2021/12/24ブログ
DAO and Sports organizations
NFT (Non-Fungible Token) has been spreading rapidly since the beginning of 2021, simply put, an NFT is digital data in a way of writing and connecting electronic information about the owner of digital content, etc. on a blockchain. Digital content itself can be easily copied, but the fact that there is only one digital content with the owner’s information, etc. attached to it creates a scarcity in value. In the world of sports, the NBA is selling digital cards of players (highlight videos of their plays) as “NBA Top Shot”[1] in the form of NFT. European football clubs are also distributing fan tokens as an NFT[2]. The Japanese sports industry is starting to use NFT[3] as well.
Reportedly, a DAO, which stands for Decentralized Autonomous Organization, will be the next wave of an NFT.
In general organizations such as corporations and nations, there is a centralized governing structure (board of directors, parliament, cabinet, etc.). In a DAO, decisions are made by voting in accordance with predetermined rules such as a majority of participants, and those decisions are automatically executed by smart contracts (programs that are automatically executed) [4] written on a blockchain. Rules and smart contracts on a blockchain are difficult to manipulate as the process of determining and executing decisions can be checked and verified in real time.
As an organization, DAO has a feature of transparency, fairness and efficient operation. The Bitcoin network is said to be the first DAO without a centralized governing structure.
The advantages of a DAO, such as its ability to manage an organization in a transparent and fair manner, seem to be compatible with the good governance that sports organizations are aiming for. Problems with Japanese sports organizations are risen by a centralized governing structure such as board of directors, councils and general meetings of members. If these centralized governing structures could be eliminated and the ideal management of sports organizations could be made into smart contracts, I strongly believe that good governance of sports organizations would be realized.
However, smart contracts, which are programs, have some flaws such as the inability to set ambiguous conditions and the vulnerability to program hacking as seen in The DAO case[5]. The former point seems to be complemented by the AI learned from the good governance of sports organizations.
At present, DAO cannot replace the existing centralized governing structures in sports organizations, but we can start to see such signs gradually.
Using the fan tokens in European football clubs, the holders of the fan tokens are given some decision-making power over their clubs. For example, at Barcelona FC, token holders can submit designs for the walls of the dressing room in the home stadium (Camp Nou), which will be voted on by the token holders. Similarly, at Paris Saint-Germain, token holders will vote on the design of a crown for their home stadium (Parc des Princes). Nevertheless, none of them are beyond fan service.
In the United States, the DAO “Krause House” (“KH”), named after former Chicago Bulls GM Jerry Krause, has been launched with the goal of buying an NBA team[6]. KH’s plan has been published as Flightpaper. According to the Flightpaper, it lists three options:
1) owning a majority stake in the team,
2) owning a minority stake in the team, or
3) owning social tokens issued by the team.
KH recommends the option 2). It said the goal of KH is to have fans become part of the team’s governance and involved in team decisions. In the first six days after its launch, 2,000 members raised about 4 million dollars’ worth of cryptocurrency. It is interesting to see whether KH will be successful or not, as it is reportedly said that only a few billion dollars is needed to buy an NBA team.
Finally, about the legal issues of a DAO organization, since a DAO is deployed on a blockchain, and people from various countries are able to participate in a DAO, how should this DAO be legally evaluated, and which nation’s laws will apply it in the first place? Also, are the responsibilities of DAO participants limited or unlimited?
Media reported that the state of Wyoming in the US has enacted a law that makes DAOs limited liability companies, and it seems to be a request from a group of lawyers for legislation to incorporate a DAO in Australia.
However, it is doubtful whether a nation’s laws can bind a DAO, which is a decentralized organization.
I believe that a centralized governing structure in sports organizations run by a few people will not be able to get rid of corruption and will become a minor entity, while a more sophisticated sports organization that achieves good governance through a DAO will become the mainstream in the near future.
Author TAKAO OHASHI
[3] https://prtimes.jp/main/html/rd/p/000000001.000084533.html
https://prtimes.jp/main/html/rd/p/000000144.000019259.html
[4] According to Nick Szabo (1993). Smart Contracts: Building Blocks for Digital Markets, it cited an example of a vending machine.
[5] In 2016, The DAO, an independent decentralized investment fund where participants vote on investments, was hacked and 5.2 billion Japanese yen worth of cryptocurrency was stolen.
[6] https://www.npr.org/2021/11/26/1059413217/crypto-enthusiasts-want-to-buy-an-nba-team-after-failing-to-purchase-us-constitu