Money & Markets: Distributed Autonomous Organisations will shake up finance and politics

Technology is driving the markets forward but politics is stuck in the past. Could a new software infrastructure for organisations transform democracy?

A new form of governance is coming to finance, and it will ricochet into politics with profound implications.

To paraphrase Bill Gates, there have always been brilliant politicians from the beginning of history and their empires have risen and fallen. However, technology and science is quite new, and unlike politicians it is responsible almost entirely for the human progress we currently enjoy, including the less savage political environment we are subjects of.

It’s a sobering thought.

While markets are ancient they are also morphed by technology and governance.

There is an intersection between the three.

Most of us agree that democracy is good and most people feel it is for all intents and purposes like Newton’s laws, nigh on perfect, pretty much immutable, and to question its validity almost sacrilegious.

Yet it is good to remember that both Newton and democracy were unexpectedly upended by moustachioed Austrians in the 20th century.

While markets and technology are dashing headlong into the future, the world of politics hangs back in a world dominated by the technology of the 19th and 20th centuries. For example, in the UK new laws are still printed on vellum, i.e. calfskin. It is no wonder then that the technology-armed electorate is turning to some unpredictable, unexpected and potentially unfortunate choices.

Is the democratic system forever fixed or is there opportunity for it to adapt to new circumstances?

As Churchill once remarked, “It has been said that democracy is the worst form of government except for all those other forms that have been tried from time to time.”

There is something brewing in crypto finance that could be the technology necessary to change the game. 

Money has been changed out of all recognition by technology. Once transformed by computing from places with people and paper to mere magnetic blips on fast-revolving magnetic platters, markets have grown exponentially, and now technology is emerging that could provide to governance that same bridge between people and parchment that has turned finance upside down.

A DAO (Distributed Autonomous Organisation) is a software infrastructure under which the stakeholders of the organisation, in this case a crypto enterprise, can change any and all their rules, be they code-driven or human-driven, using cryptography, software and voting.

A DAO doesn’t have to be a business, it could be any organisation, simple or complex, and the rules it enforces could be whatever was decided upon initially or later, just like the rules of any democracy. They could actually mirror an existing one. There is no reason in a computer driven-world that sophisticated DAOs could not be the core of a future democracy. The only difference that there might be would be efficiency and cost. However, while current systems are literally hidebound, a DAO would come with all the new opportunities of any process that has been digitised – that is, after all, the fundamental promise of technology.

Crypto and blockchain is where computing meets money, meets politics, meets technology. Cryptocurrencies and blockchain are by their very nature political. They are rule-based, codified and extremely hard to cheat. The very unmalleable way they work delays all the skulduggery that goes along with finance that regularly dumps practitioners in the soup. All that is left are robbers trying to break into vaults or mug holders.

The idea of ‘distributed (or decentralised) autonomous organisations’ has risen from the Ethereum community and it is starting to, and will shortly, revolutionise finance.

The utopian idea that ‘code is law’ is actually panning out in these businesses because the stakeholders have direct consensus control over the direction of the enterprises they own through their tokens. This enables them to do their politics directly without the need for middlemen, and the stakeholders get the project they deserve.

Optically a DAO seems to hugely add value and it is nothing but a political structure overlaid on an asset traded on a market.

Typical of blockchain technology, DAO mechanisms can be byzantine, but however you look at it or feel about the idea of direct democracy through a computer system rather than via massive old buildings-come-conference-centres, DAOs work, they are efficient and they will flourish. As they do so, old styles of control will increasingly use a DAO structure simply because, as in any system, if it is more efficient it will win out over its less efficient competition. 

The beauty of a DOA structure is that it can represent whatever system you wish to implement, yet even on a basic level deliver the sort of efficiency wins that would avoid the current electoral farce in the US.

If we are to escape the ravages of eccentrically groomed iconoclasts something has got to change in politics, and technology and finance may be beginning to show the way forwards.

The social media troll phenomenon is ascendant and more and more typifies the political process itself, so it seems the only way to progress will be to adapt. Hopefully that adaptation will come via a blockchain-inspired engineer rather than from a disgruntled inmate ruminating on his struggle.

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