Why web 3.0 communities are a big deal?
A non-technical narrative.
There is a disproportionate amount of chatter in discussing blockchain, tokens, and coins that are part of the “how” behind Web 3.0. Here’s a non-technical narrative on the “why” behind the inevitable transformation ahead of us.
Once upon a co-op
Imagine a community of people who are passionate about teaching. These are people from different walks of life and from different parts of the world with a shared interest — to pay it forward by translating their tribal knowledge into structured coursework on a variety of topics spanning well-being, work-life integration, career growth, and other professional skills. They come together to form a co-operative with a premium membership — each member is an instructor.
What does the co-op do?
The co-op runs as a platform where the members collaborate to create courses. The lead creator pitches the course concept to the co-op members and elects the peers she wants to work with based on mutual fit. Once the course is built, they are hosted on the platform for anyone to buy. The earnings are split by the lead creator and co-op members who contributed to the course creation. Alternatively, lead creators who want autonomy can choose to work by themselves and create a course independently.
Doesn’t this feel like just another co-op? Yes and no.
Much like many other co-ops, the entity is owned by many. After achieving a certain level of contributions to the collective cause, members earn a privileged status (let’s refer to them as voting members) that allows them to influence the governance of the co-op. The voting members control the co-op from within and handle decisions on exceptional situations that need human intervention.
In that sense, the ownership of the co-op is decentralized.
However, unlike the co-ops of the past, there is automation encoded in the platform that is transparent and self-enforced for the community’s day-to-day operations. The transparency ensures there is no asymmetry of information within the sections of the community. Information such as lead creators looking for contributors, course-wise revenue, member-wise earnings, calculation of revenue splits, decisions in the pipeline for voting, etc. is a matter of public record within the community. The self-enforcement is enabled through automation for events such as allocating revenue to contributing members each time a course is purchased, the elevation of a co-op member to a voting member based on predetermined criteria, assessing eligibility to onboard a new member, etc.
In that sense, the operations of the co-op are autonomous.
And that’s one flavor of a Decentralized Autonomous Organization (DAO). Based on how much ownership is decentralized and to what extent operations are automated, you can design a DAO to fit the context.
Okay, I get what a DAO is. So what’s the buzz about?
Possibly for the first time in the history of mankind, a group of individuals with a shared interest have the collective power to transparently institutionalize and autonomously operate a mission irrespective of where they pay their tax or what they do for a living.
Wait, haven’t we had global private companies do this already? No. Firstly, private companies by their very setup pursue their own private interests. A global cab aggregator will optimize for efficiency in operations at the expense of the well-being of their driver “partners”. Large food delivery businesses will have no qualms making lucrative but unhealthy meal options easy to find on the site. Secondly, if a need for change arises, the control in these organizations stays centralized with the board members, or at best with shareholders, both of which have economic incentives at odds with the greater good.
In theory, a DAO decentralizes the power to decide how to extract value and automates the ability to extract it, thus drastically reducing historically prevalent sources of corruption.
By extension, a responsibly designed DAO has the potential to weaken and in some situations, replace centrally controlled organizations or environments operated by closed intermediaries.
And that includes a significant portion of the world we know in Web 2.0. Social media giants, insurance companies, gig economy platforms, and in the case of the fictional DAO above, online course providers and ed-tech companies. This is just the tip of the iceberg. That’s what the buzz is about.
But isn’t it hard to set up something like this?
It is definitely not as straightforward as spinning a few serves based on your need from your favorite cloud service provider. But things are rapidly evolving and the rate of change has increased. As an example, check this tweet out here on the underlying stack available for free, minus the gas fees, to set up a DAO.
So, are DAOs perfect? No.
Where there is code, there may be bugs. The vulnerabilities in the DAO code, if any, can expose them to an unethical hack just like with any other piece of software. If you haven’t already, search the story of the DAO hack of 2016 that raised technical as well as philosophical challenges in the infrastructure.
Besides, there is always a risk that the financial incentives in the DAO might limit the foresight of its creators to see “beyond economic metrics” for the greater good of the community. That’s a human problem, technology ain’t going to fix it. If you are interested in the intersection of cooperative platforms enabled by blockchain governance, check out this article.
Lastly, communities of the Web 3.0 era will bring voices with shared interests together and evenly distribute gains from the pursuit with the creators and builders of the community. On the flip side, I fear it will also add to the number of bubbles we choose to be cozy within. I have written about this separately here.
A real-life use case — Government-sponsored social security schemes
If you want to understand the effectiveness of most government-sponsored social security schemes in India, you would be required to submit an RTI (Right to Information) application to a Public Information Officer (PIO) of the department. If you are lucky to avoid instances of misplaced records, missing data, inter-department coordination, you might hear back a response in 30 days. Let’s take a deep dive into a specific instance.
Context: The Pradhan Mantri Garib Kalyan Package (PMGKP)
This scheme was launched on March 30, 2020, to provide comprehensive personal accident cover of ₹50 lakh to 22.12 lakh healthcare providers including community health workers and private health workers in direct contact and care of Covid-19 patients. As of late October, 1,351 claims have been paid under the scheme.
The challenges: Transparency and efficiency in core insurance operations
The scheme is being operated in partnership with a nationalized insurance company that handles the core operations with the government as the payor. When an activist filed an RTI in November 2020, neither the central government nor the insurance company replied to the queries. Based on the response from one of the state governments, only 27% of health workers who applied received the insurance coverage money.
An alternative future: A semi-private government funded insurance DAO
How many welfare schemes paid by tax payor’s money will remain shrouded in mystery? Why should the most vulnerable in our society bear the added anxiety for their future? In a digital age, why should be it so difficult to hold people accountable who work on a whim with benefits people deserve? How can we elevate governance in the distribution of welfare by involving those directly impacted by these decisions? Can the combination of decentralized governance and self-enforced transparency fix some of this? Yes, at least some, if not all of this!
Here’s a rough sketch of how this would look like. The payor for the insurance DAO would be the Health Ministry. The DAO itself would be comprised of the representation from the community the welfare is meant for. In this case, it will be a combination of Indian Medical Association, Indian Nurses Association, ASHA (Accredited Social Health Activist) workers, and so on. The social layer of the DAO, at an appropriate level of decentralization, works with the Health Ministry to design and execute the scheme — coverage, eligibility, enrollment, premiums, claims process, disbursement, etc. The autonomous layer is responsible for self-enforcement at every instance where operations can be codified for transparency and making performance a matter of public record. No one should have to fill up RTI forms to view fundamental operations data at an aggregate like funds available, claims processed, disbursements made, adjudication decisions, administrative costs, etc.
So, what’s next?
This is a simplified and optimistic take on the topic. The biggest challenge in this transition isn’t the decentralized democratic setup of the social layer in a DAO, nor is it the complexity in the technology to automate the self-enforcement of the governance.
The biggest challenge is going to be in navigating the conversations with those in power to be willing to let go of their share of control for the greater good of the community.
In the commercial sector, the markets will force the move in the long run as intermediary-less structures reap the benefits of newer models of value creation. In the public sector, the road is steep and uphill.
PS: I learnt a great deal from the article, “Who Owns my DAO?” about the design choices in creating the DAO and its implications.
