The worlds of business and technology are all about trends. The democratisation of finance, the explosion into the mainstream of blockchain, crypto, and digital assets, the gig economy, the ever-growing, seemingly unending reserves of private capital, the crackdown on China’s tech industry – all of these trends headline the world economy and in one way or another, tie in with each other. We’re going to touch upon two of those trends today: the gig economy, and of course, blockchain. Or specifically, decentralised autonomous organisations (DAOs). I’ve spoken a lot about DAOs on this blog. Their development has been truly staggering, especially over the last few months – more than $6 billion worth of digital assets are now held in the top 20 DAOs alone. Thousands of projects have cropped up that utilise DAOs to coordinate, govern, and manage their financials, from media companies like Bankless and DeFi projects like Compund to games like Star Atlas.
But first, a bit of a refresher.
What is a DAO?
As we touched upon in The Future of ESG, a DAO brings together the core features of decentralised technology, such as digital assets, automated smart contracts, and resistance to censorship in order to change how organisations operate. A DAO can be defined as a voluntary organisation that allows strangers from all over the globe to come together to cooperate on a common goal, tied together by the smart contract that runs the DAO and defines its token model, incentives, and governance. Members of a DAO have ownership in the organisation via its token, which often simultaneously acts as a right to govern the DAO.
In its simplest form, a DAO is run through a group chat (usually Discord) and a bank account (usually a multisig account, a platform that allows pseudonymous groups across jurisdictions to pool and manage funds). The DAO’s token represents membership to the group chat, governance rights, and co-ownership of the DAO itself. For the governance aspect, many DAOs today use Snapshot, a platform on which DAOs can create and vote on proposals.
This tweet illustrates well what a DAO purports to be:
Moreover, what truly defines a DAO and differentiates it from other DAOs is the common goal that drives it. The goal itself drives the culture of the DAO: a group of strangers would not come together and create and operationalise an organisation unless they believed strongly in the thread that tied them together.
The Gig Economy
Now, let’s touch upon the other trend. The gig economy is now a cornerstone of the global economy. According to the International Labour Organization, there are 489 active ride-hailing and delivery platforms worldwide in 2020, 10 times the number that existed in 2010. Some researchers believe that as much of 10% of the global workforce engages in some sort of gig work today. The model, however, is broken. 40% of all gig workers make less than minimum wage. More than 60% want to quit within a year. In spite of being run by an algorithm (or maybe because of it, due to algorithmic bias), gig work is worse for women than it is for men. Gig economy workers, based all across the world, all struggle with a shared set of challenges: insecurity, anxiety, low wages, and high costs. Rest of World, through a survey of more than 4,900 gig workers, highlighted some of the key issues with the gig economy:
Stress
Gig work is characterised by eleven- or twelve-hour shifts, with some drivers even using amphetamines to stay awake. COVID also does not act as a deterrent to workers who need to work every day to pay off the vehicles they have bought to be able to deliver or drive; in Ukraine, according to Pavlo, a delivery driver, ‘the only thing that was saving them was a mask and maybe cough syrup.’
Expense
Workers pay for their vehicles, data, fuel, and insurance, and are not compensated when they are not actively on a job. These gig economy companies like Uber or Deliveroo create an oversupply of riders and drivers that pushes down costs for consumers, allowing them to fine-tune demand and supply and deliver the most efficient service. In India, for example, Zomato directed riders towards ‘red zones’, where there was meant to be a large amount of work, but there would be no work there. They would then be directed to another red zone, with the same result, and neither their time nor fuel would be recompensated. In the early days of a platform entering a market, fares and fees are subsidised, lesser workers on the platform means more jobs per worker, and dollops of private capital subsidise all the driver incentives. But once the platform scales, the algorithm demands more from its workers and an oversupply of riders means that wait times between orders grow, leading to workers needing to work longer shifts to make the minimum amount they need to survive.
Lack of Ability to Form a Collective
Workforces are disparate, divided, and unable to unionise. Platform companies often do not recognise workers’ groups and unions, and a divided workforce is more easily controlled by its centralised overlords. Gig platforms do not offer basic progressive policies like maternity leave and other measures to reduce inequality, and do not even protect their workers when things go wrong. In South Africa, for example, ‘drivers have accused Uber of failing to protect them, putting them in harm’s way by pressuring them to take gigs, and being slow to help police to trace attackers.’ These companies argue that their relationship is with individuals and refuse to negotiate with labour organisations.
Even so, the latter is changing. Platform workers are increasingly organising, both within their countries and across borders. These international groups are ‘using globalized communications infrastructure to organize, meeting in international WhatsApp groups and Telegram channels, to share experiences, express solidarity, and coordinate their actions.’
A global, disparate group of strangers from across the world who need to come together and serve a common goal? A goal that can be served efficiently using technology that can cement incentives to tie the group together, allow its members to vote on proposals to direct the future of the group, and enable them to fairly share in its profits? Sounds familiar.
Enter GigDAO
Gig workers from across the world can create a DAO (let’s call it GigDAO) to serve their own interests. GigDAO can issue a token – maybe $GIG – which each worker can hold and use for governance purposes. GigDAO can be funded through a multisig account, as mentioned above, and functions similarly to ‘traditional’ gig platforms, incorporating areas such as marketing, finance, or legal that can be set up and run within the DAO itself. Workers can gain as much flexibility as they want – even though an algorithm would still run the operations of the platform, it can be created to take into account the needs of the workers themselves, rather than being focused squarely on profit-maximising as many platforms are today. For example, the algorithm could be structured to avoid the ‘oversupply’ problem and not send workers into red zones without the possibility of them obtaining work. Profits could also be distributed more fairly and evenly, while costs could be lower than those of traditional platforms.
All of this may seem utopian, but it isn’t – a ride-hailing or delivery company controlled by its workers could be one of the only ways to succeed in such a low-margin business. Uber, for example, has famously failed to turn a profit (although that might be changing soon). In ride sharing, Uber shares the fee paid by the passenger with the driver, while in the food delivery space, the fee paid by the customer is split between the driver, Uber, and the restaurant. This cramps profit margins significantly. In GigDAO, however, the driver would be able to keep a higher percentage of the fee – and so would the restaurant. These entities would only pay the amount necessary to keep GigDAO operational (i.e., a breakeven amount) and a percentage, perhaps, towards future growth initiatives and R&D, and pocket the rest. While the reality is obviously more complex than the scenario I have painted here, and profits may not end up being as high as envisioned due to any number of reasons (lack of scale, coordination issues, etc.), the idea still holds: the power would be decentralised, in the hands of the workers rather than the platform, and there is a good chance that wages per worker are, indeed, higher.
GigDAO may also be able to solve for one of the most glaring weaknesses of the gig economy – workers having to finance and purchase their own vehicles for transport. There could be two solutions to this:
GigDAO could potentially direct some of the fees collected from drivers for future growth initiatives towards a fund that purchases and maintains their own fleet. Drivers who own their vehicles would not need to use GigDAO’s fleet, and would be fairly compensated for their fuel, insurance, and data. A potential problem with this method is its high capital intensity, and the large amount of time and effort that would be required to store and maintain the fleet globally.
A second solution could be in the vein of what Yield Guild Games is doing. GigDAO could lend drivers the money required to buy their vehicle with low or zero interest rates, and collect the principal over a defined period of time. GigDAO would draw from its treasury to lend the funds, using the funds gathered from the fees collected for future growth initiatives or even from a separate fund created specifically for funding vehicle purchases. Since GigDAO will be able to granularly track the driver’s activities, the repayment could be restructured in case a driver does not have a particularly good month, to ensure that drivers do not get under financial strain to pay the loan back. To avoid bad actors who abuse the system to obtain a ‘free vehicle’, the arrangement would be structured as a traditional credit requirement, with thorough KYC checks conducted and enforcement undertaken if the DAO judges that the driver has not fulfilled the terms of the agreement.
Now, how would GigDAO actually operate?
Payments
Workers could choose to get paid in stablecoins, $GIG, or even the fiat that customers pay GigDAO with. The transactions would be instantaneous, completely auditable, and transparent, and would be operated entirely by the smart contract.
Coordination
The DAO can coordinate on any co-working platform – Slack, Discord, Microsoft Teams, etc. There will be dedicated departments that replicate those in traditional platforms, such as HR, marketing, operations, legal, product, and so on that ensure that GigDAO operates smoothly and functions like a ‘real’ organisation. The employees within these departments can either be full-time resources, or can even be sectoral specialists that are part of a DAO themselves that freelance to offer these services. As the DAO grows, it can potentially split into regional DAOs that operate in the same manner as the mothership.
Governance
As Vitalik Buterin has pointed out with great eloquence in his blog post ‘Moving Beyond Coin Voting Governance’, the accepted form of governance today, which is dependent on the number of tokens held by each individual, is flawed since whales control a large proportion of tokens, coin voting governance disempowers parts of the community that do not hold tokens, and token holders may have conflicts of interest. To avoid such a scenario, GigDAO can potentially introduce a ‘proof-of-personhood’ based voting mechanism – the system would verify that an account corresponds to a unique individual human, who obtains one vote. Proposals on future direction can be submitted by anyone with a $GIG governance token; they may have to attain a certain number of votes in order to be discussed further, after which they might need a 60% majority to pass (this number, obviously, is adjustable).
Governance for an organisation like GigDAO would be especially interesting, with the incentives having to be structured very carefully. For example, it would be important to make sure that the drivers do not vote for short-term gains at the expense of the long-term survival of the DAO. If they all vote for higher fees to the drivers and low or no fees towards future growth initiatives, the growth of GigDAO could be threatened and may impact their future position in the market. Moreover, increasing fees to prioritise drivers combined with GigDAO and its service not being subsidised by private capital as it is today, may lead to customers paying higher fees and the emergence of other platforms that offer lower fees for customers. One benefit of centralised profit-seeking platforms is their thirst for efficiency and scale that drives ostensibly ever-increasing returns over the longer-term. It is possible for this efficiency to be threatened by an organisation that favours short-term benefits over long-term ones, and it is therefore critical for token and governance incentives to be structured in a way that mitigates for all of these potential issues.
Another interesting thought experiment would be on the topic of innovation; self-driving car research is very advanced currently, with Waymo being 99% of the way towards self-driving cars (even if the last 1% is the trickiest obstacle), with the technology poised to shake up the transport industry over the next decade or so. It would be interesting to see how members of GigDAO would vote if self-driving cars were being considered for a trial. From the perspective of self-preservation, we can assume that they would actually vote not to trial self-driving cars, in the same way that factory workers would not vote for trials of robots that could replace them. In the long-term, this could place immense competitive pressure upon GigDAO from more centralised, cheaper competitors that have fleets of self-driving cars, and potentially place it out of business. Such a scenario may indicate that while a DAO may be well-suited for organising large groups of workers, it may not be fit-for-purpose for innovation, which requires a degree of centralisation and a long-term-profit-based thought process that is able to absorb short-term losses. This, too, would need to be tackled in the incentive and governance structure of GigDAO.
Conclusion
It may seem as if GigDAO is replicating a lot of the features of the traditional organisation – and that is good! The traditional platform does have a lot of benefits in the way that it has organised itself and the way it operates, which, in almost all cases, is geared towards efficiency and maximum profit. Where GigDAO would differ would be in its ownership, profit sharing, incentives, and governance – and these will make all the difference. Switching to a DAO model would allow the gig economy to move away from its exploitative roots and transform into a structure that is more aligned with how the worlds of business and technology are trending: an onus on fairness, equitability, and above all, power to the individual.
Since we haven’t gone through any articles today, I’ll list my favourite ones from the last week here:
Insiders and Experts are Driving a Massive Spike in Crypto Transactions, New Data Shows
No More Apologies: Inside Facebook’s Push to Defend Its Image
Xi Jinping Aims to Rein In Chinese Capitalism, Hew to Mao’s Socialist Vision
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