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Can someone ELI5 DAOs please? Ideally without the buzzwords and more focused on the value they create and how. I'm a software engineer but the idea of a "smart

Can someone ELI5 DAOs please? Ideally without the buzzwords and more focused on the value they create and how. I'm a software engineer but the idea of a "smart" contract working as an "organisation", none of which can be undone when there is an error seems like it has massive risk attached and little to no benefit. It doesn't seem "decentralized" as there are still organised parties to write and deploy code and the tokens that inevitably belong with each DAO are usually majority held by the creators. Currently I like the __idea__ of a DAO but see them massively overhyped and unable to describe or prove their actual value. Please change my view.

daoming 5y ago
You have to accept the premise that code as an absolute authority is a good thing, if you accept that premise, a DAO makes a lot of sense and can deliver a lot of value: no longer are we beholden to the weakness of corruptible man, we are now empowered by the strength of noble technology. of course, as a software engineer, you know that is a hellish nightmare because the code we write is fallible so this entire thing makes no sense whatsoever.
- kisamoto 5y ago
  Ok I can (hypothetically) accept that. Let's imagine I'm creating a fresh business and choose to structure it as a DAO, does this mean that the ever understanding code is the CEO steering the company? Or is the DAO the product of the company itself? I don't understand the relationship here. Following on from that, I am the party that writes the code for the DAO. Now I can claim that my code is perfect and we can trust the machines to execute it. But I'm still running the deployment of it and the weakness of corruptible man can still abuse the trust given to the code they create.
  - daoming 5y ago
    There's difficulty in translating these new concepts into examples using existing real-world concepts but as a broad generalisation: a DAO is a "company" that the shareholders govern and the DAO's code is the shareholder agreement which has zero implicit rights or behaviours. The DAO itself could have code that enables something like, "the code for this DAO can be updated as if 50% of token holders vote yes" and then 50% of token holders could vote yes to a code change that appoints a CEO who has absolute authority or they could vote to change the code so that no vote could ever take place in future, and the code becomes "stuck" forever. The code for a DAO lives and runs on the blockchain, so the integrity of the DAO is linked to the integrity of the network on which it runs: although there's no absolutes, in the case of a network like Ethereum, it is for all intents and purposes, secure, so deployment and execution is not a network-level attack vector. Does that help? The reason DAOs are considered _the future_ by some is the implicit assumption that perfect code is possible to produce. Many non-software engineers believe that _if we have the integrity of the network to guarantee the code cannot be changed without consent, then we can have absolute faith in the code_... but of course, as software engineers, we know code is very fallible, whether it's unintended side effects or malicious backdoors or just an honest misunderstanding of what the code is meant to do, there's millions of ways for code to go wrong long before we need to worry about code integrity.
PragmaticPulp 5y ago
The DAO model makes more sense when it’s only controlling on-chain cryptocurrency in ways that can be controlled entirely with smart contracts that can be voted on. However, the most popular version of this DAO appears to be literal Ponzi schemes operating in the open. It seems people are more likely to trust the Ponzi scheme when they feel they have some degree of control over it. Many of the high profile DAOs fail for exactly the reasons you highlighted: They’re sold as being built to buy or control off-chain assets (like a copy of the constitution or an NBA basketball team) but they lack any of the real-world contractual obligations that would actually link the DAO to the real-world asset. They’re relying entirely on the real-world volunteers to do what they claimed to do in agreement with what the DAO voted. This is why the constitution DAO had to make it clear that contributions were donations and tokens did not constitute actual ownership. It’s possible that a future DAO will go through the trouble of setting up the appropriate real-world contracts and entities to make this all legally binding and an actual security, but at that point the legal entity is doing all of the heavy lifting and the DAO is just a very expensive donation and voting system where gas fees consume hundreds of dollars of every member’s interactions. Any breach of contract would still have to be handled in the real-world legal system, so the DAO wouldn’t really protect anything other than providing a record of who voted for what.

daoming 5y ago

You have to accept the premise that code as an absolute authority is a good thing, if you accept that premise, a DAO makes a lot of sense and can deliver a lot of value: no longer are we beholden to the weakness of corruptible man, we are now empowered by the strength of noble technology. of course, as a software engineer, you know that is a hellish nightmare because the code we write is fallible so this entire thing makes no sense whatsoever.

kisamoto 5y ago
Ok I can (hypothetically) accept that. Let's imagine I'm creating a fresh business and choose to structure it as a DAO, does this mean that the ever understanding code is the CEO steering the company? Or is the DAO the product of the company itself? I don't understand the relationship here. Following on from that, I am the party that writes the code for the DAO. Now I can claim that my code is perfect and we can trust the machines to execute it. But I'm still running the deployment of it and the weakness of corruptible man can still abuse the trust given to the code they create.
- daoming 5y ago
  There's difficulty in translating these new concepts into examples using existing real-world concepts but as a broad generalisation: a DAO is a "company" that the shareholders govern and the DAO's code is the shareholder agreement which has zero implicit rights or behaviours. The DAO itself could have code that enables something like, "the code for this DAO can be updated as if 50% of token holders vote yes" and then 50% of token holders could vote yes to a code change that appoints a CEO who has absolute authority or they could vote to change the code so that no vote could ever take place in future, and the code becomes "stuck" forever. The code for a DAO lives and runs on the blockchain, so the integrity of the DAO is linked to the integrity of the network on which it runs: although there's no absolutes, in the case of a network like Ethereum, it is for all intents and purposes, secure, so deployment and execution is not a network-level attack vector. Does that help? The reason DAOs are considered _the future_ by some is the implicit assumption that perfect code is possible to produce. Many non-software engineers believe that _if we have the integrity of the network to guarantee the code cannot be changed without consent, then we can have absolute faith in the code_... but of course, as software engineers, we know code is very fallible, whether it's unintended side effects or malicious backdoors or just an honest misunderstanding of what the code is meant to do, there's millions of ways for code to go wrong long before we need to worry about code integrity.

PragmaticPulp 5y ago

The DAO model makes more sense when it’s only controlling on-chain cryptocurrency in ways that can be controlled entirely with smart contracts that can be voted on. However, the most popular version of this DAO appears to be literal Ponzi schemes operating in the open. It seems people are more likely to trust the Ponzi scheme when they feel they have some degree of control over it. Many of the high profile DAOs fail for exactly the reasons you highlighted: They’re sold as being built to buy or control off-chain assets (like a copy of the constitution or an NBA basketball team) but they lack any of the real-world contractual obligations that would actually link the DAO to the real-world asset. They’re relying entirely on the real-world volunteers to do what they claimed to do in agreement with what the DAO voted. This is why the constitution DAO had to make it clear that contributions were donations and tokens did not constitute actual ownership. It’s possible that a future DAO will go through the trouble of setting up the appropriate real-world contracts and entities to make this all legally binding and an actual security, but at that point the legal entity is doing all of the heavy lifting and the DAO is just a very expensive donation and voting system where gas fees consume hundreds of dollars of every member’s interactions. Any breach of contract would still have to be handled in the real-world legal system, so the DAO wouldn’t really protect anything other than providing a record of who voted for what.