Hackernoon logoEthereum & the Tao of the Dao by@kayuzee

Ethereum & the Tao of the Dao

Qayyum Rajan Hacker Noon profile picture

@kayuzeeQayyum Rajan

Co-Founder & Chief Data Officer

DAO — the Decentralized Autonomous Organization — An organization autonomously run by its members to pool resources and achieve a common goal.

What an exciting concept! While this might seem like a new idea, a very similar organization already exists… it’s called the coop, or cooperative, check out this definition…

Official definition from the International Co-op Alliance (ica.coop)

However, coops often tend to be local and often carry significant burden for administration and governance, now what if the coop could be structured globally, with programmatic governance and administration?

For those that have heard of Ethereum, I want to give a frame of reference for existing capital markets to grasp the true potential and raw power the world now has at its hands, and you better believe it’s more than just cryptocurrency, tokens, and coins!

Fedwire is a system used by the Central Bank in the United States (the Fed). This serves as bottom level infrastructure to facilitate transactions among financial entities and the central bank, as well as within each other. All banks in the states are built on top of this layer, adding services to consumers — or consumer facing tech — on top. Pretty powerful stuff.

Swift is another 'network' or protocol enabling interbank transfers across the world, each bank is essentially a node. It’s how wire payments work, and the banks take a cut on the sender and receiver end of every transaction.

We, the people, don’t have direct access to systems like this, but instead interact on top of these systems, through a third party, like a bank. Does this mean intermediaries are the big bad wolf? Not at all, they serve an immensely useful function to help money move through society. A means for all of us to work (almost) smoothly, with everything around us.

Want to raise money for your business? Issue shares, these get traded, usually cleared through a central depository system. The CDS is there to ensure each share is valid and every transaction recorded. If you have purchased a single investment of any public company you have benefited, and paid for, the use of a CDS. It is another system that the public doesn’t interact with directly, but use through a third party.

These systems manage accounting through proprietary, or another third party’s, accounting software, you get a nice little stock ticker and amount - on — you guessed it — yet another proprietary system (brokerage platforms like E-trade or your bank’s or broker’s ‘proprietary’ or white label version) that displays it to you, the end user.

Bad intermediaries? No, not necessarily. They help you cut through the bs, make your transactions secure, facilitate trades, reporting, accounting and are supposed to make sure nothing bad happens to you.

Ethereum, acts as a global layer that enables us all, big institutions and small organizations alike, to have access to a system of similar power, for buying, selling, clearing and by displaying these records publicly, also to account for these.

Ethereum also allows for smart contracts, which allow for the automatic implementation or execution of contract terms that would otherwise need to go through third parties.

An example of this is if you buy a stock at a broker, and you have no cash (but you have some other stocks), in many cases your transactions go through and simple debit your account leaving it in a negative balance. You might pay some small interest — determined by the rate they set on systems like Fedwire for interbank transactions, plus some margin — but hey, business is business.

A smart contract however — could check a balance autonomously, make a trade and clear the transaction , or wait until there’s availability of funds automatically. I used to be in a brokerage, and we did all of this manually!

Smart contracts are not the be all to end all, and there are limits, as well as other factors; such as ease of use, a nice interface, and all the other bells and whistles we humans like.

Ethereum allows for many of these layers — and their intermediary creators — to be eliminated, easing friction in the world and giving us all access to core infrastructure which levels the playing field.

We will still have applications on top of this, to assist in different aspects of translations and general usage. What is different this time is that each new layer is becoming programmatically integrated, allowing for easier use by the general public. Meanwhile, each new layer strengthens the competitive position of decentralized financial systems when compared to their traditional and centralized counterparts — for the general public the value proposition of decentralization is rapidly increasing.

Some will benefit, some will not. When Henry Ford made the Model T, lots of saddle, buggy, and harness manufacturers went out of business. But guess what — a whole lot of new jobs were created! Like making car seats or the entire oil and gas sector.☺

Back to the autonomous organizations, when we can pool capital and use infrastructure like this, all kinds of amazing things can happen, such as enabling companies to form world wide, without borders, and with a single unit of currency. This cannot be underestimated, and trust me, figuring out translation gains and losses for multinational companies across multiple subsidiaries on top of subsidiaries frankly…sucks.

Obligatory fancy pants picture of decentralized organizations


Comments, issues, suggestions? I would love to hear from you, drop a comment below…

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