DAOs enable you to fork the shareholder base. This is a permissionless way for anyone to compete as a shareholder. However, in order for this to be maximally effective, certain conditions must be met.
The entire “business” must be on-chain. A fork must have a fully equivalent offering to the original, plus the modifications added by the new shareholders.
There must be no network effect or economies of scale giving advantage to the original. There must be no lock-in to the original version.
Application state must be included in the fork. This is an extension of the previous point.
There must be minimal friction in activating the fork. It must be easy for consumers to choose which version they prefer.
Users must be able to activate the fork without needing to trust its developers. A hidden benefit of scale is increased trustworthiness.
As an example, imagine there was a social network developed by a DAO. If this social network ran on AWS with a proprietary database and backend, it couldn’t be forked in a meaningful way.
Even if the forkers had access to the source code, it would be extremely difficult to find early adopters for a new social network with no users or data.
Even if users could easily import their existing social graph and data into the forked app, they may not want to provide this information to an unknown developer or execute unaudited code.
But let’s take for granted that you could trust the code. What would this give us?
All of a sudden, you can have a sort of market validated A/B test for any part of the company. If a developer wants to add Snapchat-style stories to the social network, they can create a fork that does just that. Users can “install” that fork and continue using the app as usual. In doing so, they are voting with their feet.
As their usage grows, successful forking DAOS can get compensated with an increased stake in the original DAO and changes can be merged upstream. Or, if negotiations fail, the respective projects can diverge and hard-fork away from each other.
This is new dynamic has profound consequences. From the developer’s perspective, iterations were performed permissionlessly. Since there is no limit or bottleneck to the amount of forks that can be created, the shareholders are no longer a bottleneck. The iteration process, which generates compounding growth, has been parallelized and will scale linearly with the amount of resources provided to it.