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Public Goods
Roads, highways, libraries, sidewalks, streetlamps, public education, parks– these are all defined as public goods in today’s society. What do all of these have in common?
For one, these are all commodities or services that are available to the entire community and can be applied to the local, national and global levels. The exact terminology is a “public good,” which in economics, is defined as both:
For a good to be non-excludable, it needs to be available to everyone. For a good to be non-rivalrous, its supply cannot be affected by people’s consumption. In other words, a public good must be fairly allocated, have equitable access and have an “unlimited” supply. Everyone has access to and can benefit from these goods.
Another critical aspect is that we are all considered the owners of these “public goods.” Though they are regulated (commonly by the government in the listed examples), there isn’t one single entity that benefits from it more than others or decides its allocation.
In the digital world, the closest we have to a public good is the Internet. Even then, there are various caveats that deviate the Internet from being a true public good.
The Internet can be described as a massive web of interconnected users, information providers, communication facilities, and markets. In this network, the Internet protocol itself is open and public, and everyone has access to it.
The system itself is made up of and serves a variety of different users all with different interests, goals, and values. Professionals, sharers, creators and bonders for information seeking, communication and entertainment use are only a few out of the many types of users on the internet.
There is also an internet-type standard where everyone agrees on a main system. Sure, private versions are present, but they are not the major component. Similar to how private parks, schools, and roads exist, they are still greatly outnumbered by the public ones.
There are, however, a few concerns that come up. Even though it is freely available like other basic infrastructures built in our society, how accessible is it?
The internet is a privately owned broadband model, which raises questions on internet access. The dominant wires that deliver broadband access are controlled by a small number of firms, similar to cable television and telephone services in the ’90s. Broadband access has become a lot more expensive and inaccessible.
The Internet, in this regard, can be classified as a “club good,” being somewhat excludable and non-rivalrous.
The non-rivalrous aspect also comes into question. Peak loads on the network in some areas are common, reducing efficiency and overall service levels with crashes and slow speeds.
The Internet also, in a way, has become largely privatized. Web2 is owned and controlled by a few dominant players, most notably, big-tech companies that have full control over our data. As a result, personal privacy and misinformation spread are common. Our web2 is highly centralized and regulated, and its usage in many scenarios largely benefits these big-tech companies, instead of the individual users that compose the internet.
One critic, Robert McChesney, in “Digital Disconnect: How Capitalism is Turning the Internet Against Democracy” sums up our current web well: a “private sphere of increasingly closed, proprietary, even monopolistic markets.”
With Web3, we have a greater possibility of achieving an ideal form of a public good. We can first look into DAOs, defined as autonomous and transparent entities entirely governed by a community. Compared to traditional organizations, DAOs use community-based governance where participation, including voting, is based on token ownership as opposed to ranking or the hierarchy in an organization.
In classifying DAOs as a type of good, we can determine that DAOs are public and non-rivalrous and non-excludable. Within DAOs, access is guaranteed and granted to everyone. No one can be arbitrarily denied and the network is open to all, at all times. This differs from private or permissed chains, which are excludable. Users interact with permissioned nodes that confirm changes or updates to the ledger
Users can also interact with DAOs directly, with no gatekeepers, permissioned nodes, third parties or intermediaries. Nothing stands between the user and the DAO. DAOs in this scenario can be classified as a public good.
DAOs represent a huge amount of progress compared to our Web2 systems. There are still, however, a few caveats in its early stage of development. DAOs, in their current state, lack structure. In addition, though DAOs are more democratized with its token-based voting system, there’s still more work to be done to make DAOs more decentralized,
Are there alternatives to DAOs that are also public goods in the Web3 space? Let’s also explore the Decentralized Autonomous Company (DACs), an evolution of DAOs, solving current DAO inefficiencies and onboarding the next set of internet native employers and contributors to Web3.
DACs serve as a public good by supporting a more formal structure for companies to hire for, and run decentralized businesses, and are fair and equitable as a result. Though DAOs and DACs are both public goods, we can qualify them through different means of achieving sustainable governance, non-excludability, infrastructure clarity, and the adoptability of blockchain beyond Web3.
While DAOs pioneered the token-governance model, DACs allow for the use of a reputation-based governance instead of a token-based system. Through DACs, participation and decision-making is based on merit. Members are able to earn reputation scores with consistent contributions made to DACs, encouraging individuals to further empower the system. For example, if you assign responsibility to the operation of an organization, you will get more accountability. This creates a meritocracy-based system that encourages development, as opposed to a plutocracy. Through contributor based governance, DACs allow for the progression of DAO governance that can bring us one step closer to a fairer model of decentralization, and can be classified as non-rivalrous in this regard.
In terms of non-excludability, DACs are deployed on public infrastructure, are open to everyone and are resistant against censorship, where no single entity dictates who is allowed to use the protocol or for what purpose. Similar to a permissionless L1 or L2, the DAC infrastructure is open to any group or individual interested in using its framework.
While permissionless, the structure for DACs are defined and stable, including implemented functions that are fixed to be utilized by a diverse set of users looking to optimize the benefits of decentralization. The DAC infrastructure Metis is building is a solution for a clearer framework to improve organized transparency, accountability and greater legal clarity using native business management tools such as task management and payroll, permission and automation engines, document management, and decentralized job boards. Unlike the dispersed and often inefficient structure (or lack thereof) of DAOs, the standards or rules for the DAC infrastructure are defined, and do not arbitrarily change or serve a special interest.
Similar to a DAO, the DAC is non-exclusive to create. DACs are community-led and oriented organizations without boundaries, where anyone can collaborate with others. While DAOs can operate as non-profits, social collectives, or other models, the DAC is a subset of DAOs that focuses on a non-exclusive company model. The ability for any individual or group to create a DAC allows entrepreneurs of all types to launch and run decentralized companies using permissionless tools to create and manage decentralized companies.
In addition to a permissionless infrastructure, the DAC also serves as a non-excludable public good to expand job opportunities to wider communities and for the hiring of greater talent. The DAC opens doors for employment and talent recruitment through decentralized job boards as well as task management and payroll infrastructure.
With crypto related job growth up nearly 400% in 2021 alone, along with the amount of DAO participation increasing from 13,000 to 1.7million participants in 2021, there is a clear demand for the onboarding and hiring of talent. With an increase of remote work and employees seeking remote work options, decentralized hiring opens doors for a growing digital workforce and a wider pool of talent. The growth is not limited to Web3 alone, which brings us to our next point: the onboarding of industries outside of Web3.
The growth of decentralized hiring aligns with another critical component of public goods: its ability to create positive externalities– benefiting the public beyond the immediate set of users (web3 participants). DACs are a major good in the digital world that produce public externalities by opening opportunities for web2 users and companies to integrate into the web3 community.
From a study conducted by Gallup, In 2021, around 9 out of 10 workers in the US wanted some kind of arrangement where they would be able to work at least partially remotely. We need new, trusted models of how remote work is sourced. Decentralized hiring opens up the opportunity as a solution for:
In the Web3 space specifically, Metis conducted a survey with 1112 respondents across the US to gauge their sentiments around remote work and the emergence of DACs and DAOs. A commanding number of respondents (74.5%) believe that for employers to offer remote options, companies would need to adapt how they do business. Decentralized hiring is here to solve this.
With all of these components in DACs, we can better facilitate global collaborations across a variety of industries. All of these factors make DACs a public good, holding components of non-excludability non-rivalry, and generating positive externalities. DACs are on its way to becoming a critical part of the global infrastructure.
