The blockchain space is a hotbed of innovation, and in recent years has been a wellspring of new technological — even cultural — trends. Although nonfungible tokens might be flooding the purview now, another blockchain-enabled sensation is surging among investors, developers, and media pundits alike: DAOs, or decentralized autonomous organizations.

The term refers to a company or other organization that is made up entirely of coded decisions in the data-centric world. From a legal standpoint, a decentralized autonomous organization is functionally an extension of a limited liability company, a structure for ownership and operation that can apply to almost any type of business. The difference between the two is that a DAO largely removes humans from the equation.

Within a decentralized autonomous organization, all administrative processes — including human resources, accounting, and finance functions — are automated by a blockchain-based system of smart contracts that self-execute when certain directives, objectives, or milestones are reached. Moreover, the rules governing these smart contracts are recorded on a public blockchain, where they’re examinable by all interested parties.

A Foundation for the Data-Driven Economy

At first glance, the level of business process automation that can be achieved with a DAO might seem like a way to eliminate formerly manual tasks from business operations, thus saving small chunks of time here and there for business owners. However, the impact can and will be much more significant.

When advanced artificial intelligence models are added to the equation, the possibilities become virtually endless. Envision your DAO crunching data to optimize customer targeting, for instance, or automating copywriting to align with your marketing strategy. By integrating the right tools, decentralized autonomous organizations could even make key hires or ink partnerships with other DAOs in the ecosystem — creating an entire economy operating behind the scenes in support of the humans in the foreground.

Whether they realize it or not, people are increasingly placing their trust in data-driven AI models to make decisions for them. Travel logistics, electricity distribution, medical decision-making, and other processes that underpin society’s ability to function are being redefined by data, and it won’t stop there. Eventually, all of our major decisions — from career considerations to dating selections to investment choices — will be informed by data-driven systems.

Not surprisingly, this makes some people a little uncomfortable. However, if we can establish effective governance of these systems, they have the potential to dramatically improve our lives.

Of course, that won’t be easy. In order to get governance right (and enable the minting of trillions of dollars in market value in new sectors of our economy), we must be thoughtful in our approach. This involves:

The reality is that technologies (such as those deployed by Facebook and other platforms) impact everyone who uses them. As they exert increasingly greater influence over user experiences, it’s critical that they can be audited and trusted implicitly. Although decentralized autonomous organizations aren’t a panacea, DAO guidelines offer a blueprint for the fair and inclusive oversight of AI-driven systems.

A New Standard for Trust

DAOs are able to function thanks to the transparency of the rules governing their operations; their integration of payment/funding sources, like tokens, that can be distributed to members to incentivize and reward certain activities; and their reliance on a secure structure that allows all members to participate in their configuration. These systems can be designed so that code changes can’t be made unless a majority of members vote to make them, much like shareholders voting their proxy.

The downside is that unless a decentralized autonomous organization is arranged as a corporate entity, each one of its members could be liable for damages that occur as a result of its activities, no matter how large or small their stake in the organization.

Legal and regulatory challenges aside, DAOs hold immense promise for both business owners and investors seeking to capitalize on the ongoing digital transformation of the modern financial system. Ascend portfolio company Utopia Labs is positioned to lead the transformation with the world’s first cloud-based operations management suite for decentralized autonomous organizations.

The team at Utopia is creating the connective tissue that will allow for the integration of popular business apps — such as Google, Outlook, DropBox, Slack, PayPal, and many others — into DAO operations, opening up transformative new opportunities for participants in the ecosystem. As the space continues to mature, we have no doubt that Utopia and other innovative companies will guide it in the right direction.

Know of an interesting DAO that could use automated operations management? Post it in the comments below! If you’d like to learn more about what performance benefits a data-centric micro-VC firm has to offer, feel free to get in touch. We’d be more than happy to help you explore these thriving new business sectors. You can also subscribe to our newsletter to stay up to date on the market trends affecting the investment space. We look forward to hearing from you!

Image by Mathew Schwartz