Estonia's business ecosystem is open for distributed, community-driven enterprises like e-resident-founded teledisko DAO
When you bring to mind a typical web3 enterprise, you might expect it to center on wholly digital products or services. Decentralized Autonomous Organizations (DAOs) are already synonymous with virtual experiences, like NFTs and spatial environments, powered by token economies and transfers of value. teledisko DAO is an enterprise with immersive real-world experiences at its heart, ones which embrace all the senses. They create disco events in upcycled telephone booths, to create the ‘smallest disco on earth’ which sounds about as analogue as it gets — complete with lights, smoke machine, and of course, your theme tune of choice, for events across Berlin and further afield.
So, why has teledisko chosen the web3 approach of a DAO, when it comes to expanding their business and recognizing the value of contributors?
In brief, a DAO is a self-governing entity, in which people can participate democratically, according to the protocol of the underlying blockchain. A DAO operates according to rules set via smart contracts, and recorded on a distributed ledger, so it decentralizes governance and directorial responsibilities. It’s a completely alien paradigm to the traditional business world, of legal persons with liabilities and obligations, even of fixed locations. As the code runs on every node of a distributed blockchain, it’s unclear where some DAOs are even headquartered!
As such, there is no clear legal framework for pure on-chain DAOs anywhere in the world other than Wyoming, USA.
In Estonia however, there is the possibility to manage DAOs through the private limited company (Osaühing or OÜ) with which many e-residents are familiar. It does mean compromising on some of the decentralization, but Estonia's digital environment provides the foundations for democratic decision-making. It's made possible due to recent law changes extending many digital shareholder voting rights in 2020. The amendment to the General Part of the Civil Code Act made it much easier to transfer shares and take other business decisions digitally during the Coronavirus lockdowns. But it also paved the way to the kind of decentralized decision-making required for DAO governance — off chain, but legal, distributed, and fast.
From the world’s smallest disco in teledisko DAO, to the world’s newest business model
By transforming the way decisions are made in a growing enterprise, businesses like teledisko are changing the way to recognise and distribute value, according to the direct participation of its contributors.
Indeed, Benjamin von Uphues (Benito to his friends) thinks about business success a little differently to most founders. He does not go by the title of CEO, rather defining himself as the board member who executes the DAO’s decisions.
“It’s a philosophical question, of how do I treat those who create value fairly,” he explained.
“In a classic business model, the more I exploit those who work for me, the less I pay them, the more that remains for me,” he continued.
Benito realized this model did not suit his core ethical way of thinking, and was not the way he wanted the business to grow and develop.
“So the core reason we turned into a DAO was to reward those who actually create the value. In the teledisko DAO, we share the value we create based on how much has been put into the business by the individual.”
Because a DAO is driven by smart contracts, a data source is required. Then actions such as payments can be executed without human frailty and interference, according to rules which are specified in advance — transparent and verifiable. teledisko uses their Odoo open-source Enterprise Resource Planning (ERP) system as their oracle, to track the time of each contributor to the project. This then rewards in direct proportion, through an internal token, according to a linked set of expertise tiers.
It’s a great example of how web3 principles can power business in the real world, and be used to run an already proven business.
At teledisko DAO, web 3.0 meets reality 1.0
teledisko was initially constituted as a German company, and is now sustainable, thanks to the success of their product. In January 2022, the Estonian company teledisko DAO OÜ was founded, holding 100% of all shares of teledisko DAO, and serving as the holding company for teledisko GmbH. They’re not using the DAO framework to sell tokens and raise funds, they just want to distribute the profits in a transparently fair and democratic way, and allow for distributed decision-making.
Read more about types of business forms in Estonia:
Benito and his team deployed their DAO on the Evmos blockchain, a prominent Ethereum Virtual Machine (EVM)-compatible blockchain. This unlocks the potential for extensive partnerships and extensions to the business model, due to EVM interoperability being at the heart of much existing web3 decentralized finance infrastructure. Bridging into the Cosmos ecosystem via their SDK also opens the way to future technical extension.
To do this, they’ve developed a robust and replicable design called NeoKingdom DAO. They recently won second place in an Evmos hackathon with this design. They are already brokering collaborations with several other creative businesses, who wish to operate under the same model. Each kingdom will have its unique token, but they will be tradeable and interrelated.
“The NeoKingdom DAO of DAOs will act as a commonwealth, of a set of economically intertwined businesses — sharing a constitution and values. But there are plenty of challenges to overcome, because we’re challenging the status quo in so many ways.”
A new kingdom, for a new economy
He’s not wrong. As well as subverting extractive capitalism, the NeoKingdom DAO is going to need new ways to create employment contracts and taxation structures, when their entire business is based on this new redistributive model driven by smart contracts.
But Benito is ready for challenges, and has tremendous clarity of vision on his guiding purpose.
“We’re aware that what we’re doing is highly experimental. But we’re clear in our manifesto that everything we’re doing is for the greater good.” If something doesn’t hold up legally in the first instance, they’ll keep iterating until they find a solution, and unlike many web3 enterprises they are not in it to sell tokens and raise money from the public.
“For me, the DAO concept is the only reason to be in web3. I believe that this is the way most things will be governed in the future.”
According to the NeoKingdom mission statement, “The mission of the NeoCommonwealth is to recognize the energy, enthusiasm and contribution of individual’s time as an asset that should be considered as an investment. This will be achieved by adopting a new type of governance model – DAOcracy. Fostering this concept will create a better existence for everyone on planet Earth.”
With a total treasury of nearly US$9bn and over 10,000 individual DAOs at the time of writing, this is a governance model in its infancy. This is largely due to a lack of regulatory infrastructure to support its growth thus far.
The pioneering offering of Wyoming combined with the work of PwC Legal will continue to unlock the potential for DAO inception within Estonia and the EU. We also anticipate further shifts in commercial codes from forward-looking jurisdictions around the world who are keen to embrace innovative ways of doing business.
Many of the guiding principles of DAOs align well with the transparent and accessible digital nation of Estonia, which has always led the way in pioneering new approaches to getting things done. So while the future remains unwritten, e-Estonia will remain at the forefront of compliant, secure, and transparent ways of doing business, in 2023 and beyond.