Alex Batlin’s Briefing of Crypto 2.0 Musings – Standards and Reference Data Governance DAOby Fintechnews Switzerland June 8, 2016
Last few weeks has seen the rise of The DAO – an organization like no other. Part VC fund of about 170 million USD, part crowdfunding platform, part machine. The machine part is the novel piece of the puzzle – effectively all of the governance of this new entity is done by smart contracts on Ethereum, so whereas before, humans outsourced worked to machines, the machines now outsource work to humans – machines invite humans to fund them and then vote on, and monitor investments on their behalf.
Read my PALE blog for more details behind the concept of distributed autonomous organizations.
Whereas before, humans outsourced worked to machines, the machines now outsource work to humans
Machine Governance makes better decisions
Whilst the idea of machine governance is truly exciting, in the case of a VC fund, folks like BitShares, who have been running a less public but none the less similar scheme for a bit now, have raised concerns such as effective engagement – people like the idea and invest in a fund, but do not have the time or expertise to manage it, so without a clear leader, good decision making is absent – of course on the other hand we have seen plenty of leaders make very bad decisions and whole concept of crowd wisdom argues that even relatively uninformed people, in sufficient numbers will make better decisions than a well informed individual.
The same concept of automated governance e.g. voting, can in my opinion be easily transplanted to many other areas, including standards bodies. Think open source foundations like Apache Software Foundation, Linux Foundation, Ethereum Foundation and Bitcoin Foundation, or folks like International Organisation for Standardization (ISO) and BSI Group.
Governance DAO solves managerial issues based on its smart contract
Whilst standard setting activity is far less glamorous than managing a multi-million fund, in my opinion it faces a far smaller risk of rejection – very few people I suspect get excited about operating governance procedures, so automation here is a form of pain relief. The other issue with blockchains today is lack of transaction amount privacy, which may be an issue for VC funds in some cases, but a must-have feature for a standards body.
Assuming that either a standards body will be comfortable using virtual currencies or fiat money will be on-chained, a Governance DAO will even be able to manage it’s own funds to pay human staff wages, office leases etc.
And here comes the double whammy – if the standards body is managing reference data, take ISO 4217 currency codes for example, both the codes and their metadata i.e. a living locally stored and replicated document, as well as governance rules like votes for change, can be managed on-chain by smart contracts.
Any change is replicated in near real-time to anyone running a node, to make use of as appropriate inside their firewall. Given the importance of reference data and today’s reconciliation issues, a Governance DAO sounds to me like a great value proposition.