DAO structures could provide workers with greater ownership and decision-making opportunities, but how soon will these models be implemented?
Analysis
Web3 has given rise to a number of innovative business models. In particular, decentralized autonomous organizations (DAOs) have started gaining traction as Web3 as the creator economy comes to fruition.
Natalie Salemink, CEO and founder of Prismatic — a tooling and treasury management platform for DAOs — told Cointelegraph that DAOs are internet-native organizations that utilize smart contracts to facilitate coordination and governance in pursuit of a common goal.
When it comes to traditional businesses, though, one of the most interesting aspects a DAO structure can provide is leadership based on computer-generated code rather than individual authority. The idea of operating a business without any central governance has become especially intriguing to brick and mortar companies struggling to incorporate fair rights for workers.
For instance, Starbucks, Amazon and Apple employees are currently uniting across America to form unions to ensure that retail workers receive fair benefits and humane working conditions. Yet, some members of the Web3 community believe that DAOs could serve as another way for employees to receive equal representation.
Brick-and-mortar DAOs
For example, Daniel Carias, co-founder of TheCafeDAO, told Cointelegraph that TheCafeDAO seeks to disrupt the corporate coffee shop model by serving as one of the world’s first brick-and-mortar business DAOs. “The idea for a brick-and-mortar DAO developed from a Reddit post I posted in August 2021,” said Carias.
Given the unique nature of a brick-and-mortar DAO, Carias’s Reddit post caught the attention of several other individuals who agreed that a physical DAO, rather than a digital DAO, could be an innovative business model. For instance, Dustin Tong, who also serves as the co-founder of TheCafeDAO, told Cointelegraph that Carias’s Reddit post was the only search result he found when researching “brick-and-mortar DAOs.”
After discovering the post, Tong joined TheCafeDAO’s Discord channel, where the community eventually decided to create a physical coffee shop based on a DAO governance model. According to Carias, TheCafeDAO was established to solve a real-world problem rather than just serving cups of coffee to a community of people who believe in Web3 models:
Like traditional DAO protocols with clear goals, voluntary participation and distributed ownership, Carias explained that TheCafeDAO aims to provide ownership to anyone who enters its coffee shop. The first instance of this will be demonstrated at TheCafeDAO’s pop-up taking place at the Seattle nonfungible token (NFT) museum from April 30 through May 1, 2022. “Customers who purchase one cup of coffee can immediately become co-owners of TheCafeDAO and steer the future of the business,” explained Carias.
Tong added that while the economics behind TheCafeDAO is still in development, the DAO will use a combination of Ethereum signatures and blockchain technology to ensure that everyone who makes a purchase at the Seattle pop-up location will be offered ownership of the DAO. He said:
TheCafeDAO founding members gearing up for their first pop-up shop. Source: TheCafeDAO
Moreover, Tong explained that holders of coffee tokens will be able to vote on decisions regarding how the DAO is governed and managed.”The DAO can do what it wants with the tokens based on votes from customers and employees. The tokenomics model here is that ownership is created off the profits generated from the DAO.”
Staying true to traditional DAO ideals, Tong also mentioned that DAO ownership is voluntary, meaning that only customers who wish to participate in the DAO can do so. “We are only collecting Ethereum signatures and tying those to a Discord handle for customers who wish to partake in governance.”
While TheCafeDAO is still an emerging concept, Carias pointed out that a DAO model applied to a brick-and-mortar business demonstrates the flaws in today’s corporate structure:
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Change corporate governance
Although it’s unclear if TheCafeDAO will be successful, the concept certainly does have potential. Shedding light on this, State Senator Chris Rothfuss, minority leader in Wyoming’s State Senate, told Cointelegraph that the idea behind a brick-and-mortar coffee shop DAO does make sense, even if the DAO itself is not tangible.
“While the shop will serve coffee, the business model with ownership stakes translates to a governance approach based on an algorithmic model as to how decisions are made and how corporate governance is translated through underlying smart contracts,” he said. Given the logic behind algorithmic management models, Rothfuss further noted that he believes DAOs are a natural evolution of brick-and-mortar businesses:
Rothfuss helped draft the legislation forDAOs to be recognized as corporate structures, or limited liability companies, in Wyoming. “The first DAO in Wyoming was registered on July 1, 2021. We now have over 250 DAOs registered in Wyoming,” he said. While innovative, the senator further recognizes that DAOs have the potential to bring more opportunities to America’s workforce:
In addition, a DAO structure allows for customers to partake in governance for the first time. Yat Siu, co-founder and chairman of Animoca Brands — a Hong Kong-based gaming and venture capital company — told Cointelegraph that most for-profit companies view customers as a resource from which value must be extracted.
“This is the classic capitalist zero-sum approach based on ownership and governance by a few. But in a DAO, growth tends to both originate and benefit the very group that is typically targeted for value extraction in zero-sum scenarios: the customers,” he explained. As such, Siu believes that DAOs are more likely to deliver value to all constituents involved. “The customers are also stakeholders and, therefore, have the potential to increase standards of equitability and fairness in the business.”
Too slow?
While a DAO structure may provide traditional workforces with greater rights on multiple fronts, these business models will likely take months or even years to develop due to regulations and corporate governance structures already in place.
For instance, Rothfuss shared that the State of Wyoming spent five years passing over 30 pieces of blockchain-friendly legislation to serve as the foundation for enabling DAOs to be effective in Wyoming:
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That being said, Rothfuss is aware that while other states in America are interested in passing DAO legislation, the proper underlying laws must be in place to accommodate for this growth. “Many states will want to adopt the law like Wyoming did, but will likely have bad outcomes because they skipped to the finish line without doing the hard work,” he said.
In regard to traditional business models, some Web3 innovators believe that DAO structures simply won’t resonate, resulting in slow growth. Sam Peurifoy, CEO of Playground Labs — a company developing DAOs for play-to-earn gaming environments — told Cointelegraph that he doubts DAOs will soon be more common than traditional businesses:
Although this may be the case currently, projects like TheCafeDAO are certainly a step in the right direction, even if they take time to develop. Tong explained that while the DAO model may not resonate with everyone, it’s an efficient system for individuals looking to gain ownership within their workplace. “I do believe DAOs are a better way of doing things. They are not easy to form yet and we have run into many difficult decisions, but once we understand how to effectively execute as a DAO this model will ultimately be applied to similar industries.”
