It is no surprise that many social enterprises of this nature are to be found in relatively affluent areas, where residents may already have experience of running businesses or dealing with lawyers and accountants. The 2018 Plunkett report into community pubs shows that the majority were concentrated in the South East and South West, two of the UK’s most prosperous regions. The existing legal structures also lack flexibility: modern populations tend to be transient, and if you move into an area where other residents own shares in a community pub and would like to participate, it may then be difficult for you to become a stakeholder retrospectively. Most schemes also lack a route for lower-income people to build up their own stake in the organisation by contributing time, rather than money.
How might decentralised technologies support the growth of these initiatives and provide a people-focused move away from centralised decision-making towards a future where individuals can decide the future of their own communities and build the lives they want, centred around vibrant high streets where everyone feels a sense of ownership and pride?
This is where DAOs come in. By using blockchain technology, DAOs can automate the decision-making processes that are pain points for many organisations, as well as simplifying record-keeping and removing the need for a small group of people within the organisation to take on responsibility for these time-consuming tasks. So, what are DAOs, and how do they work?
By now, most people have heard of Bitcoin, and many people will also have heard of blockchain technology, which is the innovation that underpins Bitcoin and other cryptocurrencies. Blockchains are a way of storing information in many places at once, in a form that can be verified by anyone who wants. If a payment is made through the banking system, ordinary people cannot go online and look at the Barclays or HSBC database and see that their payment has been transferred. But with Bitcoin, anyone in the world can see the transactions, in real time.
A smart contract goes one step further than simply allowing for transparent payments, and allows code to be executed that represents agreements between people or organisations. Working on the principle that ‘I see what you see’, this means that these agreements and records can be kept in a format that is always accessible by everyone who needs to see them. A DAO is simply a smart contract that sets certain conditions which are agreed by everyone at the organisation’s inception, and which allows members to vote periodically to decide the direction of the enterprise.
In 2016, the first DAO was created. It was intended as an open venture capital fund, where people could contribute cash for investment and vote to finance the projects they wanted to invest in. How might something like this work for community ownership? One answer could be to provide simple legal templates for co-owned enterprises, with an easy-to-use web or mobile interface to allow new investments or subscriptions and simplified voting on governance issues. Instead of a community pub, café or shop being run and operated by humans within a CBE, it could be run by a DAO, with the costs and agreed rules codified in code running on a blockchain.
So, how would a DAO be an improvement over the existing model? Simplicity and low cost are key elements, and it is easy to envisage how founders would be able to choose from a set of open-source templates a solution that would be most suitable for their business case (such as those offered by organisations like Colony, DAOstack and Aragon). The savings in money and effort would be considerable, particularly in the area of record-keeping; no need for duplicate sets of records that need to be maintained by hand or audited by third parties, for example.