“See what they did with The DAO!”
When it comes to blockchain, geeks are quickly reaching “The DAO” point, sort of a Godwin point, but for technology. At a period where blockchain experiments of new organizations were abounding, The DAO experiment sounded like the end of the “summer of love”.
For the uninitiated, let me first explain what a DAO is, and what The DAO was. A Distributed Autonomous Organization is an organization with no specific governance body, and where decisions are taken by all the stakeholders. Once a theory, DAO became a reality with the rise of blockchains. “The DAO” was one of the first projects to try this form of organization, with the goal of managing a fund. Everyone was allowed to buy shares of this fund through Smart Contracts, and use them to vote for projects to fund. All members were anonymous (well, except some well-known figures on the Ethereum scene), and all the governance rules were written as computer code (hence the name “Smart Contract”).
To make it simple, the code in Smart Contracts was flawed and the money was stolen. As one of the assumptions of this experiment was that the trust binding all organizations could be moved from people to code, we can now say that this is not yet true: the trust must still rely on people.
Another issue raised by this experiment can be resumed by “who to sue”? If the organization has no legal existence, who is legally responsible? If the flaw was in the code, can the thief be sued? Can The DAO coders be sued by the Smart Contract holders? Who you gonna call? Certainly not Ghost Busters, because in fact, the burden of the health and security of those systems are place on every of their users. So if you get hacked, blame yourself.
Perhaps because of all those issues, blockchain-based organizations are still not common. Despite Bitcoin’s success in the markets, this technology is still restricted to proof of concepts and altcoins, and highly skilled technologists. But it begins to change…
If Smart Contracts are not secure yet, they convey a new vision of what could be a blockchain: a place where an organization can securely store its information with guarantee of immutability, transparency and anonymity. That’s the vision of the “blockchain 2.0” movement that separates the infrastructure and application.
Infrastructures are blockchains provided “as a service” which no more require blockchain applications editors to fork the bitcoin or another blockchain (fork: like a copy paste of the code where you can start to make your own changes) and deploy tons of nodes in order to make their projects work. But where Ethereum proposes to store also the code of the application within the blockchain, Blockchain As A Service (BAAS) only proposes to “buy” some place in a block to put some of your application data. The editor just use this place as he wants to, according to his own business rules.
Blockchains As A Service are making it much more easy and less expensive to create new blockchain applications. But, as the data stored in it can be encrypted, they also provide more security than Smart Contracts. This way, applications editors can control who can write the data. I know: we are no more in a Decentralized Autonomous Organisation if only one structure has the control of the data. But with this compromise, blockchain-based applications can now get a legal body, and provide all features that prevent people to use them: legality, insurances, customer service, … in a word: Trust.
At Impak Finance, we are purpose-driven. And as for our governance body, our first responsibility it to make sure our mission stays the main driver of all our decisions. We wanted the same for Impak Coin, and for this, humans we can trust are still better than code. That’s why we didn’t choose to follow the DAO trend and we wanted to entrust the Impak Coin to a governance body compound of well-identified persons that are known to be working in the best interest of the Impact Economy. We wanted also to be fully compliant by fulfilling our KYC (Know Your Customer), AML (Anti Money Laundering) and tax declaration obligations.
So, all our technical decisions were made in order to ensure that governance and legal directives will be followed. The problem was to mix the need of control offered by a proprietary stack with the security, transparence, and immutability of a public blockchain.
We reviewed many solutions for our Impak Coin project: forks from bitcoin blockchain, Smart Contracts on Ethereum. Ultimately, we chose to use Waves because of its “blockchain as a service” vision, and because it’s a Proof of Stake blockchain where transactions are less power hungry (and thus more green). This was the perfect match for us. It allows us to create a proprietary stake upon it, that will provide standard eWallet APIs to allow eWallet editors to propose Impak Coins on their apps, and block explorers to ensure transparency. Most importantly, it will also ensure that we can ascertain the identity of our users and record their transactions without compromising the anonymity on the blockchain.
As blockchains are becoming more mature, they can gain purpose and deliver their promises to the greater public. And that’s what we want to do at impak Finance.