Can blockchain and DAO replace our good old ballot papers?

In July 2021, the Pleasr group got their hands on the album Once upon a time in Shaolin of the Wu-Tang Clan, available in a single copy worldwide, for $ 4 million. In October of the same year, the Andreesen Horowitz venture capital fund contributed $ 5 million to support the Friends With Benefits community. What do these two stories have in common? A specific application of the blockchain: DAOs, acronym for Decentralized Autonomous Organization.

Because apart from the roller coaster of the price of bitcoin and other cryptocurrencies, blockchain allows enough applications to see the development of the decentralized finance (DeFi) universe, NFTs, these non-fungible tokens that allow you to buy and exchange works of digital art, or… DAO, in which some adepts see the possibility of creating a form of direct democracy. An encouraging horizon as abstention reaches new heights in the first round of the 2022 legislative elections …

A “digital community with a common account”

But before we talk about politics, let’s analyze how they work. A DAO works much like a business, from which you would buy tokens rather than shares. Each token purchased gives the right to one or more voting rights, which allow each participant to influence the financial or political decisions made by the group. Decentralization is at the very basis of the blockchain: it was present in the white paper of the creator of the bitcoin protocol, Satoshi Nakamoto. It is found in the uses of smart contracts, which make it possible to conclude transactions without resorting to notaries, or in the creation of NFTs, which aim in particular to avoid artists having to go through intermediaries to find their audience. As such, that the cryptocurrency universe is seeing the emergence of “decentralized autonomous organizations” is not very surprising. But what do DAO members really want? What are their activities, their ambitions? For investor Cooper Turley, interviewed by CNBC, they constitute only “Internet communities with a common account”. This is the image of PleasrDAO, coming together to buy an album, HerStory DAO, which funds and collects crypto projects of black women and artists, or FlamingoDAO, which collects NFTs.

For François Dorléans, founder of Stratumn, DAOs go further. They are “a good way to manage common property”. Imagine that you belong to a community of which you do not know all the members: not everyone necessarily trusts each other, but you have to manage a project together “or common resources, forests or oceans, if we take ecological matters. In this case, the blockchain solves both the problem of trust by tracking and securing every transaction, and that of controlling the boundaries of the community and respecting its rules. In other words: those who participate in the DAO have tokens, those who do not have them are external to the group. If a sanction is to be adopted, it can be translated directly by withholding the tokens from the offender or by any other modality that has been previously adopted.

The question of governance

This governance issue is the main argument for promoting DAOs: according to some, they would allow companies to adopt a much more horizontal way of organizing – rather than meeting in an assembly, one should not just vote on each topic via the blockchain. According to others, they would facilitate the democratic process by making it liquid, ensuring the vote, allowing direct expression rather than delegating decision-making power to representatives – at least that’s what the Democracy organization is promoting. While all the social movements of recent years, the Yellow Vests, Brexit, the rise of the alt-right in the United States, reflect serious crises of trust in institutions, the update of direct democracy may seem tempting.

The problem is that the first renowned DAO investment vehicle called “The DAO” and which raised $ 150 million in 2016 from several thousand individuals, is also the one that planted the seeds of distrust. Installed on Ethereum, the project was described as the first space in which the code would really take the place of law (referring to the famous phrase “Code is Law” by the jurist Lawrence Lessig): if you participated financially in the DAO, accepted its operation, you would participate in deciding where to invest … in short, everything would be fine. Until a user decides to use a flaw in the code in question to steal $ 50 million. Very quickly, the community voted to create a hard fork of Ethereum, meaning they built a second version of the blockchain where theft doesn’t exist. But is the code really law, if we change it every time we need it?

Repairing democracy without worrying about the impact of technology?

Respect the interest of the group or exploit the flaws of a DAO for one’s own interest, “this is a direct illustration of game theory, comments François Dorléans. If the system is too complex, if the incentives are too weak, the interest in respecting the DAO rules disappears. The entrepreneur still sees in these technologies an interest in questions of knowledge of the customer or in the management of common goods, in particular because he gives substance to the principles dictated by the economist Elinor Ostrom for the management of shared assets. The simple fact of accessing the DAO is generally an opportunity to build up starting capital for the project; their inherently participatory culture allows to define the rules of participation, decision-making and group conflict management, which helps to align the interests of the participants; and everything happens in a transparency that facilitates control.

In the turmoil caused by the concept of DAO for several months, the law professor at Grenoble-Ecole de management Nathalie Devillier sees for her part only a symptom of the “mainstreaming of a technology hitherto reserved for a few groups of Silicon Valley professionals. there to the consideration that it is necessary to restore democracy to human interactions, there is, first of all, a taste of deja vu: “Access to democracy, to care, to education are often brandished to legitimize the use of new technologies. But it is not because we can use them that their use is relevant to these problems. There are, then, wide areas of discussion in society, “on the ecological cost of these projects, on the legal framework in which they are inserted, on the real safety they offer”. Because even if blockchain enthusiasts refer to it as an indestructible innovation, it does not prevent fraud or “last mile security breaches”. If the user interface is not perfectly constructed, there is nothing to prevent it from being subverted to recover cryptocurrencies, forge a vaccination pass or even influence votes.

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