What Are Blockchain-Based Platform Cooperatives?

Fishermen evaluating PescaData in the field - El Rosario, BC

“Aaah, cryptocurrency,” is usually the first thing most people say when I mention that I am working on a Ph.D. about Blockchains. The remaining 20 percent say “block… what?”. It’s the spring of 2022, and Web3 is everywhere. If you’re in business, there appears to be a latent injunction to at least consider moving onto blockchains, and if you’re an individual, you should try to invest in cryptos to make quick money.

The latter is understandable, as decentralized finance (DeFi) is a booming market with plenty of opportunities to make (and lose) money quickly. The former, on the other hand, raises numerous questions, including why should a group of people use a system that is frequently slower and more complex than traditional alternatives. This is the question that my research seeks to answer. This blogpost presents my research project for my fellowship at the ICDE.

Throughout the year, I will be working with small Mexican cooperative fisheries. As I investigate whether it would be appropriate for them to transition from a smartphone app called PescaData to a blockchain-based app, I will focus on the role of trust in technology and technology-mediated interpersonal trust in the constitutional rules at the heart of cooperatives, and how blockchain-based tools may affect them. Building on this individual case study, I will be able to generalize and attempt to answer a critical question: what are blockchain-based platform cooperatives?

Blockchains and DAOs

To answer this question, we must first recognize that blockchains are more than cryptocurrencies, DeFi, and NFTs. A modern blockchain can be thought of as a computer whose state — harddrive, CPU, and programs running on it– is shared across a network of peer-to-peer nodes. It relies on cryptographic and algorithmic protocols to ensure that the shared data is valid and cannot be tampered with, but we can ignore this technical aspect for the time being. What matters is that you can deploy data and code online on a blockchain in a transparent and permanent manner.

Blockchains have the ability to run and automate programs. Decentralized Autonomous Organizations (DAOs) are examples of such programs: they are platforms on which people can interact, vote, exchange tokens, execute code, and so on. They enable complex coordination and decision-making on the Internet and will have some autonomy once deployed online. But they’re more than that.

I’ll use a definition from the Commons here: A DAO is both the code and the community of users, as well as the protocols, rules, and values that the community has agreed upon to manage the DAO. This enables the importance of DAO governance to be emphasized. A DAO is nothing more than a dApp without active community participation.

DAOs serve as a sandbox for the community to experiment with new methods of governance, funding, and organization as the blockchain world expands and uncovers new directions. Although it is still in its early stages, there are some intriguing examples.

For instance, let us mention Gitcoin, a platform to pay open-source developers for the work they provide and fund (digital) Public Goods. In particular, it builds on quadratic voting to push forward the projects that the community values.

Closer to the world of cooperatives are the examples of dOrg, a software development managed as a cooperative where decisions are made collectively and that was the first DAO to have the legal status of LLC in the US.

DisCO, an abbreviation for Distributed Cooperatives, is a variant of DAOs and platform co-ops that emphasizes “value sovereignty, care work, and commons” to value invisible work and fund pro bono translations to promote specific causes, and has recently become connected to coops in Spain.

Other examples of DAOs include voting platforms –based on Aragon for instance– or investment funds.

These examples demonstrate how DAOs can be configured for coordination and collective decision-making. Surprisingly, they are also partly to blame for the legitimate concern that blockchains will be used to reproduce/reinforce capitalistic inequalities and power dynamics.

Yes, it is true that most of DeFi currently takes place on rather centralized exchange platforms and may just be another financial bubble, but blockchain, as a technology, also offers some promising perspectives.

DAOs for Platform Cooperatives?

As cooperatives offer a time-proven system for participation, member-based governance and alternative to extractive capitalism, the link with DAOs was soon identified and both entrepreneurs and researchers tried to understand whether we could use DAOs as platforms for cooperatives.

It soon became clear that the answer was 

“Yes, but this is not the right question.”

Let’s start with the first part of the answer. To begin, dOrg and DisCO are examples of blockchain-based cooperatives. Because DAOs are becoming increasingly complex, and there are numerous examples of data computed off-chain (outside of the blockchain) and recorded on-chain, which allows for the circumvention of remaining technical limitations, virtually everything can now be moved on a blockchain. The main limitation, for the time being, would be the cost as using Ethereum is expensive, for instance, but there are already relatively inexpensive solutions that are poised to become dominant in the near future. As a result, there are no technical constraints to using DAOs as platform coops.

Another potential limitation could be legal but the example of dOrg shows that it is likely that DAOs will be recognized and granted a legal status, a necessary step if DAO-coops are to flourish. Moreover, initiatives such as the DAO Model Law led by COALA are paving the way for a legal status of DAOs.

So, what is the right question? In my opinion it is:

“Are DAO-cooperatives just platform-cooperatives using a blockchain or are they functionally different?”

In a report that was the result of a recent research sprint between the Platform Cooperativism Consortium and the Berkman Klein Center at Harvard University, the authors wrote:

“[We] see room for further investigation of how novel technical governance mechanisms in DAOs may be utilized by platform coops to help them scale efficiently, while simultaneously retaining the practices of democratic governance.”

They already contain elements of answers to our question, and I intend to initiate these “further investigations” during my fellowship at the ICDE.

My research project will extend my previous work on commons governance using blockchain technology to platform cooperatives. I’ll focus on constitutional rules and how blockchains enable groups to establish their own decision-making processes. A significant portion of this research will focus on tokens and the rights they confer, including property and ownership, but also voting rights.

I’ll also discuss scale(s) and whether DAOs provide truly scalable solutions. I will focus on the distinction between technical and social scalability, building on previous work on blockchain-based voting and scales.

Another interesting observation will be to identify current blockchain initiatives that may pervade the platform-coop world and connect them to current practices. Exit to Community, a natural link between blockchain-based startups and shared ownership, and Regenerative ICOs, which fund cooperatives, are two examples.

Returning to our Mexican fishermen cooperatives, focusing on a cooperative that manages non-digital goods allows us to assess the scope of blockchain-based cooperatives.

These are the topics on my research agenda as an ICDE fellow. These are, in my opinion, critical questions for reclaiming the narrative about what blockchains can be. Potential synergies between the cooperative and DAO worlds have been identified, but more theoretical conceptualization is required. I sincerely hope that I will be able to contribute to this project throughout the year.

Photo Credit: Cobi Cooperative