Artificial Intelligence and Decentralized Autonomous Organizations: Where two worlds meet
A point of view on AI and DAO coming together to solve business problems.
Joydeep Sarkar, Senior Architect, Wipro Limited
Abstract
Decentralized Autonomous Organization (DAO) represents a paradigm shift in the way collective decision-making and governance are approached. By leveraging blockchain technology, DAOs offer a transparent, secure, and efficient method for group coordination without centralized control. The integration of Artificial Intelligence (AI) within Decentralized Autonomous Organizations (DAOs) presents a transformative potential for various sectors. AI-driven DAOs can automate decision-making processes, optimize operations, and provide dynamic governance models that are responsive to changing conditions and member inputs. This POV explores the merits, challenges, and future implications of AI-driven DAOs.
Introduction
DAO is blockchain-based entities that operates through smart contracts, with decisions made by consensus among its members rather than through a central authority. The incorporation of AI into DAOs can further enhance their capabilities, leading to more efficient and intelligent systems that can adapt and evolve over time.
DAOs can use AI to make better governance decisions, increase efficiency, and integrate with other DAOs and organizations. But the AI x DAO intersection could go much beyond that. DAOs and AI could feed into each other to help each other grow.
“Artificial Intelligence is the new electricity.” — Andrew Ng
“DAOs represent a shift towards a more open and collaborative way of working.” — Steve Glaveski2
The potential applications of AI and DAOs are vast, ranging from governance and finance to charity and collective ownership. In this document I will elaborate how AI and DAO can be used with some use cases.
Let us first look at the growth DAO has achieved so far.
(Image Source: DeepDAO — Discovery Engine for DAO Ecosystem)
As on July 2024, the DAOs help total treasury exceeds 26 billion USD. The ‘Treasury’ refers to the total asset that the DAO can spend at its own discretion, excluding DAO-managed but not owned assets such as reward fees or staking accounts.
According to Messari report in 2023 [1], following areas could be the most interesting area in DAO.
· Social DAO: LinksDAO will let one play golf with celebrities. In 2022, they raised USD 10.4 Million [2] from its members to form a DAO golf course.
· Special purpose acquisition companies (SPAC) DAO: ConstitutionDAO raised USD 47 million [3] to bid on the rights to acquire and official copy of U.S. constitution document in a Sotheby’s auction.
· Collectors DAO: Pleasr came forward as the buyer of only one existing copy of Wu-Tang Clan’s lbum “Once upon a time in Shaolin” paying USD 4 Million [4].
· Investment DAO: This is anticipated that DAO will disrupt the traditional investment model in coming days. Syndicate, a community-based investment system, has raised USD 20 million Series A funding round led by Andreessen Horowitz (a16z) [5].
There are many such examples of DAO gaining more and more attention in today’s world. On the other hand, AI is also being adapted as a tool for ease of business. There are growing interest around AI driven DAOs.
AI and DAO can be used in various scenarios, starting from scaling up to administration to investments. The spectrum is widespread and DAO still being at its infancy, most of its capabilities are yet to unfold. Adopting AI with DAO will enable DAOs to become more effective in many ways.
“AI DAOs could be way bigger than AIs on their own, or DAOs on their own. AI gets its missing link: resources; DAO gets its missing link: autonomous decision-making. The potential impact is multiplicative.” — Ocean Protocol founder Trent McConaghy
This could open many opportunities. The AI and DAO can essentially become a self-sufficient (or close to it) system that can work on its own. The feedback loop continues, taking input, analyzing the output and taking decisions coded in the mode and smart contract.
Figure 2 illustrates a high level conceptual flow of AI and DAO integration. This is a generic process flow which can fit any use case. The DAO accepts business problem, which is aided by General Purpose AI (GAI) for recommendation. The recommendation becomes an input of a DAO, which in tern creates a proposal. The proposal creation can be then taken care of by Gen-AI process. Once the proposal is created, a DAO can start the voting process once the proposal is submitted. While the voting commences, AI agents can act on behalf of humans. The voting task can be delegated to an agent, where the agent holds the token and votes on proposals based on certain rules, as defined by the human. There might be certain challenges in agent led voting process, e.g. agent voting for a proposal less beneficial for the party. To overcome this, various mechanisms can be devised, like multi sig (agent and human both signs) or off-chain approvals. After the voting is over and enough votes are in favour, the proposal is executed. Approved proposals may not be seif-sufficient in all cases and may require additional information. The AI models can create a swarm like collective intelligence by collaborating with different DAOs and services. A monitoring service can create a feedback loop for the GAI model that can further refine the process.
Following are few use cases for AI and DAO.
Enterprise Project Management: project deliveries can be supported by AI for predictive resource booking and allocation while DAOs can manage the resources and their performances. DAOs can perform high level project management too where deliveries are monitored and managed by various proposals tailormade for specific deliverables.
Treasury Management: DAOs allow shared ownership over a treasury. But if AI is at the centre of it, then the treasury s own by only an autonomous entity/group of entities who can take decisions and make use of the tokens as necessary to carry out DAO’s specific purpose.
Shared Intelligence with AI connected DAO: DAOs can be put together using the AI connectors. The AI connectors can decide on engaging number of DAOs in a coordinated manner to create a shared intelligence. As an example, a DAO responsible for reducing carbon footprint, can vote for a proposal of another EV DAO.
Asset Management: AI can directly interact with Smart Contracts to manage assets under the DAO. The AI strategies can be devised to grow the fund and made investment decisions which smart contract will execute. A plugin for AI and smart contract can be developed for this purpose.
DAO Governance: DAO governance is a tedious process. Creating essay like proposals [6] which requires business knowledge and expertise. AI can be of great deal of assistance by creating a proposal on behalf of a member or creating a proposal’s summary for all members. Also, AI can efficiently moderate the forum by limiting the content to only relevant topics.
Figure 3 depicts a basic deployment view on Azure cloud. This view is created using Azure managed services. However, the idea is not limited to any environment or services.
Things to consider:
1. Probabilistic uncertainty: AI is always probabilistic. Therefore, it will always have a chance of making a wrong decision. Human intervention can reduce this risk greatly but that defies the purpose. There is a need to devise a strategy to prevent AI mistakes before it is executed on-chain.
2. Proof of humanity: As the AI can represent a human in the DAO, it becomes very essential that the AI models do not start acting like humans suddenly. Proof of Humanity protocols like BrightID could quickly grow in importance. But when AI does gain general, or human-level, intelligence, a new set of challenges will arrive.
3. Security: The AI and DAO integration may require revised sense of security. Since these are autonomous, incorporation of AI will reduce the chances of quick rectification, unless AI models are quickly trained with vulnerabilities mitigations plans.
Conclusion:
As Trent McConaghy said “AI DAOs could be way bigger than AIs on their own, or DAOs on their own. AI gets its missing link: resources; DAO gets its missing link: autonomous decision-making. The potential impact is multiplicative.”
AI is a powerful tool and so is DAO. This is a reality today and integrating AI and DAO will bring about great value add.
AI and DAO are a paradigm shift in technology. This will require proper nurturing as both the technologies are growing and has a risk of getting deviated from its path.
AI-driven DAOs offer a promising avenue for creating more efficient, intelligent, and responsive organizations. While challenges exist, the potential benefits in terms of operational efficiency, decision-making quality, and governance flexibility are significant. As technology advances and regulatory frameworks evolve, AI-driven DAOs are poised to become a key component of the future organizational landscape.
References
1. resources.messari.io/pdf/messari-report-crypto-theses-for-2023.pdf
2. LinksDAO raised millions selling NFTs to buy a golf course (cnbc.com)
3. From a meme to $47 million: ConstitutionDAO, crypto, and crowdfunding — The Verge
4. Meet the Crypto Fans Who Paid $4 Million for Pharma Bro Wu-Tang Album (rollingstone.com)
5. coindesk.com/business/2021/08/31/a16z-ohanian-snoop-dogg-back-dao-builder-syndicate-in-20m-series-a/
6. How to structure DAO proposals and build proposal processes (aragon.org)
