Is the DAC concept dead?
DAC is a concept conceived by Daniel Larimer back in 2013. It stands for Decentralized Autonomous Company (or Cooperative). Its essence is this: DAC is a virtual entity which mimics the behavior of a traditional company. As such, it is supposed to balance its expenses with its revenues and aim at earning a profit, which is then distributed to its shareholders.
Make your DAC profitable!
"You need to focus how to make your DAC profitable" - Dan was saying back in 2014 at a crypto conference in Texas. At that time DAC was a concept contrasted with Bitcoin's loose attitude to its huge expenses. For when the DAC metaphor is applied to Bitcoin, the obvious conclusion is that it cannot be regarded as a sustainable business model in the long run, as it makes millions of dollars of losses every year.
The case of BitShares
Then we had BitShares. BitShares was supposed to act like a proper DAC. This assumption lasted for a long time and it was still alive when BitShares 2.0 was launched back in October 2015. I remember Dan giving an interview for Adam B. Levine and stressing his content about the net profits made by the newly re-launched system.
The case of Ethereum
Now we have Bitcoin and Ethereum. Both are booming yet none of them can be considered a DAC, as they have no business model which is able to cover their huge expenses. Economically Bitcoin makes no sense - it is the most inefficient payment system that has ever existed. The same applies to Ethereum - with market evaluation at $1.5 billion, it will probably never be able to earn enough in transaction fees to pay even a modest dividend to its shareholders. Yet investors don't seem to care about it, as long as they see a potential for growth of the system.
The case of Steem
Now look at Steem: it needs to grow at a rate roughly equal to 10% or otherwise it will implode. How could the father of the DAC concept create such a monster? For Steem is a pure heresy in the eyes of DAC believers. This is how Dan explains the transition is his approach:
I learned that "inflation" isn't theft if it is done to compensate those who bring value. I learned that true theft is expecting people to work for free without getting a share in the product. This maturing perspective caused me to diverge from many of people who were originally attracted to BitShares.
The theory of start-ups
Does it mean that the concept of DAC is dead? Initially I thought so. But then I remembered watching a while ago a very valuable tutorial by Steve Blank about the difficult art of building a successful start-up. In short, Steve teaches that if you think of a start-up as a smaller version of a large company, you are doomed to fail. Rules that apply to mature businesses simply do not work for start-ups - they need their own set of rules, which are very specific for them.
Conclusion
By the same token, I now think that the notion of DAC might apply to mature blockchain-based businesses in the future but it is clearly not suitable as a business model in the crypto-space at this stage. The industry is very young and all we have here are start-ups and start-ups cannot worry about profitability - they need to grow quickly or die. That's why no DAC can survive at this moment - it's unable to compete in this environment. It's like a dolphin stranded on a beach, having to compete for food with dogs.
To sum up: I think the concept of DAC is not dead, it was just born prematurely. The idea itself is very sound and its time will come. But don't try to use it now.
I think your assessment is very accurate. In the world of startups you print shares to reward early employees. You print shares for multiple rounds of funding. You give free samples at a loss to grow network effect.
In the long run all platforms need to be sound: producing more value than they consume.
Where I was wrong is assuming value is a 0-sum game. The reality is that 1+1=4 when it comes to network effect and value creation.
I think it'd be more accurate to say that the network effect is superlinear with respect to value.
That is to say that N(x + by) \neq N(x) + bN(y) -- which is what is required for any functional to be linear, by definition.
In essence, N(x) > O(x). Depending on what the actual value creation is, i.e. features, functionality, etc., will determine the growth rate of network effect for a particular blockchain.
It seems to be the only correct statement in the paragraph.
Talking about Bitcoin we should consider it as a currency, not as a share.
What kind of dividends can you expect from holding a $100?
It's the issuer of the currency who gets profit - in he case of BTC it's the miner.
Profitability of such a bussiness we can always evaluate eg here.
And what about this bold statement:
Is everyone of the upvoters totally agree? Look at the market, is it wrong in his assessments?
Bitcoin is not just a currency similar to fiat, it's a also a mechanism to move value around. The cost of a single Bitcoin transaction currently stands at $10. Taking into account only miners' profitability, instead of the whole system profitability, is completely flawed.
I am not saying the market evaluation is wrong. I'm just pointing out the paradox that we currently witness. When you buy BTC or ETH, all you do is bet on the fact that there will be another person in the future who will buy it from you at a higher price. This has nothing to do with actual economical inefficiency of those systems. We have high market evaluation despite those inefficiencies.
what do you mean and how do you measure that? What is eg the whole system profitability for the dollar in your terms?
When I am trading @ forex I do the same bets and it has something to do with the market assessments of the relative economical (in)efficiencies of the systems :-)
I think DAC is more alive than ever. DAO doesn't have an expectation to profit or any expectation. DCO is more like a cooperative.
If you have a DAC then there is an expectation that the organization must act in the self interest of the token holders.