Trends such as the gig economy, automation and Agile organizations have been decentralizing the corporate structure for over a decade and mass adoption of blockchain technology will expedite this. Moreover, decentralized autonomous organizations (DAOs) such as that proposed by Facebook’s Libra Council have the potential to improve our economic and social systems but also the power to create self-regulating multi-stakeholder councils that could supersede national governance.

A DAO can be summarized as an organization of people who communicate with each other via a “network protocol,” communicating with one another through an online ruleset but reaching governance consensus with offline diplomacy. DAOs are the end-point of the ‘gig economy’, which to date has been championed by platforms like Uber and Airbnb, but the productivity gains in technology will allow for truly global digital cooperatives to emerge.

No alt text provided for this image

DAOs will shape the future of work with more meritocratic models that better align stakeholders and shareholders’ interests to reduce the social, economic and ecological fragility in our systems. Decentralized governance projects such as Decred, Tezos and Aragon are pushing innovations and hold the future for recreating our broken systems.

However, DAOs may also be an opportunity for industrial monopolies to elevate themselves above jurisdictional laws by spinning out an autonomous body that transcends borders and regulation. Facebook’s Libra Association to be formed in the jurisdiction of Switzerland follows the model of other elitist organizations.

The rise of multi-stakeholder global governance

With immigration barriers, protectionism and populist politics on the rise the nature of globalization is changing. Nation states no longer set the world agenda but multinational corporations now also play a central role in trade wars, policymaking and shaping economies and society.

The growing influence of bodies like the World Economic Forum, WEF, in which executives from a plethora of industries push policy agendas for nations to adopt has popularized the multi-stakeholder model of governance – a corporate management approach that gives the illusion of democracy. Councils such as the WEF are undemocratic by design because the stakeholders are self-elected or chosen from an elite cabal to begin with.

The WEF is also based in Switzerland as a non-profit organization, which grants it NGO status, the same path Facebook’s Libra Association intends to follow.

“A centralized wolf in sheep’s clothing”

Facebook has announced it intends to turn its crypto project Libra into a ‘decentralized organization’ of corporate governance. – a huge aboutface for a company notorious for its centralized control. In its Libra whitepaper Facebook even pronounced, “People will increasingly trust decentralized forms of governance.”

Under the noble banner of ‘financial inclusion’, Facebook is doubling-down on its global ambitions by endorsing a multi-stakeholder model for its Libra Association a council of the world’s biggest, wealthiest companies. This may entrench the power of strategic companies (Mastercard, Uber, Ebay, Visa etc) that sit on its council and oversee a global payments network.

“The association is designed to facilitate the operation of the Libra Blockchain; to coordinate the agreement among its stakeholders — the network’s validator nodes” – Libra whitepaper

Autonomy, the acceptable mask of capitalism?

The social network is deflecting attention and regulation from the original grievances of fake news and antitrust laws with an unmanageable curve ball – the Libra Council has the potential to undermine democracy and financial systems at once.

Facebook’s financial ambitions to create a global payment network could at once undermine retail banks, remittance services, the SWIFT interbank network and even the USD as a global reserve currency. Its stablecoin by design is a digital vision of John Maynard Keynes’ Bancor, a stable unit of trade tied to a basket of commodities and currencies to resist the fluctuations of speculation.

It could elevate the billion-dollar companies that sit on Facebook’s Libra Council to a position of power above any nation state and become a more powerful multi-stakeholder governance council than even the UN. It has been described by Ethereum’s co-founder Joe Lubin as a “centralized wolf in decentralized sheep’s clothing” – it will start as a highly centralized and permissioned network of nodes at a cost of $10m each.

So far, Libra has borrowed the best ideas from ten years of blockchain innovation and come up with none of its own and its governance model is similar to that of Hedera Hashgraph and the Hedera Council, albeit with a steroid injection.

The future constraints to the shareholder model

Just as the axis of global governance models is shifting so too is it in corporate governance. The nature of ‘the firm’ is rapidly changing in the Information Age and intangible assets are now regarded as the most important driver of corporate value as opposed to tangibles accumulated in the industrial model.

This poses problems for those still operating in the ‘old model’ including:

  • Difficulty in valuing intangible assets in digitally native organizations
  • A continuing decline in corporate accounting and auditing standards
  • Better forms of fundraising and rights issuance than IPOs, Security Token Offerings
  • Growing social and political call for corporations to account for ‘external costs’
  • Mounting social costs for corporations such as climate change value-at-risk.
  • A concentration of share value, ownership and corporate earnings in industry oligopolies
  • Passive investment strategies have increased systemic risk in global stockmarkets

The future of the firm

The latest BNC Research report, The Future of the Firm looks at the game theory behind mass scale decentralized cooperation and why organizations operating this way will be superior to today’s corporate firm structure.

For investors, DAOs may eventually becoming a less risky investment class compared to shares in a regular company, with more predictable ROI as they minimize two of the greatest risks in the running of a company – human error and self-interests. They currently also offer better passive returns than most stock dividends in the form of coin-staking and running of masternodes.

Whether it achieves this ambitious plan or not, Facebook has just expedited the adoption of blockchain, cryptocurrencies and decentralized organization for better or worse.

Download for free the latest BNC Research report, The Future of the Firm: How decentralized autonomous organizations will disrupt the governance and wealth distribution model of the corporation.

Leave a Reply