• Anastasiia Tolmacheva

The DAO: Is it the end to the idea of using algorithmic authority to create a new form of sociality


Legal authority is a well-known “issue” in the cryptocurrency and block-chain world. For years, strong idealistic proponents of blockchain technology have advocated that “code is law.” In the academic literature, this articulation of “code is law” has been described as a form of “algorithmic authority”. In much of this literature, in direct opposition to the idealistic proponents of blockchain technology, the concept of algorithmic authority is characterized critically, as tantamount to the biopolitical technologies that go about unknown by, and against the interests of, its subjects.

A “decentralized autonomous organization,” or DAO, was a short-lived experiment in organizational governance that attempted to utilize algorithmic authority through cryptocurrency and block - chain technologies to create a new social and political. According to the visionaries behind the project, by encoding the rules of governance for organizations and governments in a set of “smart contracts” running on an immutable, decentralized, and potentially unstoppable and public blockchain, new forms of social interactions and order would emerge. The forms of sociality that would emerge – they promised – would be transparent, efficient, fair, and democratic.

While the idea of decentralized autonomous organizations had been discusses for a very long time, the launch of sophisticated blockchain platforms with built-in programming interfaces gave enthusiasts a practical apparatus to realize their vision. Foremost among these emerging blockchain platforms was Ethereum, a so-called distributed “Turing-complete” computer. The Ethereum platform is a new and expanded version of the Bitcoin system in that it adds a layer of software on top of a blockchain.

It seemed like decentralized autonomous organizations would finally get their day in 2016, when a design built on the Ethereum platform emerged from a small blockchain company called Slock.it. Earlier, in June 2015, Slock.it began development of a decentralized autonomous organization framework, accepting contributions from the open-source software community. By March 2016, a large community had begun to form around the open-source framework, and Christoph Jentzsch of Slock.it published the corresponding white paper on March 15, 2016, while also launching an online forum independent of Slock.it, called DAOhub.

Being the very model of simplicity, a mere 900 or so lines of code, The DAO was intended to allow cryptocurrency “investors” to directly fund and manage new enterprises – all to be run on the Ethereum blockchain. Because The DAO was backed by Ethereum, complex business logic could be programmed, and once set in action, the organization would be virtually unstoppable. The blockchain would ensure that all business transactions and organizational changes would be immutably recorded on a public ledger authenticated and controlled by a large, decentralized network of computers. Moreover, because the organizations spawned by The DAO were directly funded through digital token-holding “investors,” each organization would be, in effect, directly managed by its investors, as per the investment stake of the individual (i.e., those investors who contributed more tokens would get a correspondingly larger number of votes on organizational decisions). No need for messy and inefficient human negotiation – so it seemed!

The DAO was launched on April 30, 2016, at 10:00am GMT (by several “anonymous” submissions associated with DAOhub, who executed the open-source bytecode on the Ethereum blockchain), with a set funding or “creation” period of 28 days. As the funding period came to a close (concluding May 28, 2016), The DAO went live with the equivalent of about US$250 million in funding, breaking all existing crowdfunding records. Some 10,000 to 20,000 (estimated) people invested in The DAO, contributing 11,994,260.98 Ethereum tokens (ETH). However, shortly after the minimum Two-week “debating” period, on June 17, 2016, The DAO’s code was “exploited” by an unknown individual. This exploit used unintended behavior of the code’s logic to rapidly drain the fund of millions of dollars’ worth of ETH tokens. Immediately, Slock.it, the leaders of the Ethereum platform, numerous crypto- currency exchanges, and other informal technical leaders stepped in to stem the bleeding – shutting down “exits” through the exchanges, and launching counter-attacks. It is at precisely this point that we see the vision of future governance structures break down, and devolve into traditional models of sociality – using existing strong ties to negotiate and influence, argue and disagree – all with nary a line of code in sight. In the end, the whole project was disbanded, with an inglorious “hard fork” rolling back the ostensibly “immutable” ledger.

To conclude, The DAO introduced and explored an interesting technology for experimenting with governance issues and new models of society. As a result of its collapse, “true believers” in the technology will say that the world is simply not yet ready for decentralized autonomous organizations, or that Slock.it and the DAOhub’s version was flawed (such criticisms were widespread well before its launch). Critics of The DAO’s utopia, on the other hand, will realize that human sociality crops up whenever humans are involved, and that existing governance structures are in fact well refined through thousands of years of social commerce, government, and exchange – not the idealistic, pre-social vision that arguably never existed.

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