In the land of DAO

George Harrap
10 min readJun 18, 2016

Some light hearted evening musings in relation to the emergence of the Ethereum funded ‘DAO’ or Decentralised Autonomous Organisation that has recently raised over $140m+ and its implications for future society. Edit: Wrote this article on Linkedin before the hack

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Once upon a time there lived a peaceful, prosperous and free society of people in a country known as DAO. Nobody quite knows when DAO came into existence but they do know that they are renowned around the world for their unique system of governance, prosperity and social well being. A visiting merchant described his journey in the land of DAO and compared it to his other travels in other countries around the world, this is his account:

The people of DAO seemed like an other people around the world, they wanted a job they enjoy, a loving family and to live in peace and prosperity for the rest of their lives and it seemed all of this was derived from a system they called, ‘the Blockchain’. This Blockchain is a piece of code in the cloud that no one entity controls or maintains and all citizens of Dao have the ability to interact with it. It started off as an effective means of keeping track of events- in everyday life an easy example of this is money. Every citizen of DAO had a Blockchain address, a 20 digit string of unique random numbers and letters they got it at birth and it seemed very similar to an old times bank account in most respects but also had some additional functionality. Because every Daolandian had an address, it was very efficient means to register payments between each other as every payment would be recorded in the Blockchain so citizens could know exactly when and who they’ve been paid by. To make a payment, a currency was necessary and this was called Daocoin. The Daocoin was fundamental to how the Blockchain worked as one could only register an event with some fraction of a Daocoin. Daocoins themselves only came into existence as governed by the Blockchain and are presented as a reward for users who secure the network ensuring that there was a financial incentive to maintain complete immutability of the events in the chain. As more people saw this as a way to make money, the network became more secure and in a short period of time it was an insurmountable task for any one person or even a group of their friends to try and mess up the system.

But this was only the beginning of my observations in Dao. I often wondered who was in control of the land of Dao, I would turn on the TV news and instead of seeing a few strangers in suits walking around talking (which in my homeland we called politicians) there was none of this to be seen. I once asked a fruit grocer “who made the decisions in Dao?” and puzzlingly he replied with “We all do”. I decided to investigate further, my first point of investigation was who build the roads, the schools and the hospitals, surely it would be easy to find this out as its something everyone should know. I asked a few people on the street: “who paved station street?” and one woman replied “Oh thats Kim and Co”. Ah-ha! It appears this Kim and Co were responsible for the street but I just thought I’d double check and ask a man a coffee shop “who built the Highway to the sea?”, “Yep, I believe it was built by “Satoshi Holdings Co”. That was strange, I thought it was Kim and Co so I asked the man if he was mistaken, he said no he liked Satoshi Holdings proposal better. It was then I found out how things really worked.

It appears anyone can build a road, or a school or a hospital but for the funding to be approved it needed to be voted on by the population and they did this via the Blockchain. Every citizen with their unique address in the Blockchain could propose, and vote on an opportunity electronically from the comfort of their home or out and about via their mobile. This way it was the direct will of the people that ensured a road would be built and there was no need for any middlemen or politicians. Because anyone could do it, there was a lot of competition, but the population were wise to vote for companies to do it who could prove their track record and solvency, which was easy as to do as their track record was visible on the public blockchain for all to see and grant money was paid in tranches only after certain sections had been finished. It was in the interests of the company to finish it ontime and on budget otherwise they wouldn’t get paid and if there were any issues it was easy to replace them.

It seemed the same with healthcare and education. Lots of families originally didn’t know where it was best to send their kids to school but an enterprising individual setup a comparison website which compared the public blockchain results of every school causing parents to send their kids to only the schools with the best outcomes. However some poorer families didn’t live in the areas of the expensive schools, but it was actually resolved recently as another entrepreneur recently proclaimed she wanted to make “education as affordable and scalable as social media”. This entrepreneur setup lower cost schools which saved on administration and expenses by utilising technology. All students were given ePads (1/3 the cost of schoolbooks) and the courses were taught by the best lecturers around the world remotely via the internet. It was easy to quantify if these lecturers were the best or not as the crowd vetted and selected only the best explainations and course curriculums by teachers. The school still employed a few tutors for classes and didn’t need to risk hiring someone who was sub-optimal in their teaching skills as they knew the students were getting the best education possible online and the tutors were there to provide assistance when necessary. This model was very scalable and not capital intensive so the school offered subscription plans and even enrolled students from abroad, it seems a booming business which again, attracted lots of competition in this space and curiously, results were that some of the best education outcomes came from these internet school as the kids learned better that way today. Coincidently it didn’t require any funding from the Blockchain or society at large.

It seemed the same situation with healthcare with private companies bidding to build the next hospital and I found there to be lots of P2P crowdfunding of health insurance via the Blockchain. I wondered where the grant money came from for the roads and the hospitals however. I asked a man I met on a bike ride in the country and he said it was the ‘transaction tax’.

The man told me that all Daolandians did in fact pay a tax, but there was only one tax in the entire country. No income, corporate, capital gains, sales, land taxes, just this one thing called the ‘transaction tax’. It was simple really, every time a transaction happened a small fee was paid to the Blockchain of 0.1% of the transaction size. This was automatically deducted in Daocoin each time a user made a transaction and got sent to the reserves address of the Blockchain. Whenever citizens voted on things which required funding from society as a whole, the money would we deducted from the Blockchain reserve and paid in increments via a smart contract. Often, legal matters arose, which required arbitrators but these situations were dealt with by crowdsourcing arbitrators via the Blockchain for a fee and locking this into the contract before it was executed. Outcomes and laws seemed entirely driven by code.

Sometimes things which society thought they needed to fund, like Taxi’s, became redundant as new entrepreneurs solved the issues like with transport via a taxi hailing app. In this case the citizens voted to not allocate anymore blockchain funds toward taxi’s and this vote passed with a very high turnout, people hated paying more for taxis. This constant innovation produced immense amounts of wealth for society and the average Daolandian lived far better lives than anyone else in the world because of this unique system.

On my travels I did however meet an interesting fellow by the name of Borg who hailed from the neighbouring country of Corrupton. He, like me was amazed at the system in place in Dao and proceeded to tell me where he felt the average Corruptonian was being let down by their system. Corrupton was a country with similar demographics, size and resources as Dao but had a number of issues. Firstly, they had these people called ‘Politicians’, who were often elected by their political party after decades of service, sometimes without ever holding a real job in society and these individuals thought they knew what was best for the average Corruptonian. When the average corruptonian voted for a politician they only had a choice between two political parties who often had rigged the system so that it was exceedingly difficult for a new political party to emerge. These two parties often had the same backers funding them and many of the same ideas so it wasn’t really an open platform for change.

Often when faced with two politicians, the people voted for whoever would give them the most free stuff and in order to fund these commitments by the politicians they needed to charge all sorts of taxes and levies often on incomes, companies and goods and services. This disproportionately hit the people at the bottom of society and caused many people to get into debt. Given the population was aging, the employed workforce was shrinking, the pressure on the budget was rising the government came up with a brilliant idea: “We need money, why don’t we just print more of it?”.

It seems the money system in Corrupton was controlled by an entity the average citizen didn’t know much about but which controlled every aspect of their lives as they were the sole creators of money, they were called the ‘Central bank’. Many didn’t know who ran this central bank, many said it was a bunch of old men and nobody knew how they came to the decisions they came to as their actions seemed very illogical. Often if there was a problem, the Central bank would print money and give it to banks and if it didn’t fix it it concluded it was because it didn’t print enough of it so it’d do it again, also to no effect, this cycle kept on repeating.

Many citizens were in debt through cheap credit, and in most cases these people did not have a good credit rating, so the government thought it’d create organisations called ‘Reddie Fae and ‘Danny Pac’ who would ‘rate’ the risk of these loans. The government wanted everyone to get a loan, often for a house because they proclaimed it was the ‘Corruptonian Dream’. However everyone had to trust these Reddie and Danny organisations who were quite opaque in their rating systems and it turns out they incorrectly rated loans high risk loans as AAA+. I commented to Borg that if these ratings were crowdsourced and on the blockchain the rating would reflect their real value and it’d be impossible to fake and require no need for trust, Borg agreed it was a better system. Lots of people got these loans which they couldn’t afford and with minimal downpayment as the banks simply onsold these loans to other investors as soon as they loaned the money knowing if anything went wrong the government has their back with deposit insurance, there was no incentive for them to limit or stop this lending. It turns out in the recent Corruptonian financial crisis the banks were on the brink of collapse and the government in conjunction with the central bank, printed a lot of new money bailed them out. To the dismay of the citizens who didn’t get the same privileges when their businesses collapsed, it seemed only those who funded the politicians got bailed out and the result was lower purchasing power for everyone overnight.

Borg told me a few other things about Corrupton which were interesting, including how they had these government departments in one city who decided what everyone would learn, how money was spent and who would need what licence. I once heard a Daolandian say that a “licence is when a government takes away your freedom and then sells it back to you”. Sometimes these government departments made good decisions and other times they made bad decisions and 100% of the time there was an administrative burden costing billions of Corruptonian Dinar for often no results. Borg did however say that he was happy he recently got his driving licence so he could drive to Dao. It was at this moment the barista in the coffee shop smiled and said that he should apply for a Dao Blockchain address as it can not only prove your identity for driving but also when dealing with any companies, signing contracts, or proving your identity when travelling overseas. It could all be done with a mobile phone, cost virtually nothing and your personal details stayed as private or as public as you wanted them to be. I think Borg said he would apply next week.

It seemed the average Daolandian lived a good life and everyone had the right to pursue happiness. Some companies offered their employees pension plans, but there was no need for forced superannuation payments as the proposal was voted down in the Blockchain as most people thought they were a better custodian of their own money than someone else and that forcibly removing money from everyone to give to a few is simply a wealth transfer from poor to rich.

It seemed this ‘Blockchain’ was an entity in itself, almost like an AI but powered by inputs from participants, the citizens. It was clearly an efficient way of representing the opinions of the people with minimum administration overheads and maximum transparency which is very important when managing other peoples money. I was only in Dao for a short trip, it seems to be built on a foundation that enforces honesty and rewards good behaviour and that seems like a good foundation for a society. I’ll be back.

-The traveller.