Most of us today make money on a simple 9-to-5 “work-to-earn” basis, but the future of income is “x-to-earn” — play to earn, learn to earn, create to earn.
What’s more, it would cut out the middle-men (read Facebook) and reset the balance of the division of labor in favor of the working masses, not the few owners of Capital.
“In the future, it’s likely that the average person will not work for a company,” Ben Schecter, who works at crypto platform RabbitHole, writes at Future a16z. “Instead, people will earn income in non-traditional ways by taking actions such as playing games, learning new skills, creating art, or curating content.”
If that sounds like the sort of post-capitalist utopia that Karl Marx and Frederick Engels dreamed of in the 1840s — well that’s intentional.
That’s because Schecter’s vision of the future of work is being built on Decentralized Autonomous Organizations (DAOs). These are a set of crypto protocols which are emerging as new ways of coordinating, measuring, and rewarding contributions.
“The idea that most people would be employed by large corporations would have seemed crazy to someone in the year 1800,” he says. “This shift [to DAOs] is already beginning to unlock new earning potential for individuals, and it is leading toward a growing transfer of value capture from organizations to people participating as individuals in crypto networks.”
Imagine, “if we have chosen the position in life in which we can most of all work for mankind, no burdens can bow us down, because they are sacrifices for the benefit of all. Then we shall experience no petty, limited, selfish joy, but our happiness will belong to millions, our deeds will live on quietly but perpetually at work.”
Thus wrote Karl Marx. Are DAOs able to bring about the societal change he called for without a revolution from below?
Leaning heavily on Schecter’s work, this article is a primer on DAOs.
What’s the Problem with Work Now Anyway?
The central contention is that traditional corporate employment is rapidly becoming outdated, pointing to the rise of alternative forms of earning such as influencers, contractors, creators, gig economy participants, and more.
“These ways of earning don’t necessarily feel like ‘work,’ but they are all examples of people participating as individual value providers in complex networks, and earning income for their contributions,” Schecter says.
“However, these non-traditional opportunities are limited in number, and when available, often under-reward a contributor’s value. That’s because these jobs are still based in a web2 paradigm in which corporations continue to control the business model.”
DAOs, on the other hand, are core to web3, the suite of technologies underpinning the metaverse and the next generation of online interactions.
“The model of a company having strict boundaries between internal and external may have made sense in the Industrial Age, but in the Information Age, this leads to misaligned incentives and unsustainable extraction,” says Schecter. “In our world of complex information and orbital stakeholders, companies are no longer suited to help us coordinate our activity. Crypto networks create better alignment between participants, and DAOs will be the coordination layer for this new world.”
What’s a DAO Again?
An article from Utopian’s Derick David at Medium breaks down what DAOs are: Purely internet-native; Digitally owned; Operated through code and Decentralized (no one central source of power)
“The mechanism behind these internet-native organizations enables people to form and coordinate economically, from the comfort of their own homes on their computers and phones.”
DAOs matter because they create user-centric networks. In a web3 network’s terminal point, a user-centric governance structure can better align incentives between the DAO and its members.
Under the hood, DAOs run on two main technologies: Blockchain and Smart Contracts.
Blockchain can be thought of a network, ledger, excel sheet, or record of transactions. For smart contracts, think of Kickstarter, the crowdfunding platform.
“Basically, DAOs bind people together through the rule of code and the use of advanced blockchain technology,” says David. “By leveraging such technology, members are able to collaborate on a whole different level.”
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Unlike traditional companies or corporations, DAOs don’t have CEOs or board members. When it comes to spending money, like how capital will be managed and deployed or making decisions, like project proposals and hiring, it requires the votes of all of its members.
Instead, these functions are enabled by technology. This is claimed to be democratic “through highly participatory processes or algorithms”, enforced by the rule of code or software, instead of written agreements and operated with no requirement for a physical office.
According to the Antler Insights newsletter, DAOs also claim to be: Permission-less (a broader base of people can participate); autonomous implementation: (meaning that decisions are enforced via self-executing smart contracts (software or code) versus human intervention; and resistant to censorship (meaning DAO decisions cannot be censored since they’re transparent).
Does this mean that DAOs are going to replace traditional corporations?
“Not entirely,” writes David in another piece, “DAOs Explained To a 12-Year-Old.”
“Not everything has to be a DAO. Some organizations are better off as a traditional corporation and some are better off as a DAO. We’re most likely going to see both types complement each other.”
READ MORE: DAOs Explained To a 12-Year-Old (Utopian)
Power To The People
To underline the utopian (socialist?) leanings of some exponents of web3, David points out that what makes DAOs attractive and powerful are the “billions of dollars getting lost or being wasted by power-hungry and maniacally greedy executives” in the prevailing division of labor.
The structure of a DAO is inherently open and accountable, “a forcing function to share value with the participants who create it,” writes Schecter. “The openness of crypto economies will allow people to participate in several DAOs and crypto-networks, mixing and matching different income streams and ownership returns.”
He adds that the best DAOs distribute ownership to their participants through their own native token or NFT.
It is theorized that open economies will make work more flexible, fluid, and playful than the 9-to-5s we are accustomed to.
People’s income will be a mix of things we already currently do in our lives (such as play games), things we think of as traditional work (like contracts), and things that are currently accessible to only a small percentage of the population (like investing and passive income from things like rent).
“To think of it another way, DAOs will expand the type and quantity of opportunities that are open to several types of participants, including token holders, bounty hunters, and core contributors,” Schecter says.
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Further, in this new future of work, jobs will be more transient and dynamic. The cost of switching jobs will be lower it is claimed, opportunities will be more visible, work will be reduced down into more atomic units, and the entire world will be unified under a single workforce with access to all opportunities.
“We will discover new opportunities based on our on-chain history, ownership, and reputation, and we will be matched to contribute where we have the best comparative advantage.”
For comparison, here is Marx’s classic — if vague — idea of a post-revolutionary future: “In communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic.”
The exciting part of the future of work, per Schecter, is the idea of “participate-to-earn.” Within any given DAO, this is where the majority of people will fall.
The idea is a critique of the current work/reward imbalance. “Networks gain strength with more activity and additional participants, yet, for years, users, consumers, and participants have been adding value to networks without capturing their share of value (app developers for Apple, creators for YouTube, and drivers for Uber, for example),” Schecter argues.
Functioning more like open economies than closed organizations, DAOs will reward each individual contribution based on the value it provides, regardless of who it comes from. This means that everyday actions that are valuable to a network will be turned into income-earning opportunities.
“Nearly every single person will earn some income from simply living their lives online, using products, and participating as a user. For people receiving compensation for their own participation in networks, earning an income will feel a lot like a game.”
Play-to-earn is a new type of gaming model that rewards players for playing and unlocking achievements within a game. The traditional gaming model involves a one-sided transfer of value towards the game creators or platforms, whereas play-to-earn games reward users as well.
According to Schecter, play-to-earn games function like an economy: players provide labor (their time and energy) and capital (often purchasing NFTs to participate in the game), and are rewarded with fungible tokens for their achievements and progress within the game.
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Earning currency from games isn’t new, but instead of rewarding players with in-game currencies confined to usage within the game, play-to-earn games distribute NFT rewards that are swappable for other crypto tokens or fiat currencies.
“This means that video game players can literally pay their bills through their in-game achievements, particularly for people in countries with lower wages and living expenses. This phenomena is already a source of income for millions of people, most notably through blockchain game Axie Infinity.”
Described as “ Pokémon on the blockchain,” Axie Infinity is operated by a Vietnam-based company called Sky Mavis, and has made more than $3 billion in total since launching in March 2018.
Schecter is careful to caveat his thesis, admitting that it is unclear how much income can be earned through DAOs. X-to-earn does not mean every single person will be able to make art and play video games for a living.
“X-to-earn is about rewarding value where it is created,” he says. “DAOs make these non-traditional paths more sustainable and available for more people, but the market will not reward everyone. Market dynamics are still relevant, and to be rewarded, you will need to provide value. Creators will need to find audiences, game players will need to achieve outcomes, and bounty-hunters and contributors will need to create an impact.”
That said, Schecter believes in the fundamental (Marxist) idea that creating value should be rewarded, and that DAOs will coordinate the value reward within crypto networks enabling new income earning opportunities.
On one hand, DAOs allow people to choose how they work and associate with communities where they are value-aligned. On the other, by reducing much of work into atomic units and purely financial incentives for actions, we risk reducing people’s meaning to purely financial rewards.
“We risk turning work into discrete, meaningless tasks, where labor is reduced down to a commodity service.”