The future and potential pitfalls of DAO work

In the future, it is likely that ordinary people will not work for companies. Instead, people will earn non-traditional means through activities such as playing games, learning new skills, creating art or curating content. This shift in the way we work is not uncommon or unexpected—the idea that most people would be employed by large corporations seemed crazy to some in 1800.

This new future of work is enabled by networks formed around cryptographic protocols that are emerging as new ways to coordinate, measure, and reward contributions to complex ecosystems. This shift has begun to unlock new revenue-generating potential for individuals, and has led to an increasing shift in value capture from organizations to people participating in crypto networks as individuals. 

The traditional way of making money is “working to make money”, but the future of income is “X-to-earn” – playing games to make money, learning to make money, creating money, and working to make money. 

However, this will not happen magically – it will require new Decentralized Autonomous Organizations ( DAOs ) that can coordinate all these new activities in the context of enterprise systems. This paper provides a framework for understanding the options available in future work. 

Limitations of the company as a coordinating mechanism

First, we need to explain the inadequacies of the existing profit model. In the information age, traditional corporate employment is rapidly becoming obsolete as a means of coordinating activities – we are already seeing this in the emergence of alternative forms of income such as influencers, contractors, creators, gig economy participation etc. These ways of making money don’t necessarily feel like “jobs,” but they are all examples of people participating in complex webs as individual value providers and earning income from their contributions.

However, these non-traditional opportunities are limited in number and, when available, often undervalue contributors. This is because these efforts are still based on the web2 paradigm, in which the company continues to control the business model.

More and more traditional companies have “peripheral stakeholders,” players who blur the lines between internal and external members of the organization. Think Apple and the developers who create the App Store apps, YouTube and the creators, or Uber and their drivers – the participants contribute to the company’s growth from the outside, but it is difficult for the company to align incentives with these stakeholders be consistent.

As companies grow, they can no longer maintain sustainable relationships with these external network participants. The relationship between the company and the players becomes a zero-sum game, and the company begins to extract value from these players in order to maximize profits.

The future and potential pitfalls of DAO work

A corporate model with strict boundaries between the inside and the outside might make sense in the industrial age, but in the information age, it can lead to misaligned incentives and unsustainable extraction. In a world where we have complex information and peripheral stakeholders, companies are no longer fit to help us coordinate our activities.

The encrypted network creates better consistency among the participants, and the DAO will be the coordination layer for this new world.

DAO as the new coordination layer

DAOs will eventually replace the traditional model. The DAO is an internet-native organization whose core functions are automated through smart contracts and consists of people who do things that automation cannot (e.g. marketing, software development). In practice, not all DAOs are decentralized or autonomous, so it is best to think of DAOs as internet-based organizations jointly owned and controlled by their members. 

Although DAOs are still in their early stages of development, they are no longer just a promising concept. They are real organizations that manage billions of dollars in capital, provide real products and services to millions, and create new ways for people to generate income. 

Here’s a good overview of the current DAO landscape from Cooper Turley:

The future and potential pitfalls of DAO work

DAOs come in many different types and sizes: DAOs that manage cryptographic protocols (Protocol DAOs), DAOs that make venture capital investments (Investment DAOs), DAOs that provide services to other DAOs (Service DAOs), DAOs that buy  NFTs  (Collector DAOs) ), There are a lot more.

But across all DAOs, there are some common threads that differentiate them from traditional organizations (these are generalizations, so be aware that they vary by specific instance):

The future and potential pitfalls of DAO work

These elements that differentiate DAOs from traditional organizations actually enable DAOs to develop more symbiotic relationships with their stakeholders and participants. DAOs function as open economies, encouraging the accumulation of value wherever value is provided, not based on arbitrary legal boundaries. Chris Dixon once pointed out:

Crypto networks use a variety of mechanisms to ensure they remain neutral as they grow, preventing the bait and switch of centralized platforms. First, contracts between a crypto network and its participants are executed in open source code.

Second, they are controlled through a “voice” and “exit” mechanism. Participants gain a voice through community governance, both “on-chain” (through the protocol) and “off-chain” (through the social structure around the protocol). Participants can exit by leaving the network and selling their tokens, or in extreme cases by forking the protocol.

The structure of a DAO is inherently open and accountable, a coercive feature that shares value with the participants who created it. Otherwise, other DAOs will outcompete them, or their participants will leave to find other opportunities.

In fact, the best DAOs are those that reward participants, which are the foundation of the ownership economy. This emerging positive-sum dynamic is the foundation of the X-to-earn trend that will shape the future of work.

The future of DAO “work”

To better understand the options available to people, we must explore the specific structure of a DAO: 

 

The DAO as an open economy will drive the X-to-earn trend, which will make work more flexible, fluid, and fun than the 9-to-5 we are used to. 

The openness of these cryptoeconomics will allow people to participate in multiple DAOs and cryptonetworks, mixing and matching different income streams and returns on ownership (remember, the best DAOs are those that distribute ownership to their participation through their own native token By). 

People’s income will be what we currently do in life (e.g. playing games), things we think are traditional jobs (e.g. bonuses/contracts) and things that only a small percentage of people currently have access to (e.g. investments, passives) income). In other words, the DAO will expand the type and number of opportunities open to multiple types of participants, including token holders, bounty hunters, and core contributors.

For example, token holders may earn by receiving grants from major DeFi protocols, passive income income from various tokens, etc.; bounty hunters will earn by completing incentivized on-chain actions; network participants can earn by playing Axie Infinity  or other upcoming P2E games to earn money. 

In this new future of work, jobs will be more ephemeral and dynamic — switching between jobs will be less costly, opportunities will be more apparent, jobs will be reduced to more atomic units, and the world will be unified under one labor force Get all the opportunities below. We will discover new opportunities based on our on-chain history, ownership and reputation, and we will match where we have the best comparative advantage to contribute.

Below are the details of how participants see earning opportunities through the DAO.

  • Core contributor: work-to-earn

A core contributor is how we typically think of an employee today – someone who is dedicated to one (maybe 2-3 in some cases) projects or organization full-time. A single focus enables individuals to integrate into projects and accumulate contextual and strategic knowledge.

The need for dedicated and embedded workers will never go away, but in web3, this group will be much smaller than ever. Software and to a greater extent smart contracts enable a small group of people to have a huge impact. Instagram was  acquired by Facebook for $1 billion with a team of 13 at the time. This type of outcome will become common in the future as the power of software automation and a larger network of smaller contributors will keep the number of core contributor team members small .

In the future, working for this team will not be significantly different from working for the company – DAOs will still have core contributors whose interests are most directly aligned with the health of the organization. Because DAOs are more transparent than corporations and can be held accountable to a larger community, however, with more pressure (think scrutiny of public officials).

  • Bounty Hunter: contribute-to-earn

“Bounty Hunters” do well-defined work for an agreed-upon price and/or duration. These people are typically functional experts in areas such as finance, development, and design who serve multiple DAOs simultaneously and accomplish specific tasks with clear boundaries. 

Bounties are usually posted publicly for anyone to claim, and can sometimes be competitive, rewarding the best submissions based on merit and value contributed after the fact, rather than based on a pre-application process or bidding wars.

Many bounty hunters will band together to form their own service DAOs – think of these organizations as outsourced help to DAOs that don’t have the required skills on hand. These service DAOs have emerged to accomplish tasks that require functional knowledge, such as money management (eg, Llama), software development (eg, RaidGuild), governance (eg, Fire Eyes), and more.

While bounty hunters and service DAOs may sound like contractors and professional services firms, they will be different and more popular in DAOs for several reasons:

 

  • Smart contracts will automate a large portion of the DAO’s core functionality, leaving more peripheral work that is well-defined, functionally specialized, and well captured through bounties.
  • DAOs will deliberately try to push work to the periphery to maintain decentralization and avoid large hierarchies, and bounties create a sustainable way to do this.
  • The transparency of the DAO will reduce the coordination cost of bounties.

 

  • Network participants: participate-to-earn

This is the latest and perhaps the most exciting part of future work. In any given DAO, this is where most people will fall.

The network gains power with more activity and more participants, however, over the years users, consumers and participants have been adding value to the network without gaining their share of value (e.g. Apple’s app developers, YouTube creator and Uber driver) ).

Compared to closed organizations, DAOs are more like open economies, where DAOs will reward each individual’s contribution based on the value it provides, regardless of who it comes from. This means that everyday actions that are valuable to the network will translate into revenue opportunities. 

Almost everyone can earn some income by simply living online, using products, and participating as a user. For people who get paid for participating in the network, earning income can feel like a game.

  • Play-to-earn

Play-to-earn is a new type of game mode that rewards players for playing and achieving achievements within the game. Whereas traditional game models involve a unilateral transfer of value to the game creator or platform, game-earning games also reward users.

Playing money-making games functions like an economy: players provide labor (their time and energy) and capital (often buying NFTs to participate in the game), and are rewarded with fungible tokens for their achievements and progress in the game. Earning currency from games is nothing new, but instead of rewarding players with in-game currency limited to in-game use, the game distributes fungible token rewards that can be exchanged for Other crypto tokens or fiat currencies.

This means that video game players can pay the bills through their in-game achievements, especially for people in countries with lower wages and living costs. This phenomenon has become a source of income for millions of people, especially through Axie Infinity. 

Axie is a popular blockchain game where players can buy pet NFTs (Axies), breed them, fight them and trade them. These actions take place in the game, but each user actually owns the Axies they bought or created. The game has been hugely popular over the past few months, grossing over 200,000 ETH (currently $860 million) in July and August  (these numbers have since declined, and are the subject of a heated debate that I discuss below) .

The future and potential pitfalls of DAO work

Source: Axie World

This explosive growth is attributed to the incentive alignment between Axie and its users, which Axie describes as follows:

Axie has a real money economy that is 100% player owned. Rather than selling game items or copies, game developers focus on developing players into player economies and monetizing them for a small fee. Axies are created by players using in-game resources (SLP and AXS) and sold to new/other players. The holder of the AXS token is the government that receives the tax revenue. Game resources and items are tokenized, which means they can be sold to anyone, anywhere in an open peer-to-peer marketplace.

Axie opened the way to earning income, and more importantly, it opened the eyes to the larger X-to-earn trend, showing how people can earn income by contributing to the network.

  • Learn-to-earn

Learn-to-earn is a new educational model in which a person is actually paid for proving that they have learned something, rather than paying to learn. This is possible when a person learns skills, knowledge or information that adds value to the network and the network is willing to fund the learning. 

On RabbitHole, cryptographic protocols pay for tasks, incentivizing users to complete specific actions on-chain. When users complete these actions, they will be rewarded by the protocol. While bounty hunters often contribute to building the protocol, these on-chain actions are often associated with participating in the protocol.

This new positive-sum interaction helps parties:

 

  • Users learn new skills or methods of using the crypto industry and earn tokens for them
  • Crypto protocols gain knowledgeable new users
  • RabbitHole earns a percentage of revenue to boost engagement

 

This new model is similar to Google sharing a portion of their ad revenue to learn about new products, or paying your university because you strengthen their alumni network. In both cases, you are providing value to the network without being rewarded, but for now, you can. 

Since its launch, RabbitHole has distributed over $750,000 in rewards, paid out by some of the largest crypto protocols (e.g.  Uniswap , Aave , Compound , The Graph, Pool Together, and  Polygon ). While it’s early days in this space, the potential to earn rewards for learning is huge if you take into account the revenue generated by education and advertising that is currently not available to users.

  • Create-to-earn

Cryptocurrencies have created new wealth and digital scarcity, which has paved the way for the explosion of the NFT market over the past few months. This provides artists around the world with the opportunity to earn a living, and in some cases even a fortune for generations. 

But it’s not functionally different from any artist getting paid when their work is successful. More interestingly, creators are paid for the value added to the network, not just their personal profit from their work.

For example, NFT marketplace  SuperRare  airdropped 15% of its tokens to early users, collectors, and artists on its platform in recognition of the role these value creators played in its early network success.

Audius is a decentralized protocol for music streaming that allows creators to earn tokens by uploading music and curating playlists. Audius gives creators ownership of the network because of the value they bring. 

  • Token holders: Invest-to-earn

Anyone with an internet connection and a crypto wallet will be able to invest in high growth opportunities.

In a world where every network has a token, tokens are earned by participating in the network, the ability to buy tokens is permissionless, and everyone becomes an investor. 

Investment will become the main source of income for an increasing number of people. Not every investment will appreciate in value, but individuals will have access to opportunities previously reserved for a few, and a whole class of income-earning opportunities will be unlocked.

What it takes to start a DAO and the future of work

X-to-earn opportunities will only become mainstream when DAOs become mainstream. DAOs show a lot of promise, but they are still in the early stages and there is still a long way to go before future work is realized. In a recent survey of 422 DAO participants by Gitcoin and Bankless, <45% of respondents said DAOs are their main source of income.

The future and potential pitfalls of DAO work

In order for the DAO to truly become the center of work, we need to develop the infrastructure, tools, and systems that can support the DAO and its members.

  • Coordination tool

Most DAOs currently rely on a combination of Web2 software that was not designed for DAOs, or very young web3 software. In both cases, the DAO’s needs are not fully met.

DAOs have incredible potential to harness the power of decentralized networks and the collective intelligence of people, but they need better software tools to coordinate. DAOs will require tools to support governance (e.g. Snapshot, Orca), software collaboration (e.g. Radicle), treasury management (e.g. Parcel, Multis, Gnosis), discussion (e.g. Discourse), access (e.g. CollabLand), etc.

Of particular relevance to this article, an interesting area that needs new solutions is rewarding contributors. DAOs don’t have a CEO or HR department to decide who should get paid, so new, decentralized ways are needed to determine how much value a person contributes and how much they should get paid for it. Some early but interesting solutions include having colleagues determine each other’s rewards (Coordinape) and using an algorithm to create a graph of contributions and calculate the rewards (SourceCred). 

  • reputation system 

DAOs are open and permissionless, but new methods are still needed to determine who to trust, collaborate, and reward.

The traditional corporate solution is to have an extensive interview process, but this goes against the spirit of the DAO. To complicate matters, many of the people participating in the DAO are anonymous. In this new world, DAOs need a new way to determine who to allocate scarce resources to. 

This highlights the need for an on-chain reputation system. An on-chain reputation system will capture what we do on the blockchain: our contributions to the DAO, our governance voting history, our token holdings, and more. Ultimately, reputation systems will use these on-chain actions to predict our future actions to determine who is trustworthy, trustworthy, and consistent. On-chain reputation will replace the way companies currently use credentials, resumes and interview processes.

However, there are a number of privacy and security concerns in tracking distributed ledgers of public activity related to personal identities. Currently, blockchain identities revolve primarily around addresses, but to make these reputation systems viable, we will need more robust decentralized identifier solutions (such as Ceramic/IDX) and identity management. 

Warning: About creating value and possible pitfalls

It’s unclear how much revenue can be earned through these channels in the long run. X-to-earn doesn’t mean everyone can make art and play video games for a living. 

X-to-earn is about rewarding value where it is created. DAOs make these non-traditional paths more sustainable and accessible to more people, but the market won’t reward everyone. Market dynamics are still relevant, and to get a return, you need to provide value. Creators need to find audiences, gamers need to get results, and bounty hunters and contributors need to make an impact. 

However, the ongoing debate around the sustainability and scale of certain revenue-generating opportunities does not depart from the theme of this article: the creation of value within the network should be rewarded, and the DAO will coordinate the return of value within the cryptonetwork to enable new revenue-generating opportunities. 

More broadly, the jobs of the future will not be absolutely good. As with any major technological shift, there are usually positives and negatives. DAO will lead to the same result. Here are some directions to watch:

  • Competitiveness and Gap

Measuring and rewarding all contributions to the network will result in a more meritocratic allocation of resources. The flip side of meritocracy is a world where DAOs actually add to the laws of power that web2 economies have demonstrated before. For example, on Spotify, the top 1.4% of creators earn 90% of the royalties. Furthermore, a truly global workforce with lower switching costs will only add to these competitive dynamics. If DAOs exacerbate this trend, how will one reconcile the increased variance in outcomes?

  • cognitive overload

The processing power of the human brain is limited. The Dunbar number is the well-known limit on how many social relationships the human brain can manage, but the “DAObar number” is the DAO version of that concept: how many DAOs can a person meaningfully participate in? Each subsequent DAO engagement adds processing power to maintain context and awareness of everything that is going on. DAO tools for communication and collaboration (discussed above) will try to mitigate this, but people may struggle with additional overload.

  • state separation

On the one hand, DAOs allow people to choose how they work and connect with a community that aligns with their values. On the other hand, by reducing most of the work to atomic units and purely economic incentives, we risk reducing the meaning of people to purely economic rewards. We risk turning work into discrete, meaningless tasks in which labor is reduced to commodity services.

There is a common metaphor that the future is already here, just unevenly distributed. This is certainly the case with DAOs and future work. Every day, more and more people join the DAO and commit to web3 full-time. DAOs are growing rapidly and are in great need of talent to help them achieve their mission.

The future of work is emerging, and it will take unexpected and fascinating directions.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-future-and-potential-pitfalls-of-dao-work/
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