Why We Need On-Chain Organizations

Bring organizations on-chain. Worry about decentralization and automation later.

Web3 is fighting two wars simultaneously: we’re trying to bring people on-chain and we’re also trying to make substantial changes to operating models that people have used for hundreds of years. We’ve attempted to leapfrog corporate hierarchies directly to decentralized autonomous organizations while also changing the underlying technology. We’re making both tasks more challenging. While decentralization and autonomy are admirable aspirations, they’re often not realistic or optimal. To accelerate the adoption of blockchain based technologies, we must embrace the pragmatic realism that many organizations that exist on-chain will resemble regular businesses and companies, at least for a long time. Let’s build organizations on-chain first. After that, we can focus on optimizing them.

The vast majority of “Decentralized Autonomous Organization” launched in the last six months aren’t decentralized or autonomous. In most cases, the “DAO” is probably closer to a large group chat with a wallet. There are “DAOs” for golf courses, lawyers, media groups, and yes, even cults. But is the golf course going to take care of itself? Are you going to select a legal strategy on a 50% vote? Anyone who has joined a DAO recognizes that decentralization is a spectrum and that central coordination is frequently more effective. Becoming “autonomous” is an aspiration. “DAOs” currently refer to any organization that is web3-native and on-chain in some way.  

The acronym enjoys the perfect type of buzzwordy intrigue that captures the imaginations of speculators and investors. I get it– I started ConstitutionDAO. With exactly one week from kickoff to auction, we raised over $40 million to bid on an original copy of the constitution at Sotheby’s. While we wholeheartedly embraced the ethos of DAOs, we were hardly decentralized or autonomous. If we had won the auction, we would have started a process to responsibly relinquish many governance rights to tokenholders, but even that would not have made us a DAO. 

ConstitutionDAO was just an on-chain organization. Yes, we had a very large contributor base. Yes, it was permissionless to contribute. But we never even had a governance vote. The incredible power of what we demonstrated was the speed, efficiency, and modular use of existing on-chain products. Our crowning achievement was not decentralized operations– it was on-chain operations. 

My theory is simple: we’ve spent too much time and energy working on decentralization and not enough time focusing on bringing organizations on-chain. The good news is that there are many promising on-chain organizations that are not DAOs. 

READING UP NEXT: Why Regenerative Treasuries are Better On-Chain, Introduction to Treasury Protected Tokens, Web3’s Dirty Secret