After coming back from AraCon, back in January, I couldn’t stop thinking about the parallels between a DAO and my small hometown — A Kibbutz in Israel.
The goal of writing this
I’ve published this piece to emphasize one of the most potentially impactful use cases for crypto networks in our world. While a lot of the public discourse seems to revolve around the idea of crypto as sound money, I am most excited by the use cases of blockchain to empower freedom for decision making and human collaboration. In this specific use case, I see enormous potential for communities to become a DAO. To start realistically, I thought my hometown’s example could make more sense to most. It’s a rural village(Kibbutz) in Israel that is built on an interesting governance model and happens to be my hometown. This place is somewhat unique, and I think it could benefit a ton from operating as a DAO.
The Kibbutz’s mindest is aligned with the decentralized economy
A Kibbutz is a business in the custom of a social community. All shareholders in that business work in it, live together, eat together, and share profits.
As a working Kibbutz member, you’d: Work for the main business of the Kibbutz — usually in a factory, agriculture, or at one of its facilities — e.g., dining hall, education, medical center or else. The main idea is the everyone provides their work, and in return can count on the Kibbutz to take care of all their needs. Meaning almost everything is free, including Food, Healthcare, Housing, Transportation, Holidays, Cigarettes, Alcohol, and much more.
The Kibbutz’s ideology is somewhat very similar to one of the open-source communities and built on “skin in the game.” Each member has to contribute to the whole — and receives the incentives to do so.
Where the problem had arisen
With time, some of the Kibbutzes in Israel had scaled their businesses. The businesses were mostly factories that produce things like cheques paper, baby diapers, or Agriculture solutions(like my hometown Yiftah). On the other hand, a lot of them had taken big loans from banks or sold shares to outsiders to finance the massive operational costs of their gigantic factories.
That had come to place gradually, as its society had developed a culture of overconsumption. Where everything is free, human nature is to consume more than it needs. The bubble had burst in the early 2000s, then many kibbutzes have decided to stop this party, resulted in owing too much money to banks.
The Kibbutz had decentralized itself, to the point where nothing is free anymore, and people are free to work outside the community.
The current state of the community
My Kibbutz had paid its debt back(by selling its shares in the multi-billion dollar agriculture equipment factory it used to have). Nowadays, the community wants to bring back some of the old Kibbutz’s culture. They want to recruit new Kibbutz members and invest in new businesses to generate new income sources. So far, that hasn’t proved to be very successful, given the lack of incentives to join a poorly run business with a broken governance system that is controlled by a small group of people. Perhaps these words could be applied outside of my Kibbutz to describe many kinds of communities, cities, and countries.
How this community could improve as a DAO
Think of these benefits specifically for this kind of society, and also more broadly, how could this concept be applied to larger populations, cities, countries, and continents.
If this community would be a DAO:
- Each kibbutz members will have to hold the Kibbutz’s token(TCR), that would give him voting power while staying completely anonymous. That will bring up the opportunity to improve ideas, collaborate, and change realities without any politics.
- New members would have to purchase the native token to get to live in the Kibbutz and participate in governance.
- Tokens are liquid, transferable, and valuable. People can decide it’s not for them to be involved in governance and sell the tokens to another kibbutz (DAO) members. In that case, they wouldn’t be part of the Kibbutz and would be considered as residents. If they believe in the project, they will hold the asset in the long term.
- The Kibbutz’s funds and finances would be fully transparent; everyone could track each expense, and criticize it. The results would likely be an automatic improvement in purchasing power and utilization.
- Socially: the more tokens being minted, the more popular the place and community turns to be. The value accrues in the token. Early believers and contributors benefit from their support.
- The tokens would be used to pay residents-service fees. The Kibbutz would have constant cash flow from newcomers to the place and service fees.
- On top of that, operational costs would be reduced. Most salaries paid to managers, principals, financial controllers, etc. would be eliminated. It wouldn’t be needed anymore, as it’d be automated and controlled by the community, verified and authorized by smart contracts.
Everything will be on-chain, transparent, and consume less energy. People would feel encouraged to participate in community decisions and contribute to the place’s well being. More similarly to the old days, only this time, there’s more anonymity, transparency, and freedom.
The most exciting part to me in this notion is to have a location-token. A token that is offered to and used by users at a specific location. The idea for such a token is mostly to represent value only to people that are connected to a particular location. I chose to give this example because I think that as with everything, we have to start small, experiment, evolve, and repeat. A small village(500 residents) could be a great stepstone to the adoption of larger residential communities in the thousands and the millions. Starting small in a Kibbutz could be the first step to test the use case for DAO in larger communities and residencies. A successful experiment could liberate and automate tons of bureaucracies, (paper) money and time.
Perhaps it could be interesting to think about the possible results of having a location-based token on us as a society. For example, the social signaling effect of holding a token of a location like my hometown or in contrast, a place like SF. How would that be translated to a network’s value, token value, and the people’s reputation?
While the future of a decentralized decision-making economy seems to be the inevitable(at least to me), there’s still a lot to figure out. Some of the challenging aspects with putting up such a governance system in place include reaching social consensus, as nothing would be changed otherwise. Reaching that point requires a lot of education, open-mindedness, and acknowledgment that the current system is broken. I’m curious to see what we can extract from the characteristics of the Kibbutz communities in Israel, combined with the innovation DAO bring us.
A sovereign community(whether digital or physical) that operates without a dictator, and powered by on-chain governance could potentially be the most potent, elegant society we will experience.