from ego to dao
ego → rational agent → consensus → objectivity → smart contracts → DAOs → coordination
A DAO is a funny beast. It (sometimes rightly) claims that it produces
coordinated action between participants, but it relies on blockchains which are
operated by rational agents (miners or validators) which (mostly) only care
about their own interest and profit.
How did we go from selfish, rational agent behavior to coordination at scale?
How did we go from ego to DAO?
Selfishness is the rational way to be
Most of modern game theoretic and economics literature is based on the rational
agent as a building block. It is well understood that this
view is limited and doesn't model human behavior
accurately, but it has well demonstrated its
analytical potency. [1]
For the sake of this article, we'll consider this hypothesis as true: humans
behave as rational agents by default. This will allow us to consider how
blockchains and then DAOs are structured.
Consensus as a byproduct of blockchains
Bitcoin miners are rational agents entering in a contract with the rest of the
Bitcoin network. They contribute security to the network via computation in
exchange of rewards.
Token-denominated mining rewards constitute the incentive system that allows
creating, between all participants of this network, a consensus on what is
stored in the blockchain data. [1.5]
More generally, a property of a lively blockchain is the ongoing generation of
consensus between its participants.
Shared truths
To all blockchain users there is one and only one global state at any given time.
Participants must agree on which address owns how many tokens at a given time.
Once such a consensus is in place, there is no place for disagreement, apart from
successfully attacking the network or forking the chain.
A blockchain thus produces a shared canonical state, conditional on the
protocol's security assumptions. [2]
Smart contracts as axioms
Ethereum smart contracts are pieces of code which are enforced by the network.
Their code, being part of the blockchain data, is interpreted
objectively by all Ethereum nodes.
More than shared truths about quantitites (tokens held by addresses) at a point
in time, smart contracts describe how the blockchain data might or might not
change in the immediate future. [3]
Interactions require expectations
Now, let's look at how DAOs are built, starting with conditions under which
people might become participants in a DAO.
In general, economic agents will interact with a system (a market or a smart
contract) only if the rules are clear and fair: transparent, unambiguous, and
difficult to game.
In case of a DAO [4], agents will interact with it only if
they have a good model about the DAO rules and have guarantees that these rules
are enforced.
In a decentralized setting, this means interacting with smart contracts, which
are open source and transparent [5], which operate an
economic game which is useful to the participants.
A typical example would be a marketplace contract or an AMM where participants
find it useful to swap some tokens for others depending on their needs.
DAO as nexus of spontaneous coordination
At the blockchain level, a DAO is operationally defined by a set of rules
enforced by smart contracts. The DAO can then be considered as the resulting
system including agents interacting with each other and with the DAO's smart
contracts.
These rules are designed ahead of time so that the DAO will produce a certain
goal, a (hopefully) useful service.
Via its enforced rules, a DAO will provoke interactions with its participants. A
DAO will be successful when these interactions are coordinated towards producing
the DAO's goal as an outcome.
For example with Bitcoin [6], mining rewards induce
miners to coordinate towards the goal of producing network security.
DAOs can encode coordination games around shared goals
We will consider that to gather any initial interest, the goal of a DAO needs to
be about produce a useful service to a given community. Hence, a typical DAO
will initially be designed to serve a common goal, shared among a group of
people or even the shared by whole public (a public service).
As they need capital, DAOs will contract with investors:
investment is incentivized by a reward consisting of control-bearing tokens (and
these investors might never give them up).
But even if DAOs exhibit human control structures, they create new coordination
schemes among human (and non-human) participants, geared towards common goals.
Full circle
It's remarkable that starting with a human characteristic, ego, we ended up
producing a fairly opposite human construct: coordination towards a common goal.
ego
-> rationals agents
-> consensus
-> truth
-> smart contracts
-> DAOs
-> coordination towards a common goal
Building DAOs is an endeavour by humans to reach coordinated action by exploiting
our own tendency towards egoism.
Caveat ethereum emptor
But let's not forget that most (if not all) participants of DAOs in the Ethereum
space are also aligned with the success of Ethereum. [7]
This might invalidate some of our assumptions.
First, all Ethereum agents might already be sharing a common goal from the onset
(increasing Ethereum usage), hence reducing the apparent contradiction between
blockchain consensus and DAO-induced coordination.
Second, the goals defined by DAOs at their inception might not be as much to
create commons or public services, but to increase Ethereum usage and thus ETH
value.
Seen from this angle, this is an alignment system that is well known, akin to
issuing stock to employees.
[edited 2026-06-04: tightened two over-broad claims for precision — blockchain "unequivocal truths" → a shared canonical state conditional on protocol assumptions; "DAOs make humans coordinate" → DAOs can encode coordination games. original argument and notes preserved.]
Notes
[1] Gavin Wood has made the point that rational
agents are part of "nature". This is a useful approach as it allows quickly
considering the autonomous aspect of blockchains. But it is very misleading and
anyways too radical for our purposes.
[1.5] Namely, data that has been published in validated transactions, including token
transfers.
[2] Blockchains and cryptography create truths about property in a decentralized
fashion, which is unprecedented. Previously, only a centralized power could
guarantee property at the level of an entire society. As [Hobbes][Hobbes] said:
My own can only truly be mine if there is one unambiguously strongest power in
the realm, and that power treats it as mine, protecting its status as such.
[3] Formal systems rant: the set of smart contracts at a given time is a formal
system which formalises which transactions (or state changes, or smart contract
calls) are allowed.
[4] Strictly speaking, we're talking about a DO here.
[5] Strictly speaking, smart contract need only be transparent to some agents. They
could be opaque, in a non-permissionless setting.
[6] We can reasonably consider Bitcoin the prime example of a DAO, albeit not built
on smart contracts.
[7] May we say shareholders of Ethereum? If we consider Ethereum a form of
DAC.