Exploration of Composable Organizations :: Part 1: Introduction and History

Exploration of Composable Organizations :: Part 1: Introduction and History

X
minute read time
Bryan Wilson
Bryan Wilson
Legal Engineer
Bryan Wilson
Published:
April 28, 2022
Last Updated:
September 15, 2022

Welcome to the first in our four part series on strategies to navigate the present and future landscapes of composable organizations.

You can read Part two here. Part three here. Part four here.

"If the first slogan was 'code is law,' I think we need to see that business models eat law. Business models eat law."

- Lawerence Lessig @CodeX Future Law 2022

Introduction and History of Composable Organizations

History has shown that the development of new technologies for rulemaking enables new business models. From the Code of Hammurabi and Stone contracts, to market monies and grain receipts, to the creation of land registries, to the advent of blockchain and smart contracts, each of these innovations makes it possible to identify parties in a transaction, set permissions based on different events, and execute the transfer of value based on rules that are predetermined and agreed upon by a group.

The rise of Decentralized Autonomous Organizations (DAOs), Cybernetic Organizations (cybOrgs), and other digitally enabled business models represents the next evolution in the ways that people can organize themselves, work on tasks, raise funds, or build communities. However, defining the attributes of these newfangled forms of governance has proven particularly tricky. The reason this matters is because the different architectures – or code – that are used for representing an organization require different safeguards to protect it.

Think about it this way: if you want to make rules that prevent a combustion engine from malfunctioning, the rules necessarily depend on what type of an engine you have – a combustion engine for a train will require different sets of rules than a combustion engine for a car, for example. A more relevant example, when thinking about the incorporation of a digital technology to a legacy business model, appears with ridesharing apps such as Uber and Lyft and the Taxi industry. The digital platforms are able to do things that the incumbent industry is unable to do, including automatically accepting payment, rating the behavior of drivers, and easily providing comprehensive records of transactions to users. However, there are also new risks associated with these new technologies. Uber and Lyft, for example, enable the algorithmic discrimination of certain areas and groups based on rase, increased congestion, and reduced vetting and identity theft in registration processes for drivers.

Now, looking to these new digital organizations, there are several questions that need to be answered. The following post(s) will explore

  • What is a DAO?
  • Where did DAOs come from?
  • What are the core features of a DAO?
  • What can I do to protect my cryptographic organization?

What is a DAO?

In the past several years, Distributed Autonomous Organizations – DAOs – have gained notoriety as a mechanism for creating new types of organizations that function differently than traditional business entities. The likes of SpiceDAO, ConstitutionDAO, and LinksDAO all have made big headlines for their ability to coordinate and invest in projects together. However, these headline grabbing DAOs do not have the highest market cap in the space. Per, the DeepDAO, at the time of writing (April 3, 2022), the following are the most capitalized DAOs in the space.

So where did DAOs come from?

And while many of these organizations have not been around very long, the sentiment motivating DAOs has been around for quite a while. Looking through the anthropological and the biological literature, it becomes clear that the history of DAOs is actually one of analogies – creating parallel paths between different types of systems that function in similar patterns. In 1962, W. Ross Ashby, one of the fathers of cybernetics, published Principles of the Self-Organizing System, wherein Ashby provides a thorough overview of the components comprising a self-organizing system (of which DAOs are arguably a type of self-organizing system).

Then, in 1968, at the Association for Computing Machinery / Institute of Electrical and Electronics Engineers (ACM/IEEE)—Computer Society's Fall Joint Computer Conference in San Francisco, Doug Englebart gave a live demonstration, the Mother of All Demos, which showcased of windows, hypertext, graphics, navigation, command input, word processing, file linking, and collaborative editing. This potential of computers, he believed, could facilitate the creation of an organizational efficiency or collective IQ that would enable people to coordinate and participate on projects in new and exciting ways together.

Fast forward to 1990, and Steve Jobs took this further when he hypothesized about interpersonal computing could lead directly to the creation of flat organizations that are digitally enabled, exist for a specific purpose, and then fall dissolve once their purpose is achieved.

Now, we are getting to a critical moment in 2008, where these cybernetic systems are becoming more mainstream and increasingly embedded in commerce. At this point in time, people are using smartphones, and internet connected devices are becoming both more powerful and more widely used. But the reason 2008 is so important to the timeline of composable digital organizations is because it is the year Bitcoin was created. Bitcoin was created by Satoshi Nakamoto as a network that rewards people who maintain the network with mining rewards.

"To some, the Bitcoin (BTC) network is the earliest example of a DAO there is. The network scales via community agreement, even though most network participants have never met each other. It also does not have an organized governance mechanism, and instead, miners and nodes have to signal support. However, Bitcoin is not seen as a DAO by today’s standards. By current measures, Dash would be the first true DAO, as the project has a governance mechanism that allows stakeholders to vote on the use of its treasury."

- CoinTelegraph, "What is a decentralized autonomous organization, and how does a DAO work?"

Drawing from the self-organizing nature of the network, the autonomy of its execution, and the miners, developers, and others who participate with the network, Bitcoin is arguably viewed as the creation of the first DAO. While the criteria for what comprises a DAO remains to be settled, Bitcoin is a distributed network. Bitcoin functions autonomously, per the instructions transcribed in the code. And Bitcoin is organized in a way that facilitates the governance of the network.

This article does not constitute investment and/or legal advice, and is strictly for education purposes only. Upside is not an SEC registered investment advisor, practicing legal entity or any other type of licensed body that can legally provide investment and legal advice. Upside is not responsible for any errors or omissions in this article, due to the changing nature of laws, rules and regulations or otherwise, or for results obtained from use of the information it contains.

Why It's Hard To Launch A Token...and Why Its Worth It For Ambitious Businesses

Join Noah Thorp, founder and CEO of Upside, for a 40 minute overview of why businesses are moving into Web3; and the legal, technical and regulatory complexities involved in that move.
Watch The Presentation
The Ledger
More from the Upside Ledger
Nine Examples of Security Tokens in Web3
Nine Examples of Security Tokens in Web3
Security Tokens are cementing their place in the financial industry as a programmable vehicle for investment in any asset that already has value, like real estate, a car, or corporate stock.
The Complete Guide To Governance Tokens
The Complete Guide To Governance Tokens
Uniquely, compared with other types of tokens, Governance Tokens may actually take many forms. There are security tokens, utility tokens, and LP staking tokens, that each perform a governance function.
Everything You Need to Know About Liquidity Provider Tokens
Everything You Need to Know About Liquidity Provider Tokens
Liquidity Provider Tokens, or LP Tokens for short are a reward mechanism to help facilitate transactions between other different types of currencies. To understand Liquidity Provider Tokens better, it is helpful to...
The Complete Guide to Security Tokens vs. Utility Tokens
The Complete Guide to Security Tokens vs. Utility Tokens
Organizations from all types of markets and communities are looking to tokens as a way to deploy new types of businesses and projects.