Technology created to facilitate DAOs could impact service delivery

by Kirsty Bisset. Some of the technology created to facilitate decentralised autonomous organisations (DAOs), could impact service delivery within the retail sector if adopted and applied smartly and timeously. I’m talking about smart contracts, which are essentially chunks of code that automatically execute whenever a set of criteria are met. But let’s take a step back to fully understand DAOs, because that will make it easier to get to grips with smart contracts.

What is a DAO?

A decentralised autonomous organisation (DAO) is pretty much exactly what it sounds like – it’s an entity with no central leadership. Decisions get made from the bottom-up, governed by a kind of community organised around a specific set of rules which is enforced on a blockchain. In other words, they are internet-native organisations which operate using smart contracts, which establish the DAO’s rules.

Essentially, a DAO comes into being – is established – by a three-phase process:

• First, a developer, or group of developers, must create the code that will govern code the business of the DAO. Very simply, a group of investors might establish a DAO intent on only investing in companies that can prove year-on-year improvements in decreasing their carbon footprints. The smart contract they develop will govern the process for evaluating proposals they receive and what is required to trigger investment in one of the companies (usually a membership vote). After launch, they can only change the rules set by these contracts through the governance system.
• Second: After the smart contracts have been created, the DAO needs to determine a way to receive funding and how to enact governance. More often than not, tokens are sold to raise funds. These tokens give holders voting rights.
• Third: Once everything is set up, the DAO needs to be deployed on the blockchain. From this point on, stakeholders decide on the future of the organisation. The organisation’s creators — those who wrote the smart contracts — no longer influence the project any more than other stakeholders.

Most DAOs makes money through dividends from investments made by the organisation. Individuals starting DAOs are really convincing other people to invest in their business ideas.

Why are investors interested in DAOs?

There is a growing desire worldwide for more transparency across the board. Because they are built on open-source blockchains, anyone can view their code and anyone can audit their built-in treasuries. They are also fully autonomous and build trust by letting their members participate in their protocol updates. This delivers on the transparency front. In fact, while a traditional organisation requires a lot of trust in the people behind it, with DAOs only the code needs to be trusted.

Further, the DAO has no hierarchical structure. Yet, it can still accomplish tasks and grow while being controlled by stakeholders via its native token. The lack of a hierarchy means any stakeholder can put forward an innovative idea that the entire group will consider and improve upon. Internal disputes are often easily solved through the voting system, in line with the pre-written rules in the smart contract.

DAOs aren’t perfect – the technology has attracted much criticism due to concerns regarding their legality, security and structure. Because they can span multiple jurisdictions, there’s no legal framework for them, and any legal issues that may arise will likely require those involved to deal with numerous regional laws in a complicated legal battle.

How can DAO technology – smart contracts – impact retail?

The goal of a DAO isn’t just to reduce human inputs — it’s to eliminate them. This saves on resources such as time and labour. And, smart contracts are extremely useful for automating transactional processes, and for reducing the input that humans must supply for relatively simple tasks. For example, a novelty keychain store that keeps its inventory on the ledger can create a smart contract that triggers at each item’s specific reorder point based on historical customer demand. The smart contract will autonomously create an invoice for the store’s relevant supplier, send it and specify the date of delivery. When the shipment arrives, the smart contract will be notified using scanners or IoT beacons connected to the ledger, and execute the release of a payment in cryptocurrency. It can then pull customer information from a CRM system when orders come in, automatically print labels and help accelerate shipping.

Think back, too, to my previous column on space commerce and the applications I mentioned that it  could have for logistics. Smart contracts and automated processes could dramatically decrease the manpower needed ‘on the moon’ or ‘on a space station’ when it comes to manufacturing, sorting, packaging and then firing products back down to Earth!

Main image credit: Pixabay.com.

Kirsty Bisset is Managing Director of HaveYouHeard Durban.

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