{"id":2191,"date":"2020-01-13T04:40:46","date_gmt":"2020-01-13T04:40:46","guid":{"rendered":"http:\/\/kusuaks7\/?p=1796"},"modified":"2024-01-26T17:14:36","modified_gmt":"2024-01-26T17:14:36","slug":"blockchain-organizational-culture-part-2","status":"publish","type":"post","link":"https:\/\/www.experfy.com\/blog\/fintech\/blockchain-organizational-culture-part-2\/","title":{"rendered":"Blockchain for Organizational Culture: Part 2"},"content":{"rendered":"\t\t
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\n\t\t\t\t\t\t\t\t\tThis is Part II of Blockchain for Organizational Culture. As we saw in Part 1\u00a0there are powerful cultural decentralization trends globally, within enterprises or organizations, and for individuals. The modern worker is keen on innovation and is increasingly yearning for autonomous work environments.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tI recently attended the\u00a0Blockchain World Conference<\/a>\u00a0and it was quite interesting. There were some interesting case studies and transformational messages that were pervasive.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tDecentralization and its impact on organizations as well as business transactions came through loud and clear throughout the conference. Examples of pragmatic applications with disintermediated interactions spanned healthcare, financial services, sports, education, government, non-profit, beauty, industrial applications and many more. A number of presenters emphasized the new era of decentralization with an ideology that empowers communities vs. centralized greedy brokers.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t\nThe focus in this Part 2\u00a0is primarily on the cultural ramifications of a decentralized organization that can be realized through Blockchain (or rather deployed on a Blockchain) \u2013 including its governance policies, bylaws, voting and overall operations. Even though the Blockchain revolution is in its infancy, the introduction of Smart Contracts executing on the Blockchain is a key enabler for substantive changes in organizational culture: towards autonomy, flat organizations and robust communities.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tBlockchain could become a critical contributor for decentralized governance. It provides a robust peer-to-peer infrastructure for trust and actual organizational business logic can execute in the Blockchain through Smart Contracts.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tHowever, the compelling autonomy and decentralization trend also impacts development communities who are innovating and building what is often characterized as the next phase of the Internet \u2013 the Internet of Value that we alluded to in a previous post.\u00a0Not surprisingly computer scientist and software developers are usually the avant-garde of next generation digital solutions for their own environments. Software has been the core milieu of creativity and innovation, for the digital era. Software developers and computer scientists have been the early adopters of technology as well as the cultural transformations to accelerate innovation especially through decentralization.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Decentralized Applications (dApp)<\/strong><\/h3><\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tDecentralized Applications (also called dapp, Dapp or dApp) can leverage an existing Blockchain ecosystem (e.g. Bitcoin) or execute Smart Contracts over the Blockchain. These are not exclusive. There are different perspectives and definitions on the scope and capabilities of Decentralized Applications. Here is a good definition from\u00a0Blockchain: Blueprint for New Economy<\/em><\/a>:\u00a0<\/em>\u201ca Dapp is an application that runs on a network in a distributed fashion with participant information securely protected \u2026 and operation execution decentralized across network nodes.\u201d\u00a0The\u00a0Ethereum white paper<\/a>\u00a0on decentralized applications distinguishes three categories of dApps: spanning financial transactions as well as decentralized governance.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t\nNow one of my favorite examples \u2013 to be launched soon – is\u00a0Storj<\/a>. Storj allows participants on a network to rent their hard drive storage space and uses peer-to-peer decentralized Blockchain network to provide secure file storage application capabilities. Contrast that with centralized cloud storage options \u2013 with a central point of vulnerability or failure as well as higher costs.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tdApps are foundational for understanding DAOs: Decentralized Autonomous Organizations are a more complicated and specialized type of dApp. DAOs use code (in Smart Contracts) to digitize and automate on organization\u2019s bylaws or constitution.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Blockchain Decentralized Autonomous Organizations<\/strong><\/h3><\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tIf you have been following Blockchain and cryptocurrencies \u2013 especially Ethereum \u2013 most likely you will have been exposed to Decentralized Autonomous Organizations (DAOs). The governance, constitution, bylaws and operation of a DAO uses Smart Contracts executing on the Blockchain. In other words, code running an organization in a decentralized and distributed network. This approach has several advantages. It allows participation by all the shareholders as well as employees or other stakeholders to quickly agree and vote on decisions. Since actual code is executed for running the organization, it leaves little to the imagination for the interpretation of the governing policies. Furthermore, there is no central government or authority regulating a DAO. In a very real sense DAOs operationalize flat organizational cultural trends.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\t\u201cDAO\u201d was introduced by\u00a0Vitalik Buterin<\/a>\u00a0\u2013 co-founder of Ethereum. As he describes it in his seminal \u2018incomplete\u2019 (as he titles it)\u00a0decentralized organization guide<\/a>: \u201cit is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automation itself cannot do.\u201d\u00a0In his taxonomy of automation, including automated agents through AI, Buterin characterizes a DAO as \u2018autonomous at the center\u2019 but \u2018humans at the edges.\u2019 Thus the operation, governance of the organization is done through smart contracts executing on the Blockchain, with human participants at the edges.\u00a0A DAO is a Blockchain application and as we noted above a specialization of a dApp.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tEthereum DAO had a rocky start. The three letter acronym has two connotations. First, it stands for Decentralized Autonomous Organizations or Corporations. As noted, it leverages Smart Contracts for an innovative self-governing organization running on Blockchain. In fact some consider\u00a0all cryptocurrencies that use public Blockchains as DAOs<\/a>! However, there are examples of organizations that more explicitly implement a DAO and clearly indicate it often in the organization\u2019s name (e.g.\u00a0DigixDAO<\/a>). Second, it also stands for an actual crowdfunded organization that was launched in May of 2016.\u00a0The DAO<\/a>\u00a0raised in\u00a0excess of 100 million dollars<\/a>\u00a0(other numbers sited are 150 million and 168 million) through crowdfunding. One of the largest in history! However The DAO\u00a0<\/em>Smart Contract had a vulnerability that resulted in tokens (think of DAO tokens as shares) that were adversely appropriated – ok, stolen! It caused Ethereum to be hard-forked and you can read about this unfortunate turn of events\u00a0here<\/a>. This is important. Smart Contracts running organizations (or for any other purpose for that matter) are powerful. But the developers should be careful as bugs or vulnerabilities could cause havoc \u2013 which was the case with The DAO.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Disadvantages of DAOs<\/strong><\/h3><\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThere are many advantages and desirable features of DAOs \u2013 as a corporation or organization. But as noted with the example of The DAO, there are also vulnerabilities and disadvantages. Smart Contracts are essentially software. A Smart Contract can contain the policies and governance bylaws of the organization. It can and most probably will have bugs or vulnerabilities. However, unlike traditional software development and deployment, Smart Contracts deployed on the Blockchain are immutable. If there is a vulnerability or bug, it will persist. As one of The DAO developers, stated in\u00a0a New York Times interview:<\/a>\u00a0\u201cIf I would have known the size it has grown to, maybe the tester in me would say, \u2018I need more testing,\u2019\u2026This is very risky. It\u2019s all new land.\u201d\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThere\u00a0are\u00a0<\/em>workarounds. You can devide the contract into more discrete components of logic and decide how to enforce or turn off various components. You can deploy other contracts to compensate. This is different than creating a new versions while deprecating the old. dApps take a different software life cycle approach and, as noted above, it is very much a ‘new land.’\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThere are other disadvantages \u2013 such as liability as well as lack of recognition by governments. Cryptocurrencies and Blockchain technologies go across countries and continents. Governments can lose control and there are numerous audits and initiatives to legislate and control crypto. Well, DAOs take it a step further and challenge the whole corporation or organization registration and incorporation laws of states and federal governments. And yes, malicious players will prey on the innocent. There have been many\u00a0Initial Coin Offerings<\/a>\u00a0(ICOs – some claim\u00a0as high as 80%<\/a>) that were outright frauds. So fraudulent DAOs and corresponding ICOs will happen \u2013 not that fraud has not happened with conventional organizations. For instance\u00a0Ponzi schemes<\/a>\u00a0predate DAOs by decades if not centuries!\n\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Blockchain & Crypto Development Communities<\/strong><\/h3><\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tBlockchain is about decentralization and disintermediation. Therefore it is not surprising that Blockchain communities and cooperatives are themselves seeking and pursuing non-traditional models for cooperation. Open Source has always fostered and promoted democratic cooperation. These cultural trends are also giving rise to several community initiatives. Behind the various cryptocurrencies as well as technologies developed by Open Source communities are organizations that promote communication and cooperation \u2013 which are in essence democratic and \u201cflat.\u201d For instance the\u00a0Bitcoin Foundation\u2019s Manifesto\u00a0states: \u201cthe technology is completely decentralized and the founder does not head up an organization that sets the strategy, governance and standards. This has created a diverse ecosystem of stakeholders that don\u2019t all share the same vision for Bitcoin. We believe that The Bitcoin Foundation is uniquely positioned to facilitate communication, cooperation and integration towards a shared purpose.\u201d\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tSimilarly, the\u00a0Ethereum Foundation<\/a>\u00a0encourages collaboration for\u00a0\u201cdevelopment and education to bring decentralized protocols and tools to the world that empower developers to produce next generation decentralized applications (dapps), and together build a more globally accessible, more free and more trustworthy Internet.\u201d\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tAs another interesting example of the collaboration culture,\u00a0RChain Cooperative\u00a0hosted a webinar by\u00a0TheHum.org<\/a>\u00a0on\u00a0Patterns For Decentralized Organizations.<\/a>\u00a0The Hum has been around for a while and focuses on organizational interactions without a management hierarchy. The presentation made some interesting observations, especially on the tradeoffs with decentralized organization. The illustration above from the presentation elucidates the negatives and positives of Hierarchical vs. Collaborative organizations. Not surprisingly, with collaborative innovation and creativity score higher. However, decisions take longer.\u00a0\u00a0These are quite applicable to Blockchain communities, organizations and the overall decentralized approach implicit in Blockchain. RChain Cooperative advocates and promotes these principles within its community developing this next generation Blockchain.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tIt should be noted that while decisions could take longer due to collaboration \u2013 as participants express views that need to be discussed, vented, and voted upon \u2013 once a decision is made and captured in a Smart Contract, its execution is very fast. Compare that to making a voting decision of a publicly traded company via an annual shareholder meeting. As long as the by-laws and governance policies are captured in Smart Contracts and deployed on the Blockchain, their execution and operation is much faster.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tGovernance of global organizations in a digital era is complicated. There are organizational challenges and the technologies are rather immature. Building a DAO on top of a Blockchain solution ground up could be challenging. Some organizations are providing technology layers on top of existing Blockchains to facilitate the development and deployment of DAOs. This is similar to what happened with the Internet \u2013 where many software companies provided, and continue to do so, robust easy to use stacks and development environments for faster innovation and deployment.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Conclusion<\/strong><\/h3><\/h3>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tCulture is always more important<\/a>\u00a0and more significant than technology. There are irreversible trends of workers or employees wanting to be more autonomous, creative, productive, and enjoy their work. We saw in Part 1\u00a0that this not a new trend. It is one of the main characteristics of the cognitive knowledge worker. An increasing percentage of the workforce is becoming cognitive. But there are obstacles. Without the balance of control and accountability, decisions take longer. So finding balance is extremely important.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThere are mostly yet to be discovered opportunities for Blockchain assisting organizations who want to become flat or circular and more decentralized. There are several DAOs that leverage Smart Contracts for governance. Examples include\u00a0DigixDAO,\u00a0Dash DAO<\/a>, and\u00a0MakerDAO<\/a>.\u00a0Others will emerge or experiment. However, as noted above, vulnerabilities, liabilities, regulations, and recognition by governments is still a huge challenge \u2013 and will be for the foreseeable future.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThe most likely scenario of Blockchain for cultural change will be sub-organizations that leverage elements of a DAO approach. A hybrid approach – as we discussed in Blockchain to Valuechain. Smart Contracts for organizational, worker, shareholder, or even customer empowerment can accelerate decision making. This is similar to the \u201ccircle\u201d or \u201cflat\u201d organizational trends that were discussed in Part I. Thus a recognized formal organization or corporation can potentially leverage Blockchain for some of its community decisions \u2013 either with shareholders or employees.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThere is a whole spectrum of possibilities and organizational models for DAOs. It can involve members, shareholders, administrators and a board of directors \u2013 agreeing upon and deploying Smart Contracts that capture the bylaws or operational policies of the organizations. More interestingly, non-human intelligent agents or robots can also be members or participants in the DAO. This is similar to assigning tasks to automated agents,\u00a0IoT devices<\/a>, or robots in a digitized business process. DAOs can also potentially be members of other DAOs \u2013 so you can have a mesh of DAOs collaborating for business objectives.\u00a0Conventional organizations or corporations can govern potentially multiple DAOs – in a hybrid approach. Organizations can leverage the best of Blockchain for certain decentralized activities, within the context of legally recognized (by government agencies) organizations. Furthermore, digital technologies especially\u00a0Artificial Intelligence<\/a>\u00a0and\u00a0Digital Process Automation<\/a>\u00a0can be used to make the entire organization more dynamic\u00a0responsive<\/a>.\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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\n\t\t\t\t\t\t\t\t\tThere are several salient\u00a0characteristics of decentralized services<\/a>\u00a0and organizations: execution speeds, flat organizational structure, built-in trust, and consensus-based decisioning. The flattening and decentralization trend is cultural, powerful and unstoppable. DOAs are one manifestation and possible realization of this trend. As described elegantly by\u00a0Wright & De Filippi<\/a>: \u201cThese organizations can re-implement certain aspects of traditional corporate governance using software, enabling parties to obtain the benefits of formal corporate structures, while at the same time maintaining the flexibility and scale of informal online groups. These organizations also can be operated autonomously, without any human involvement. They can own, exchange, or trade resources and interact with other humans or machines, raising novel questions around traditional notions of legal personality, individual agency, and responsibility.\u201d\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

The most likely scenario of Blockchain for cultural change will be sub-organizations that leverage elements of a Decentralized Autonomous Organizations approach. The focus in this Part 2 is primarily on the cultural ramifications of a decentralized organization that can be realized through Blockchain (or rather deployed on a Blockchain) – including its governance policies, bylaws, voting, and overall operations. Even though the Blockchain revolution is in its infancy, the introduction of Smart Contracts executing on the Blockchain is a key enabler for substantive changes in organizational culture: towards autonomy, flat organizations and robust communities.  <\/p>\n","protected":false},"author":704,"featured_media":8390,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[192],"tags":[98],"ppma_author":[3513],"class_list":["post-2191","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-fintech","tag-blockchain"],"authors":[{"term_id":3513,"user_id":704,"is_guest":0,"slug":"setrag-khoshafian","display_name":"Setrag Khoshafian","avatar_url":"https:\/\/www.experfy.com\/blog\/wp-content\/uploads\/2020\/04\/medium_e736bac2-8af5-4224-b28c-0a82c894c0c0-150x150.jpg","user_url":"http:\/\/www.khoshconsulting.com","last_name":"Khoshafian","first_name":"Setrag","job_title":"","description":"Dr. Setrag Khoshafian is Chief Evangelist and VP of BPM Technology at Pegasystems. He is one of the industry\u00b4s pioneers and recognized experts in Digital Enterprises, especially pragmatic Digital Transformation leveraging next-generation BPM: Digital Process Automation, Robotic Automation, AI, Internet of Things (IoT) and CRM.\u00a0A frequent business transformation and innovation speaker and presenter in international workshops and conferences, he is the author of more than 10 books and hundreds of business and academic articles in recognized journals."}],"_links":{"self":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/2191","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/users\/704"}],"replies":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/comments?post=2191"}],"version-history":[{"count":9,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/2191\/revisions"}],"predecessor-version":[{"id":35706,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/posts\/2191\/revisions\/35706"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/media\/8390"}],"wp:attachment":[{"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/media?parent=2191"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/categories?post=2191"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/tags?post=2191"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.experfy.com\/blog\/wp-json\/wp\/v2\/ppma_author?post=2191"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}