Vincent A Saulys' Blog
Decentralization: Is it even feasible?
Tags: defi crypto
July 14, 2021

Can organizations ever be truly decentralized with no central decision maker?

This is a question that has come up many times in human history. After all, if an "invisible hand" guides capitalism towards efficiency shouldn't it be possible to implement one in an organization?

And there have been experiments in this. Most notably the holacracy Tony Zhu tried at Zappos where it had mixed success.

Cryptocurrencies are trying yet another experiment in this world of decentralized decision making. Letting people vote with either their feet (buy or sell a token) or through their ownership percentage via protocol.

This goes beyond simple democracy. Instead it turns everything into a market. In a democracy, you have "one man, one vote" while in the markets a man's financial stake determines his vote.

By coupling the ownership share, you're coupling people who have a huge financial stake in the protocol or organization doing well.

Blockchain backed cryptocurrencies has been the ideal way to implement this. Each side of a transaction in a blockchain could potentially be adversarial but the technology allows them to "trust" each other's result anyway. This is why Bitcoin nodes can be run by anybody and the results thus trusted by anyone -- you can't muck with the data that is spit out. That means people who don't like you can't kick you out of the protocol.

Of course, the actors in the protocol may not want to do what the votes demand. This would mean losing faith though and cause people to voluntarily leave (read: sell) their governance tokens. I've stated before that such developers are incentivized not to do this because they have a vested stake via token ownership.

Anarchism and the Crypto Future

This is all reminiscent of Anarchy in which the State does not own the monopoly to violence.

To quote murray rothbard: "Let me say from the beginning that I define the state as that institution which possesses one or both (almost always both) of the following properties: (1) it acquires its income by the physical coercion known as “taxation”; and (2) it asserts and usually obtains a coerced monopoly of the provision of defense service (police and courts) over a given territorial area. An institution not possessing either of these properties is not and cannot be, in accordance with my definition, a state."

Decentralized Autonomous Organizations (DAOs) are precisely that. Completely voluntary organizations that cannot coercively force anybody to do anything they don't want to do. Freedom of association is most pure on the internet if money is permission-less(!) as members cannot be punished.

It's difficult to conceptualize all organizations looking a DAO and, perhaps, there will be a variety of different structures. But the important steps of legalizing, and thus legitimizing, them have already started with Wyoming legalizing DAOs under its state laws.

A great new future or just a different step?

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