About Nesta

Nesta is an innovation foundation. For us, innovation means turning bold ideas into reality and changing lives for the better. We use our expertise, skills and funding in areas where there are big challenges facing society.

DAOs enjoy a multitude of benefits. They are uncensorable, allow fast transactions, are not bound to the confines of any legal system beyond what is encoded in their software and are cryptographically secure.

It is quite likely that more exploration towards such a corporate structure will take place within the next 10 years, with a promise of significantly improving the efficiency and security of older structures.

If not for other reasons, economic efficiency will push traditional corporations to trial blockchain-based solutions. Additionally, the ability to securely and transparently conduct board meetings and voting remotely by making use of cryptographic signing keys can be lucrative in itself, accompanied by the capacity of smart contracts to leave an auditable trail of their election decisions.

We should remain cautious about these experiments. These premises rely on the assumption that the underlying consensus mechanism behaves as expected. While voting can be implemented on top of a blockchain, the faithful execution of the voting rules encoded in a smart contract remains in the hands of the consensus population. As such, even if a fair voting protocol is developed for a DAO, it can always be subverted by this underlying population. In the end, it all comes down to plutocracy – the ruling of a rich elite. If the majority of the money participating in the blockchain consensus dislikes a decision taken by the stakeholders of a DAO, they can roll it back or censor its progress by disallowing voting altogether.

We are hearing proposals to replace existing social, legal and corporate structures with a new technocratic blockchain system under the pretense of democracy. Within the next 10 years, we may see the adoption of such a structure in corporate governance, and we may even see some experimentation of these schemes in political governance. However, with the understanding that blockchain consensus is necessarily and unavoidably plutocratic and not democratic, one very reasonable question remains: Why should we alter our good old ways?