Introduction
One of the major objectives of Blockchain revolution is to create new forms of management and design for the organizations. The Decentralized Autonomous Organizations (DAOs) are among the organizations that introduce new organizational design to the world compared to the traditional examples. But what are the features these DAOs which work with Blockchain? What are the features of the traditional and modern organizations which work with different technologies?
The Problems of Traditional Design of the Organization
Traditional organizations are working while being managed by specific people and stakeholders as the joint stock and public companies. The stocks in joint stock companies are usually owned by one or some stockholders while public companies sell their stock at the exchanges for the public. These structure design models suffer from some defects. For instance, the first defect they have manifests itself in the financial issues. The reason is that due to legal limitations and various instructions, different investors with various conditions cannot invest comfortably in traditional companies. Hence, most of the businesses and companies have to raise loan to launch their jobs and projects which is itself an inefficient, difficult and time-consuming method.
Another major defect traditional design of the organizations face, is having a specific manager or in more specialized term, the existence of a hierarchy in the organization. This hierarchy causes minimizing the speed of decision making in an organization and company; however, with Blockchain, there is the possibility of making changes in the structure of the organizations and designing abreast which avoids the centrality of management of just one specific person or board.
DAOs
DAOs are those who work by a code. They use smart contracts in the process of their activity and are active on the infrastructure of Blockchain. The ownership in these organizations is via tokens. The tokens which are similar to the stocks in usual and traditional organizations; since the DAOs are active under the Blockchain, working protocols and the system of poll taking and pronouncing judgment are very transparent and clear too.
For example, in such an organization, there is no chance of conducting hidden projects. Imagine Apple Company which slowed down the speed of older versions of its iPhone. This company accepted then that it has done it secretly, but with a DAO there will be no suspicious in such decision makings and hidden measures.
In order to understand the DAOs, their autonomy should be very much attended to. These organizations are similar to traditional ones, the only difference is that they have their own bank account; in other words, they have a cryptocurrency wallet. Moreover, their identification number or address is unique.
What turns Blockchain-based organizations to the autonomous organizations is that each organization is controlled by its unique code in the network and its controllers are the human and work forces. [1]
Blockchain-based organizations have solved the problem of financing businesses with the help of using tokens. Everyone can invest in the organizations and companies without any limitation and hold the ownership of a part of it through buying the tokens. Therefore, small companies and businesses can absorb the capital through crowdsourcing.
The concept of DAOs play a dramatic role in the revolution the decentralized networks have made in the world. These new structures can have an important role in the growth of businesses, economy and investment status.
The effects of Blockchain on the organizational design
The entrance of Blockchain in different organization, companies and businesses can completely change designing organizational structure. Blockchain technology and smart contracts have dramatic impacts on the process of decision-making of every group. The issue is about the smart contracts which can bring about more security and transparency among stakeholders. The organizations which use Blockchain turn into the ones which apply a combination of human-machine in directing and managing themselves. In such new organizations the transactions among stakeholders are under the complete overseeing of autonomous software. Each DAO continues its activity through an immutable code which is under the control of a set of business rules. Decision makings in such an infrastructure are defined by autonomous systems which consider consensus and agreement of all the members. [2]
As it was stated before, the power distribution in Blockchain-based organizations are totally different from that of their traditional peers. With removing the hierarchy, the power balance disturbs in its traditional style. In the traditional organizations, it was the knowledge or the level which determined every person’s position, but here, i.e. in Blockchain-based systems, the number of tokens each person has specifies his/her role and position in the organization. [2]
As a result, power distribution turns from a hierarchical form to new structures. In these new systems, the emphasis and concentration are on the data and information. The data accuracy in Blockchain-based organizations is easily verified, but the data reliability in this system is not very much adducible. For this reason, using Blockchain in the organizations requires defining process of careful data management. Rules and regulations should be programmed in codes. So they can be automatically shown in the system. And the data management will get easier consequently.
Many of the supply chains in every company, organization, and business are composed of middlemen that manage and undertake different contracts. With smart contracts and Blockchain there will be no need to the existence of these middlemen. Blockchain members get some rewards through their activities in this system. Among the rewards is activating existing blocks in the Blockchain network to do transactions for the users who are liable to receive reward. Blockchain is not just a technology, but it is a tool which can be effective on the structure, culture, and the appearance of the organizations and different societies in decision making, management and selection. [3]
References
[1] Cryptocurrencyhub, “The Blockchain Democracy — DAOs, A New Organizational Structure” April, 2018
[2] Vanrijmenam, Dr Mark van Rijmenam, “How Blockchain Will Change Organisation Design”, March 2019
[3] Xebia, Walter van der Scheer, “How Blockchain Leads to New Organizational Structures”, February, 2018
Written by:
Dr. Pooyan Ghamari
https://www.linkedin.com/in/counos/
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