There are 53 million freelancers in America alone in what some are calling a workplace revolution. One aspect of smart contracts could accelerate this process and perhaps provide a glue for freelancers to join forces. It promises to make us all CEOs and board of directors while getting rid of useless job interviews and 9-5 work hours. But, let’s go a bit slower.
In a high-level advisory meeting at IMF, ICOs were raised as a trend that could potentially disrupt finance. It is the first mention of ICOs at such a high level, which may suggest the field is slowly moving towards mainstream awareness.
The ICO space is very new, barely a year old, but hundreds of millions have already been raised. However, it is all somewhat confusing and in flux as it isn’t very clear what exactly should be called an ICO.
There is a great deal of difference between a project where eth is sent to a smart contract that has coded rules which allow the movement of funds solely based on a token holders vote and an ICO that sends the funds to a simple address which is fully controlled by the project founders.
The later isn’t very much different from a crowdfunding project. A token is created, which may add different dynamics, but conceptually there isn’t much difficulty here. On the other hand, there are ICOs which raise some very difficult and not easily answerable questions.
An ICO can be designed in such a way that one can reasonably argue the funds are not raised by a human, but by a machine (smart contract). Here’s a simple design to illustrate the concept. I want to lead the creation of a project which will allow a smart contracted (or smartified) self-driving car to automatically pay a smart contracted electronic charging station.
I’m an honest and conscientious person who wants to pursue my dream of getting this project going. So I develop a smart contract which allows for the funds to move solely based on an x % of token holder’s approval.
My first request is 2,000 eth for the development of a prototype. In the request I lay out the plans, etc, the token holders approve it, the smart contract releases 2,000 eth. I start prototyping.
Then, I come back with the prototype results, say x is needed for pilots. Token holders decide whether to give x, to counteroffer y, or are so disappointed they disband the project and release all the remaining funds back to themselves.
On the surface, it looks like a simple course of events, but conceptually, there is a lot happening here. Let’s start with the boring legal aspects.
First of all, was there an ICO at all? If there was, who raised the funds: I who led the project, the smart contract, the token holders? Once they approved the funds, who paid me exactly? Was it the token holders or the smart contract?
If it was either the token holders or the smart contract how can we hold either to account for anything considering one of them is globally dispersed while the other is just code?
If I run away with the funds or committed some fraud, the answers here are easy. Obviously, it would be I who is responsible since I committed theft or fraud, therefore should face criminal sanctions.
But what if it’s a simple contract breach or a civil matter? Who would sue? Should the smart contract be given legal standing? If it is so given, who would act on its behalf and thus bear the responsibilities as well as advantages?
Why bother with any of this at all, why not just make it all illegal or why not just incorporate in normal ways?
There are some very good reasons why this experimentation should not only be allowed, but encouraged. We’ve touched above on some potential disadvantages and complications, but there are some knowable as well as unknowable advantages.
Let’s take the easiest one: the current problem shareholders face in holding management to account. The system today in effect operates by taking small amounts from many (shareholders), concentrating it in the hands of the few (management), who then invests it etc.
As they say, possession is 80% of ownership. It can and has been abused. CEOs pay themselves $20 million a year. Inequality is at some of the highest levels. What if, instead, these funds remain in the hands of shareholders through the smart-contract proxy which obeys solely their commands allowing them to decide just how much should be given to who and for what?
Now, imagine here we have a nice website. You log in, get some snippets of the latest reports on a tl;dr basis letting you know of the latest developments from your smart companies. You are asked to approve a 1% funds release for a company project. It has gone through advisors pre-screening. Let’s stop here.
The Slock.it DAO taught us a very important lesson. Innovation in this space is obviously not all encompassing or all replacive. We need professionals to undertake many tasks. One of them are advisors or analysts. They had put forward a proposal, giving their credentials, etc., asking x amount for their advisory work, the token holders were happy to approve. Now they are advising us.
Going back to the project, the advisors say the request for x funds is boring and uncontroversial, recommend a yes, so you click yes because the title says boring this for that boring thing.
Below it we have a bit of a more controversial proposal. Token holders are not very convinced x for some other “company” you control through smart contract tokens, should be released because it all sounds too vague or whatever. Advisors have listed the pros and cons. You think it obviously shouldn’t be funded so you click no.
The algorithmic bot suggests a new project you might be interested in. Something about flying cars. Many are ridiculing it. You think the team sounds alright, but are not very convinced. After some consideration, you conclude: meh, I’ll throw one eth, who knows.
You are the CEO now, and the board of directors. You even work for some of these smart companies, coding stuff. There are millions like you. The young are flocking to it. People are leaving established businesses. That whole interview process and 9-5 now seems somewhat arcane.
This is already happening. The number of freelancers has skyrocketed in recent years, with America alone having 53 million of them in a transformation that some are calling a workplace revolution.
It’s only natural that eventually they will join forces. Smart contract based “companies” have the potential of providing the fuel for it. They might even make work a bit of fun as the world slowly moves towards automation with the lateral thinking economy likely to become as dominant as agriculture was for our ancestors.
This is all very much at the embryonic stage. The first attempt went disastrously wrong, but the first airplane crashed, many times. Even now, they come down crashing. This won’t give us some sort of utopian perfection, but might it make things better, more efficient, more equitable?
Who knows. Imagination is easy, but reality has a way of defying imagination. Experience alone can tell us. On that point, I think this would be one of the most interesting experiment with significant potential to grab our imagination.
As for laws and regulators, they have no place in these sort of ICOs at this point because they certainly have no clue just what on earth all of this is and, moreover, no one else does either. It’s all at the prototype stage, not even experimental. They might wish to come back in around five years.
As for the crowdsale like ICOs, most of the eth based investors tend to be fairly sophisticated considering this is very much a niche space. Most of the ICOs tend to be under $5 million too. Losses, therefore, are very much contained.
Crowdsale ICOs are, too, at the early experimental stage. Any regulation in the guise of risk managing would probably be far too premature. I’d give these ICOs around five years too, but a non-governing body wouldn’t cause much, if any harm, therefore might be welcomed for both types.
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