increased and tools matured, the scope for conceptualising DAOs has increased significantly and some of the early narratives have diverged. To gain a grasp on the current landscape, we created a Pol.Is instance with the question "What makes a DAO a DAO" and distributed it through our networks and across multiple DAO communication platforms. By June 2022, over 150 voluntary participants rated statements (agree/disagree/pass) and were given the option to add their own statements. The resulting metrics at the time of writing are:
  • Participants: 155 total
  • Votes cast: 1,829
  • Statements submitted: 31
 
There is consensus among participants that a DAO has at least these qualities. Consensus means that at least 64% of participants agreed with these statements (quoted as submitted to Pol.is):
  • Decentralised power: no single source of authority.
  • Autonomous: self-sovereign, not bound to an external coercive force.
  • A common goal, vision or set of values that are (being) worked towards.
  • A shared treasury controlled by a decentralised voting mechanism.
 
Among the participants, 96 people formed two distinctive groups. The remaining participants could not be grouped into one coherent opinion group.
Group A (44 participants) strongly opposed the statement that DAOs are Crowdfunded, not VC funded, whereas for Group B (52) participants this wasn’t an important characteristic of DAOs. People in group B hold the opinion that in addition to the 4 statements listed above, DAOs are also characterised by
  • open-door politics (instead of hidden agendas)
  • Horizontal organization, working groups with rotational leadership, people doing the work have decision-making power in the overall strategy
 
*The survey is still available and results might change over time. If you would like more information, access the full (live) report here.
 
Conclusion: Proposed DAO conceptualisation
We began by noting a wide variety of definitions and understanding of what a DAO is. Looking at the genesis of the concept of DAOs, the central idea of DAOs as coordination mechanisms. In this way, they are similar to organisations. While organisations coordinate activities between people, numerous DAOs distinguish themselves though the absence of solid borders between the organisation and their environment, and a specific Ethos (the collective mindset and paradigms of their members). We conclude that while DAOs are not organisations (in a traditional sense), they are collectives exhibiting some degree of organisationality which they enact through communication events and processes.
In addition to organisationality, we frame DAOs a both static entities while simultaneously evolving and striving to uphold certain values (an Ethos). Conceptualising DAOs as communication networks enables us to resolve the tension between the current entity and its evolution (between what is and what is yet to be). Finally, we find that the Ethos that shapes DAOs highlights decentralisation of power, autonomy, a common goals, vision or set of values that are (being) worked towards, and a shared treasury controlled by a decentralised mechanism.
 
Authors:
Daniel Ospina - lead writer - @_daniel_ospina
Katerina Bohle Carbonell, Ph.D. - co-writer - @katerinabohlec
 
Acknowledgements:
Special thanks to Professors Dennis Schoeneborn, Vivianna Fang He, and Phanish Puranam for their support in navigating these conceptual waters, to SCRF for their support funding this research, and to RnDAO contributors Caryn Tan, Unipuff, WhiteFlamingo, and Fabio Martins for providing valuable comments, proofreading and helping us finalize the paper.
 
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What is a DAO?
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What is a DAO?

 
💡
About this page: Here we explore the conceptualisation of a DAO so we may inform DAO design and practice. The following conceptual foundations serve to inform the creation of our mapping framework so we may capture “the paths towards becoming a DAO” and provide a resource for DAO designers
Audience and objectives of this doc
 
Summary
We delved into the question of 'What is a DAO’ and frame 5 conceptual lenses that enable us to leverage the existing body of research on coordination and organisations:
The five lenses:
🌐
DAOs as Organisational collectives DAOs as multi-agent systems, with interconnected instances of decision-making, where agents attribute decisions to a collective entity (the DAO) and where declarations, statements, references (i.e. speech acts) describe what the entity is or does.
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DAOs as Entities DAOs in a specific point in time, represented by the communication processes between their agents (human and non-human).
🌱
DAOs as Process DAO as the constant process of change and evolution of a collective (towards certain goals and informed by a specific culture or ethos).
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DAOs as Communication DAOs as communication events (human and computer language) between DAO agents.
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DAOs as Cultural Systems DAOs as complex adaptive systems of emerging, and being (re)created as informed by an Ethos (exemplified by a set of DAO qualities) resulting in a Socio-Cultural System.
 
Combining the above lenses with a study with 150+ participants on the convergence of DAO-defining qualities, we offer the following definition:
DAOs are collectives that exhibit organisationality, expressed and evolved through communication events and processes, and shaped by an Ethos that highlights (quotes taken from participant statements with 64%+ approval in our study):
  • Decentralised power: no single source of authority.
  • Autonomous: self-sovereign, not bound to an external coercive force.
  • A common goal, vision or set of values that are (being) worked towards.
  • A shared treasury controlled by a decentralised voting mechanism.
Conceptual foundations proposal:
Before the what, we need to understand the why
Put simply, Decentralised Autonomous Organisations (DAOs, for short) are changing how organisations are defined and thought about. Recently DAOs have taken near-centre stage in Forbes articles (Forbes, 2022), at the World Economic Forum (WEF Agenda, 2022), and most famously at the recent Sotheby’s Auction (BBC news, 2021) where a DAO raised nearly $50m in an attempt buy the US Constitution.
Across these articles, there is no universally agreed definition on what is a DAO. Some examples of definitions are:
  • “Member-owned communities without centralized leadership. A safe way to collaborate with internet strangers. A safe place to commit funds to a specific cause.” - Ethereum.org
  • ”Collectives that use automation and crowdsourcing to make decisions” - The Economist
  • “An entity that seeks to replicate the decision-making activities of a traditional organization without the traditional structures and costs of an organization” - Forbes
These definitions illustrate a common issue: DAOs have become a meme, one used to describe everything and nothing.
In this conceptual exploration we ‘grab the bull by the horns’, directly addressing the tension between the practicality that a common definition could provide and the richness enabled by diverse metaphors for DAOs.
While an exploration on the different perspectives for how DAOs are designed could well include a broader arrange of lenses (e.g. legal, economic, etc.), we focus our research on elucidating the telos of DAOs (end, fulfilment, completion, goal or aim) so we may provide a conceptual foundation to build upon.
Pre-history of DAOs
DAOs have inherited a rich narrative from social movements and organisations across history. Organisational theorists, Samer Hassan and Primavera De Filippi pointed out (in their paper on Decentralised Autonomous Organisations) the abundance of references for decentralised organisations that precede DAOs (Shubik, 1962; Beckhard, 1966; Freeland & Baker, 1975).
More broadly, multiple ideas associated with DAOs have been present in narratives that preceded them, as Nathan Scheinder (2014) points out: “The urge to decentralize and autonomize has informed social movements since the 1970s”. Some key examples of preceding narratives and the ideas associated with DAOs are:
  • Co-operatives and stakeholder capitalism (documented since 1769): distribution of ownership amongst providers of labour and multi-stakeholder governance (as opposed to governance exclusively by shareholders).
  • Digitalisation and Process Automation: eliminating cumbersome or repetitive tasks, using software to facilitate processes.
 
The evolution of the concept of DAOs
One of the first reference to Decentralized Autonomous Organisation (DAO) can perhaps be attributed to computer scientist W. Dilger (1997) describing a multi-agent system in an internet-of-things (IoT) environment. However, Dilger's framing is different to the definitions that have followed, as it's centered exclusively on non-human agents interacting with each other through digital signals.
The modern usage of DAOs has a strong human element in it, as it describes interaction and coordination between people. This human coordination aspect of DAOs has been picked up by Hassan and De Fillipe (2021). They suggest that the modern meaning of DAOs can be traced back to the earlier concept of a Decentralized Autonomous Corporation (DAC): ”The DAC concept was used mostly informally in online forums and chats by early cryptocurrency enthusiasts, using both “decentralized” and “distributed” autonomous corporations interchangeably. It was only in 2013 that the term became more widely adopted, and publicly discussed in a variety of websites (D. Larimer, 2013a; D. Larimer, 2013b).”
Further, in A Prehistory of DAOs, Kei argues that by 2014, DAOs were described as “a capitalized organization in which a software protocol informs its operation, placing automation at its center and humans at its edges”. Kei then further adds “by the time a DAO went from theory into experiment, the community largely reframed the term DAO to indicate “unstoppable”, or censorship-resistant, businesses”.
The unstoppable or censorship-resistance quality went on to define the first generation of DAOs, the first of which was The DAO - an investment organisation that raised $150 million (DuPont 2017).
From this beginnings, the industry has faced a growth explosion and has increasingly diversified, now including DeFI, NFTs, and other verticals. As more people have flocked into the space and new organisations started, there was a multiplication of how to define a DAO.
Can we converge on a definition?
DAOs have evolved to encompass a multitude of entities, and, as a result, have had a spectrum of definitions. Yet there is certain momentum to place all this variety under the same umbrella, the word DAO. We'll aim to bridge theory and practice to provide a conceptual foundation to meaningfully study and operate DAOs.
 
DAOs as coordination mechanism
Across different definitions, DAOs have come to be associated with a broader exploration of coordination between (autonomous) agents who seek to satisfy certain needs and aspirations.
Formally, we use the following definitions:
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Coordination: ”managing dependencies between activities“ - Malone and Crowstone (1994, p. 90) Agent: ”a system situated within and a part of an environment that senses that environment and acts on it, over time". For example, a person, an AI, or an animal. - derived from Franklin, S., Graesser, A. (1997)
At the intersection of politics and economics, different arrangements have been identified to “solve problems of ‘coordination’ (between the firm and its financiers, employees, suppliers, and customers)" under the framing of types or varieties of capitalism.
Following this line of inquiry, 4 idealised forms of coordination were established by Schneider, B. (2013):
  • Hierarchy: command-based coordination
  • Network: trust-based coordination
  • Coordinated: negotiation-based coordination
  • Liberal: market-based coordination
While these are idealised concepts, they seldomly exist in isolation, thus different institutions use them in different combinations and proportions.
 
Coordination at the organisational level
The literature on organisational studies has covered coordination arrangements such as networked organisations, traditional hierarchical organisations, gig-economy (marketplace) organisations, and self-managed organisations, amongst other labels that use different combinations of the coordination arrangements mentioned above.
DAOs inherit this history but, as the name implies, are conceived as a distinct type of organisation: Decentralised Autonomous Organisations.
Faced with this claim, we can see two approaches:
  1. examining the distinctiveness claim of DAOs to assess whether DAOs are indeed a new organisational form (that leverages new coordination mechanisms or leverages them in a new way)
  1. examining what conceptual parallels can be made to leverage existing theoretical foundations in the organisational studies literature to aid our understanding of DAOs
Over time, the study of DAOs will likely cover both approaches. For our present undertaking, we work under the assumption that DAOs have become a popular concept and are likely to remain so irrespective of whether we define them theoretically as a distinct form or not. As such, we'll focus on the second approach (bridging conceptual tools to better comprehend DAOs) and will, at a later date, examine further the theoretical divide between DAOs and other organisations.
 
DAOs as (problematic) organisations
To build parallels and bridges, we begin with a formal definition of organisations:
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Organisations: Puranam, P. et al (2014) identified the following consistent features across multiple definitions of organisations:
  1. ”a multi-agent system with
  1. identifiable boundaries and
  1. system-level goals (purpose) toward which
  1. the constituent agent's efforts are expected to make a contribution”
 
From the point of view of traditional organisations, DAOs are inherently problematic, as Organisations “are simply not conceivable without reference to workable identities and boundaries” (March and Simon, 1958, as cited by Schreyogg and Sydow, 2010, p. 1253). But in DAOs, boundaries are fuzzy, as exemplified by this conversation between two participants of a recent event at DAO Camp:
Person A: "How many people are in your DAO?” Person B: "Well... " [both participants laugh] Person B: "hard to say but perhaps 8-12 at the core, and then maybe 20-30”
Fluid membership and fluid degrees of contribution lead to patterned, subjective rather than clearly identifiable boundaries of membership. This gives rise to the picture of DAOs as constantly in flux, constantly changing.
Additionally, system-level goals can be less identifiable (or purposely not be defined), creating the feeling that the organisation is going in different directions instead of heading towards a common goal. While constituent agents may be anonymous or pseudonymous, they can also challenge the notion of contributing towards a common goal (e.g. lurkers or malicious actors).
Comparing the classical definition of Organisation and the description of DAOs, it looks like DAOs depart from the pattern as they have fluid boundaries, don't always have system-level goals and might have agents who actively work against the system-level goals and can, by design, continue being members of the organisation. Thus, strictly speaking, trying to fit DAOs into a traditional definition of Organisation becomes indeed problematic.
Fortunately, the definition of Organisation has also proven problematic for studying other social collectives (e.g. is the hacker collective Anonymous an organisation?), which has led to a new concept proposed Ahrne and Brunsson (2011): Organisationality - a more gradual differentiation, than the traditional, binary classification as either organisations or non-organisations.
 
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Organisationality ”Organizationality depends on the degree to which social collectives fulfill the minimum criteria of what constitutes an organization (see also Ahrne and Brunsson, 2011). Our notion of organizationality draws on the idea that social collectives are ‘organizational’ on the basis of three criteria:
  • second, these instances of decision-making are attributed to a collective entity or actor (King et al., 2010);
  • third, collective identity is accomplished through speech acts that aim to delineate what the entity or actor is or does (‘identity claims’; see Bartel and Dutton, 2001).
This conceptualization emphasizes that the formation of collective identity (see Gioia et al., 2013; Hardy et al., 2005; Schultz and Hernes, 2013) is a key component of organizationality, especially (but not only) in fluid social arrangements.” - L. Dobusch and D. Schoeneborn (2015)
 
Leveraging Organisationality, we can comfortably apply the three criteria to refine our definition of DAOs and differentiate them from, for example, groups or communities in social media that have no instance for decision making.
Conceptually, we conclude that DAOs are social collectives that exhibit organisationality. Contributors in DAOs are interconnected and communication is used to coordinate actions. The definition of organisationality also mentioned the concept of a collective identity. This collective identity is visible through the ideals that DAOs embody. We refer to them as the Ethos.
 
The D & A in D.A.Os: the Ethos
DAOs are infused with specific ideals in their name (e.g., decentralised, autonomous) and the associated values (e.g. permissionless, trustless, transparent, etc). These ideals are not fixed in that every DAO has the same ideals. But there exists a larger set of ideals, and every DAO is striving to live according to a subset of ideals taken from this larger list given the individuals interpretation of these ideals and aspirations to live according to them.
These ideals and values shape how DAO members coordinate their actions, how goals are defined, and what is incentivised (or not). For example, in a DAO tasks are frequently not distributed by a small set of agents (i.e. leaders and managers), but self-assigned by contributors (opt-in).
In sum, there's a set of ideas and values that qualify DAOs. And in cases, the pursuit and activation of these qualities become the explicit goal of the DAO, as is the case with RnDAO, Aragon (as stated in their manifesto), and others.
Because of the cultural significance of these DAO qualities (ideas and values) we refer to them as an Ethos:
 
💡
Ethos: ”The characteristic spirit of a culture, era, or community as manifested in its attitudes and aspirations" - Speake, and LaFlaur (2002) Note: a shared ethos facilitates a shared identity, in turn facilitating organisationality.
 
This leads us to expand our framing of DAOs to include both:
  • DAOs as collectives with some degree of organisationality
  • and DAOs as the pursuit of an Ethos (represented through a set of DAO qualities).
 
Before we dive into the specific Ethos of DAOs, however, there's a further paradox we must bridge: as we talk about these qualities of DAOs, we're talking about a constant pursuit, not simply a static reality. How can we address this temporal component?
 
DAO as entity and process
We aim to enable DAO and community designers and strategists to leverage and apply our research outputs. It is therefore imperative to be able to describe a DAO at a specific point in time, and compare it with other DAOs (or the same DAO in the past or future). In sum, we need the ability to assert ‘what is’ at a specific point in time: the DAO as an entity at a specific point in time.
Alas, DAOs truly come alive over time, they are constantly changing and (re)inventing themselves. Numerous ‘DAOs’ are heavily influenced by the idea of Progressive Decentralisation, whereby they start as messy communities or centralised organisations and over time adopt decentralised and autonomous organisational processes (e.g. governance processes leveraging blockchain technology to provide censorship resistance and enabling token holders to make proposals, vote, and transfer funds transactions without trusting any single individual to facilitate or execute). Additionally, DAOs are often seen as evolving entities, with a MetaGovernance process that can enable a DAO's policies to evolve. As a consequence, any meaningful description of a DAO also needs to frame it as change and transformation: the DAO as a process.
In essence, we need to bridge both the need for concreteness in the entity (how a DAO is at a point in time) and the process (how a DAO is changing over time) as well as the mechanisms and principles for evolving itself.
Here, we can leverage the concept of metaphors or lenses, as a well-tested conceptual tool in the study of organisations (and we'll check for applicability to the concept of organisationality along the way).
 
💡
Metaphors as a tool to conceptualise DAOs As FrameWorks Institute sets out, “Metaphors give us a new mental framework for thinking and talking about a topic...and can open up dead-end conversations and repetitive debates”. Metaphors are “useful ingredients in efforts to shift the interpretational frameworks that people access and employ in processing information”, including of DAOs (Erard, 2012). By using metaphors to “fortify our understandings of abstract or culturally innovative phenomena” we can advance ideas and avoid rebutting talking points that halt progressive change (Erard, 2012).
 
In his seminal work on Images of Organisation (last edition 2006), Gareth Morgan provides eight different metaphors to map organisations.
💡
Morgan's 8 metaphors for Organisations “Each of the eight metaphors that Morgan presents in his book incorporates a group or cluster of organisational theories, as described below:
  1. The machine metaphor encompasses theories such as Taylor’s scientific management, Weber’s bureaucracy and views of organizations that emphasize closed systems, efficiency and mechanical features of organizations.
  1. The organism metaphor depicts organizations as open systems that focus on the human relations and contingency theories.
  1. The brain metaphor focuses on the cognitive features of organizations and encompasses learning theories and cybernetics.
  1. The culture metaphor emphasizes symbolic and informal aspects of organizations as well as the creation of shared meanings among actors.
  1. The political system metaphor encompasses stakeholder theories, diversity of interests, and conflict and power in organizations.
  1. The psychic prison metaphor draws from psychoanalytical theories to examine the psyche, the unconscious, and ways that organizations entrap their members.
  1. The flux and transformation metaphor emphasizes processes, self-reference and unpredictability through embracing theories of autopoiesis, chaos and complexity in organizations.
  1. The instrument of domination metaphor draws from Marxist and critical theories to highlight exploitation, control and unequal distribution of power performed in and by organizations.”
(Örtenblad et al, 2016)
 
The challenge for us is one of selecting the right metaphor (e.g. do we refer to DAOs as organisms or as machines or as communities or as... ?)
 
Metaphorical requirements of DAOs
An effective metaphor describes or represents an abstract target through a more concrete, detailed, and easily understood source. For example, conceptualising an organisation as a machine (Tsoukas, 1991: 566) creates the image of various moving and interconnected knobs and bolts. Everything needs to work smoothly together for the machine (and hence the organisation) to run.
Given our paradox of DAOs as an entity (at a specific point in time) and as a process (the evolution of said entity), we need to seek a balance between the fluid, changing nature of an organisation (orienting us towards the flux and transformation metaphor) with a more ‘tangible’ view of an organisation as a mechanical, almost fixed entity (orienting us towards the machine metaphor).
And given our conceptualisation of DAOs as organisational collectives (rather than traditional organisations), we need to check for the compatibility of the selected metaphor with open and loosely defined boundaries and the three key characteristics of organisational collectives.
Although Morgan's metaphors provide a rich tapestry to explore organisation, “many of Morgan’s metaphors refer to entities (e.g. machine, organism, brain) whereas one of them refers to processes (flux and transformation)" (Jermier and Forbes (2016) and Schoeneborn et al. (2016) as quoted by Örtenblad et al. (2016)).
Schoeneborn et al. (2016) explored how to bridge this paradox of the organisation as both a process (changing, abstract) and an entity (fixed, concrete). Their research led them to highlight the value of conceptualising Organisations as Communication to resolve the paradox.
DAOs as Communication
”When I imagine an organization I have in mind [...] an interlocking network of communication processes” (Taylor, 2003: 12)
 
Communication serves as the main mechanism to create (shared) meaning and achieves all three base criteria for organisationality: reference the existence of a collective (i.e. make identity claims), decide as a collective and attribute said decisions to the collective, and generally portray what the collective is or does.
And communication also serves as a key mechanism to achieve other properties of organisations, such as defining system-level goals and coordinating to achieve them.
Specifically, conceptualising DAOs through communication provides us with great properties:
  • Communication events and processes are observable phenomena, they can be described and designed (e.g. through direct action, facilitation or nudges). Hence, this metaphor provides us with a great level of concreteness to map DAO journeys and inform future DAO design choices.
  • Equally, the communication metaphor enables us to describe a specific point in time while also acknowledging that the organisation is re-created at every moment by agents engaging in said conversations. If the communication were to stop, the organisation would cease to evolve and exist as an entity, as it is through communication that the organisation is created and transformed.
 
Importantly, we use a broad definition of communication to include:
  • Communication through technology-mediated process: use of code and algorithms as mediators in a communication process (including reacting to a post without words, signing into a tool, etc.) and the use of tokens, avatars, etc. to communicate notions of value, ownership, status, etc.
  • Communication through systems: both communication processes (such as defined workflows, processes, rules and systems) and communication events (events and gatherings that might have taken shape).
  • Communication between agents: including autonomous and non-autonomous entities (e.g. humans, other organisations, and algorithms or tools).
  • As well as anonymous or pseudonymous communication (enabled through technology).
 
Using DAOs as communication, we can thus look at the patterns of communication in a collective e.g. communication events, communication processes, and generate a picture of the entity 'as is' (communication events and processes in the moment) and the way it is changing (the implications of said communication).
 
Let us now leverage these foundations to explore how Ethos comes into play in DAOs.
The role of Ethos in DAOs
Monge and Contractor (2003) propose complexity theory to explain the evolution of communication networks.
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Monge and Contractor (2003) define a complexity system as a network of agents, each with a set of attributes, who follow rules of interaction, which produces emergent structure (p. 241).
From this parallel, we can follow that DAOs, as communication networks, are subject to the principles of complex systems, including emergent structures. And hence leverage the seminal work of Donella Meadows to showcase the extraordinarily important role of Ethos in the unfolding DAOs:
💡
Places to Intervene in a System (in increasing order of effectiveness):
9. Constants, parameters, numbers (subsidies, taxes, standards).
8. Regulating negative feedback loops.
7. Driving positive feedback loops.
6. Material flows and nodes of material intersection.
5. Information flows.
4. The rules of the system (incentives, punishments, constraints).
3. The distribution of power over the rules of the system.
2. The goals of the system.
1. The mindset or paradigm out of which the system — its goals, power structure, rules, its culture — arises. Donella Meadows (1999)
 
Ethos represents the number one point to intervene in a system. Hence Ethos directly shapes the emergent patterns and structures that we see in DAOs. And, as we shall see next, the Ethos of a DAO directly informs design choices for goal setting, the distribution of power, information flows, and more. Simply put, Ethos shapes DAOs.
 
Describing DAO Ethos: the pursuit of DAO ‘Qualities’
 
While the concept of a DAO took shape in the 2010s the associated values and ideals, the Ethos of DAOs has deeper roots as we've seen in our section on the prehistory of DAOs. By 2022, as adoption has increased and tools matured, the scope for conceptualising DAOs has increased significantly and some of the early narratives have diverged. To gain a grasp on the current landscape, we created a Pol.Is instance with the question "What makes a DAO a DAO" and distributed it through our networks and across multiple DAO communication platforms. By June 2022, over 150 voluntary participants rated statements (agree/disagree/pass) and were given the option to add their own statements. The resulting metrics at the time of writing are:
  • Participants: 155 total
  • Votes cast: 1,829
  • Statements submitted: 31
 
There is consensus among participants that a DAO has at least these qualities. Consensus means that at least 64% of participants agreed with these statements (quoted as submitted to Pol.is):
  • Decentralised power: no single source of authority.
  • Autonomous: self-sovereign, not bound to an external coercive force.
  • A common goal, vision or set of values that are (being) worked towards.
  • A shared treasury controlled by a decentralised voting mechanism.
 
Among the participants, 96 people formed two distinctive groups. The remaining participants could not be grouped into one coherent opinion group.
Group A (44 participants) strongly opposed the statement that DAOs are Crowdfunded, not VC funded, whereas for Group B (52) participants this wasn’t an important characteristic of DAOs. People in group B hold the opinion that in addition to the 4 statements listed above, DAOs are also characterised by
  • open-door politics (instead of hidden agendas)
  • Horizontal organization, working groups with rotational leadership, people doing the work have decision-making power in the overall strategy
 
*The survey is still available and results might change over time. If you would like more information, access the full (live) report here.
 
Conclusion: Proposed DAO conceptualisation
We began by noting a wide variety of definitions and understanding of what a DAO is. Looking at the genesis of the concept of DAOs, the central idea of DAOs as coordination mechanisms. In this way, they are similar to organisations. While organisations coordinate activities between people, numerous DAOs distinguish themselves though the absence of solid borders between the organisation and their environment, and a specific Ethos (the collective mindset and paradigms of their members). We conclude that while DAOs are not organisations (in a traditional sense), they are collectives exhibiting some degree of organisationality which they enact through communication events and processes.
In addition to organisationality, we frame DAOs a both static entities while simultaneously evolving and striving to uphold certain values (an Ethos). Conceptualising DAOs as communication networks enables us to resolve the tension between the current entity and its evolution (between what is and what is yet to be). Finally, we find that the Ethos that shapes DAOs highlights decentralisation of power, autonomy, a common goals, vision or set of values that are (being) worked towards, and a shared treasury controlled by a decentralised mechanism.
 
Authors:
Daniel Ospina - lead writer - @_daniel_ospina
Katerina Bohle Carbonell, Ph.D. - co-writer - @katerinabohlec
 
Acknowledgements:
Special thanks to Professors Dennis Schoeneborn, Vivianna Fang He, and Phanish Puranam for their support in navigating these conceptual waters, to SCRF for their support funding this research, and to RnDAO contributors Caryn Tan, Unipuff, WhiteFlamingo, and Fabio Martins for providing valuable comments, proofreading and helping us finalize the paper.
 
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