The 2021 New Economy Network Australia Annual Conference featured a session on DAOs (decentralised autonomous organisations) as part of their Rethinking Value stream. The focus of this year’s conference was “Growing a Wellbeing Economy.”
As someone who’s participated in the transformation of the digital landscape as we develop and embrace Web 3.0 solutions, I was pleased to be part of the session and present some of the work that we do here at Civic Ledger.
Here’s a guide to understanding DAOs and what that means for our roadmap at Civic Ledger.
Introduction to Web 3.0
In blockchain-related discussions, you will often see the term “Web 3.0.” So, what does that mean and what even was Web 2.0?
The main distinguishing factor between Web 2.0 and 3.0 is that, whereas in 2.0 the platform is owned by someone else and so is your data, in Web 3.0 the platform is co-owned by the participants. You retain ownership of your data and participation is often incentivised by some kind of rewards.
Web 2.0 enabled large scale participation so that we could create communities online and connect with like-minded people. When we create our own content, comment, and share — from participating in online conference calls to social media, forums, collaborative work tools, storage drives, and content production tools — that is Web 2.0.
Before that, in Web 1.0, we often just consumed content or submitted it through intermediaries (i.e. editors or publishers). Web 2.0 has changed forever how we share our stories, our experiences, and how we relate to each other — often more compassionately, and honestly, although it has also seen the rise of trolls and misinformation. It feels like we own our creations but we don’t. We can be locked out of our social media accounts and platforms make money by selling our data for advertising and mass manipulation.
When we talk about Web 3.0, we mean the next evolution in internet platform technology but really what we mean is that we are getting back to the original vision of the internet, which was a collaborative digital expression of the commons where we share our own content but we collectively own, manage and benefit from it too.
Think about the difference between the Brave web browser, for example, and Chrome. On Brave, if you want to view ads, you switch that function on and are paid for it in Brave tokens. With Chrome, Google and other advertising platforms make money by advertising to you. The resource that they commoditise is your consciousness and your brain. I didn’t realise how intrusive ads actually were to my well being until I temporarily tried using a Chrome browser after a month on Brave.
In Web 3.0 versions of popular platforms, you are rewarded for social media, not just in likes but in tokens. You are rewarded if people read and share your article and if people like your contributions to an online wiki. It moves us from an extractive model of the internet where we are the commodity to one where we each benefit from our contribution in proportion to the benefit it makes to society’s collective knowledge and enhancement.
The Commons
Now that we’ve introduced Web 3.0, which is a relatively new concept, let’s take a look at one of the most ancient institutions in human society — the commons.
The main features of a commons are:
- A resource that needs to be managed (often a natural resource)
- Collective ownership of the resource
- Rules to govern the management of the resource
For thousands of years, cultures around the world collectively managed their natural resources in a framework that we now think of as “the commons.” Private property ownership (other than of personal items, necessities, and self-built dwellings) is a fairly modern concept and limited in breadth to places touched by civilisation.
Civilisation, which is effectively centralising the management of resources among a population, came about as a response to the needs of trade.
When you trade at large scales, to be incentivised to keep trading you need to ensure that the trades are fair, even when the traders don’t know each other personally. Thus, intermediaries came about in order to maintain integrity of the transaction between buyer and seller. You still see these intermediaries today in places like water markets, and carbon markets, where there is a broker between buyers and sellers.
Capitalism drives the disassociation between resources and ownership, turning the relationship from one of management and mutual benefit to exploitation and consumption. Without consumption in this model, there is no growth. Communism and socialism however aren’t capitalism’s panacea — both are centralised, and it’s the external imposition of control that leads to both disempowerment and injustice.
The commons remained a valid model for countless communities around the globe and still is today. In fact, 2 billion people around the world still depend on natural resource commons — fisheries, lands, and forests — for subsistence and livelihood. We talk about 2 billion unbanked in crypto but the underlying critical issue is 2 billion people vulnerable to dispossession and displacement from the basic needs of life.
We are seeing a resurgence of the commons as a valid operational model for collective resources even in Western society, often supported by the group building functionality of Web 2.0 technology, as the extractive, consumptive, market-state duopoly of the last century takes us to the brink of food, water, housing and climate insecurity for billions of people.
The first woman to ever be awarded a Nobel Prize in Economics was Elinor Ostrom. Merely a year after the global financial crisis, the award was in recognition of her life’s work expounding the commons.
“A political economist, in 2009 Ostrom received a Nobel Prize in Economic Sciences for debunking the long-held belief that natural resources, when used collectively, would eventually be destroyed due to the self-interest of each (selfish) individual. Through her research, she proved that when communities shared natural resources, they developed rules for caring for and nurturing those resources, which in turn promoted economic sustainability. In her book Governing the Commons, she demonstrated that groups can effectively manage natural resources without resorting to government control or private ownership.” — Bill Dunhill
What are DAOs
DAOs are Decentralised Autonomous Organisations. On one hand, you could think about DAOs as essentially digitally transformed commons, but that would be a disservice because they aren’t just digital, they are built with blockchain which enables them to be decentralised, secure, and scalable.
Because a commons is member-owned and managed, they too are decentralised, but they are built on trust. As soon as you try to scale a commons beyond people who know each other and trust each other, the commons will break down. That is why they are often place-based, managing small to medium areas of natural resources, and why they are unable to compete or even stand their ground against the surgical efficiencies of the centrally controlled market-state.
In contrast, DAOs are trustless. This answers one of the main friction points experienced by people and organisations (like the members of New Economy Network Australia) wanting to reintroduce more mutualist models to replace the extractive and privatised models of economics that we live under today.
Relationship-based economies, without blockchain, can’t scale beyond a local community. With blockchain, they can be borderless, interoperable with polycentric layers of community and society, and transcend the scales of corporations or even nation-states.
If you think of the rise of meme coins, like Doge or Shibu Inu, regardless of what you think of their long term value, they are a call to arms of a new generation wanting to redefine the meaning of value in the modern monetary system and break away from dependence on corporations and governments who want our time, labour, and unquestioned loyalty.
Modern monetary theory, an economic theory that suggests that the government could simply create more money without consequence as it’s the issuer of the currency, has been the dominant paradigm since Nixon Shock in the 1970s and the decoupling of gold from the dollar.
Yet it has been cracking around the edges since Satoshi and Bitcoin showed centralised currencies for what they are — tools that enable the flow of wealth away from the people who own and earn it. People the world over want to transition to a system where they aren’t dependent on banks and large institutions to define value and intermediate the means of accessing it.
DAOs may be the technology that allows us to return to a fair and sustainable world, where we have individual sovereignty and self-determination and co-exist in mutually beneficial arrangements of responsibility towards community and environment.
DAOs for Natural Resource Management
When we think of natural resource management today, what comes to mind might be a picture of a Forest Ranger, the symbol of a government department and legislation for the management of national parks.
Every year, $44 Trillion of the world’s GDP (gross domestic product) depends on natural resources. That’s nearly half of the world’s annual GDP.
Without the extraction of natural resources, the modern economy wouldn’t exist. And yet, without conservation and restoration of natural resources, the habitability of the entire planet in the near future is in question.
The world needs to move away from extractive models to grow the economy, towards models of mutual endeavour and wealth building. All it takes is a change in how we value our activities. Just like cryptocurrencies built trillions of value (seemingly out of nothing) simply by defining value as that which is represented by an idea, a meme, or even an NFT, so can we change our collective systems of value from activities that destroy the common wealth to activities that enhance it.
Activities that enhance the common wealth are the markets of tomorrow — markets that support sustainability, accountability, indigenous rights and the circular economy.
This is where the potential for DAOs to impact on the collective management of natural resources becomes apparent. The management of natural resources has been dominated by centralised governments, who sell the rights to extract and exploit them in closed, opaque negotiations, with total disregard of the rights of the traditional owners and the people who collectively own and use them and that of future generations of this planet.
One market of tomorrow is carbon credits. A market that didn’t exist a decade ago, the global carbon market sits at around $300 billion annually. The carbon market is made up of credits for tree planting but also credits for forest preservation. Arguably, without forest preservation also being economically rewarded as part of the framework, people will be incentivised to cut down forests in order to be paid to plant new trees — not a desirable result.
Australia has access to only about $3 billion of the global market. Why is Australia locked out of this new realm of wealth creation? Seemingly it could be a profitable new opportunity for farmers whose livelihoods have been taken to the brink by the floods, storms and droughts that are now a regular occurrence brought about by climate change?
One reason is how the market operates. Purchasers of carbon credits mostly interact with large sellers — not private landholders. The Australian government has recently announced that it will enact laws to limit carbon abatement to one-third of a farm’s area — ostensibly to dissuade the purchasing of large tracts of Australian land by corporations for the sole purpose of carbon markets.
On one hand, this may seem like a blow to Australia’s inclusion in this burgeoning new opportunity. But what if it’s not? What if, in fact, it’s the key to the inclusion of everyday farmers, organisations, and indigenous communities to participate in global carbon markets on a level playing field?
With Civic Ledger, we plan to offer an interoperable marketplace for credits of all kinds of natural resources — from water to carbon, reef, biodiversity, and marine. It’s our part in ensuring that the trade of natural resources is transparent, accountable and appropriately valued.
As part of this framework, we build in the capacity for owners of natural resource entitlements to work together and form DAOs. Small scale farmers, conservationists and indigenous communities who want to innovate with new solutions to the environmental crisis will be able to work together and scale their projects. They will ultimately be able to offer them to the global market on the Civic Ledger marketplace in a way that is currently out of reach.
This is one vision for how we will create the frameworks necessary for a new ethic in natural resource governance built on co-ownership, respect for the environment and mutual flourishing.
A quick note about why I’ve chosen the hero image. I’ve chosen it because the economies of the future must both recognise indigenous sovereignty over natural resources (which represent half the global economy) and thus these new economies must be indigenous-led.
Do you want to learn more about DAOs and their application to regenerative finance models? Sign up to Daos by Design, a free event I will be co-hosting online in December.
