The DAO in-depth: Interview with Stephan Tual, Slock.it CTO

Opinion
18.03.2016

The Ethereum company Slock.it prepares to launch a decentralized autonomous organization (DAO) as a new type of corporate funding and management. The Germany-based company develops Ethereum-based software for smart locks, dubbed “slocks”, thus connecting shareable items and the Internet of Things to blockchain ecosystem. In an interview to ForkLog (FL) Stephan Tual, Co-founder and CTO of Slock.it, explained how this new DAO will function and what it will bring to the world of corporate business.

What is DAO?

“A DAO, or Decentralized Autonomous Organization, is a digital company with its by-laws set immutably within the Blockchain: its governance is transparent, its finances can be audited by anyone, it suffers zero downtime and corruption is impossible,” according to Slock.it website.

Earlier in his post on Ethereum blog Vitalik Buterin explained:

“The ideal of a decentralized autonomous organization is easy to describe: it is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do.”

The exact model of launching your own DAO on Ethereum has been also posted on Ethereum Project website.

Stephan Tual, CTO and Co-founder of Slock.it

Stephan Tual, CTO and Co-founder of Slock.it

FL:  Could you please describe the main idea of how your DAO decentralizes the management of trust? How is it different from other solutions and why it’s more convenient for investors as compared to regular corporate investment? Why would Slock need this DAO?

Stephan Tual: First, it’s Fair. So the first thing to remember is that we ourselves get zip zero (none, nada) tokens from the DAO sale.

Second, participants get rewards, similar to dividends. The DAO earns revenue generated by the products it helped fund, in this case a portion of the income from the objects shared through the Ethereum Computer. Profits are then distributed to participants based on transparent rules. The rules are decided by the participants. Default rules is that ‘take profit’ can take place every two weeks or so.

Third, it’s safe. The DAO participants can submit and review proposals, casting their votes to elect a service provider representing them in the physical world. The DAO participants can also ‘sack’ the service provider delivering the product and elect a new one if they feel they are not getting their money’s worth.

This is at the core of why this DAO model is considerably superior to both the kickstarter and token presale ones.

Think of this DAO as a bit of a decentralized fund management, which then invests money in projects by accepting proposals from service providers. Under the Kickstarter model, if the operational side of the project fails (and that, unfortunately, seem to happen over and over and over again), the project is over, and all funds are lost.

Under the DAO model, the project could still go on, effectively shielding participants from a bad service provider.

FL: How will the DAO make profits and how Slock.it will make profits under this project?

Stephan Tual: The DAO funds projects, then gets a cut of the profit from the revenue they generate. When a slock rental brokered by the Ethereum Computer is used, the slock autonomously sends part of the rental fee to the DAO.

The DAO is then free to reinvest this into new projects, keep it as cash on hand, or redistribute is as ether (akin to dividends) to the token holders.

Slock.it UG doesn’t pay dividends to the DAO. The slocks autonomously send a portion of their revenue to the DAO which can then decide to either reinvest or distribute the equivalent of dividends to the participants. As for us, Slock.it UG, we get zilch zero commission, and de nada tokens. instead, our incentive is in the continued development of the DAO’s product line (as we are mostly paid based on a daily burn rate and not lump sums). This way, incentive are kept aligned as part of a synergic relationship.

FL: As far as we know, you intend to issue DAO tokens. What can a user do with these tokens?

Stephan Tual: DAO tokens:

  • Give voting rights on important issues in the DAO
  • Can be traded peer to peer or on an exchange
  • If voted in by the DAO, provide access to a portion of the profits (generated by the Slocks), proportionally to how many tokens a participant holds
  • Can be used to open or close Slocks without having to pay a fee to the DAO

FL: Will those tokens be colored Ethereum coins, or will there be a completely different entity independent from ETH price?

Stephan Tual: Neither. They are represented in a ledger as part of an Ethereum Smart Contract.

FL: When do you intend to launch DAO tokens crowdsale?

Stephan Tual: We are doing everything in our power to help deliver the DAO token sale as soon as humanly possible. There is no defined timeframe besides “Soon”.

FL: Could you name the first projects you intend to propose to DAO immediately upon its launch? How long will it take those projects to start generating returns to the DAO?

Stephan Tual: Our first proposal to the DAO will be for the Ethereum Computer and its ecosystem.

The Ethereum Computer brings smart contract technology to the entire home, making it possible to rent access to any space or compatible smart object and accept payments without intermediaries.

Flexible, the Ethereum Computer is intended for both consumers and developers, providing a platform to securely browse any decentralized app (or ‘Dapp’) from the convenience of a desktop or home theater, alongside an easy to update stack to develop Ethereum applications.

In the future, it will become a source of passive income: it’s the ideal platform for Ethereum Proof of Stake mining, and will come preloaded with pioneering apps, for example, to rent one’s hard drive space in exchange of cryptocurrencies.

We’ll be publishing a complete description of the proposal (29 pages) very soon.

FL: In the course of the Mobile World Congress you have presented some insights into Ethereum Computer project alongside with Canonical and Samsung. Is this project by any means connected to DAO? What is its goal?

Stephan Tual: In a nutshell, the DAO will make its money because there are slocks in the wild and a degree of adoption. Creating partnerships with existing lock providers, real estate companies and smart object manufactures is one of our priorities, but it will take time, and even if we are able to integrate with say, 10 different smart locks after 6 months, it still would represent a small fraction of what’s out there.

On the other hand, the EC speaks zigbee/zwave so it can already talk to just about any smart object out there. This vastly (exponentially!) increase the number of supported objects in the wild from day one, and forms the core of a slock-base even prior to launch, so that there will already be objects to find via the mobile interface.

FL: According to the draft whitepaper, a DAO can have only one service provider, so it’s not an ecosystem of different projects by different providers. How do you intend to resolve project scalability issues when the DAO grows big enough to incorporate numerous projects by Slock.it?

Stephan Tual: Actually, The DAO is free to work with as many or as few actors in the real world as it sees fit: the only requirement being that the current Service Provider vouch for the actor in question by adding them to the list of addresses authorized to receive funds from the DAO.

FL: Will it be possible for ‘token-holders’ of different DAOs to cooperate on some projects AFTER the split?

Stephan Tual: That’s a great idea! – Didn’t actually occur to me but absolutely, they would just need to cooperate to insure the smart contracts for the autonomous objects disburse their reward to both DAOs.

FL: DAO is an acronym for Decentralized Autonomous Organization. However, it’s more of a democratic voting system as the majority’s decision is binding for everyone unless the minority wants to leave the hive. Did you think of a voluntary project investment model with no need to split in case a token-holder is not into the particular project?

Stephan Tual: Splitting is here to keep things truly decentralized – we have considered many models, including having a panel of guardians, but in the end only an uncompromising solution with zero premine or pools to developers felt ‘right’. 100% of the DAO belongs to the DAO token holders, and therefore so is the voting power.

Interviewed by Eugene Muratov

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