Aragon: Can the Economy be Built on Blockchain?

Transition to the digitally interconnected world

Computers, laptops, smart-phones, television – all have become an inseparable element of our daily lives in the ever-changing digital age. With the technological advancements of the past decade, we’ve been introduced to a new world of endless possibilities. To facilitate a transition to a more transparent, decentralized, efficient and co-operative environment of tomorrow, blockchain technology has become more prevalent in the recent years. With the ability to enhance the foundations provided by the internet, blockchain is poised to create a more effective, transparent, rapid and autonomously operating economy.

According to Swan (2015), blockchain is “a comprehensive information technology with tiered technical levels and multiple classes of applications for any form of asset registry, inventory, and exchange, including every area of finance, economics, and money”. Therefore, it can be stated that blockchain represents a new method to realize, valuate and transfer any discrete unit as well as coordinate all economic activity at a much faster rate than ever before.

Blockchain has already begun its infiltration with various cryptocurrencies and projects – payments, business management, gambling, security, data, sports, etc. already slowly adopt the benefits presented, indicating that large-scale adoption is only a matter of time. The question remains: Are we ready to accept and execute the change, or are there still overarching difficulties to overcome before the real transition into a digital economy can occur?

The case of Aragon

It is important to note that change in economic activity is significantly affected by businesses taking advantage of emerging technology in order to introduce new products and services. As Berger (2006) indicates, the foundation of any strong economy is competitiveness among organizations and the willingness to globalize and introduce new methods of value creation. Therefore, it is essential to have a supporting framework that provides an efficient way for organizations to transition and adapt to blockchain adoption. To help facilitate that, an emerging project called Aragon may play an important role in connecting the corporate world with the benefits of blockchain and bring about a more cohesive economy.

What is Aragon?

The Aragon Network (AN) intends to be a digital jurisdiction that makes it easy and efficient for organizations, entrepreneurs and investors to operate — a task currently made difficult by intermediaries and third parties (such as governments and regulatory bodies) decreasing the output of operations by imposing restrictions and creating complex regulatory frameworks. In the future, most company activities could instead be structured on the AN (see organizational setup). Not only does it provide a platform for efficient company management, communication and partnerships, it also minimizes costs related to most tasks required to run those operations. Currently, the primary demographic is private companies, but additional support is built for NGOs, project management, charities, and even government organizations.

Aragon also utilizes a native ANT token, which is used to facilitate network services, either for governance or other functionalities. For example in the case of the court, holders will be able to use their tokens to help arbitration and get a reward. Furthermore, when an organization needs investors or plans to do a fundraiser, the invested tokens can also represent shares in the company on the Aragon Network. Once one invests and buys shares of an organization, they’ll be allocated appropriate voting rights and governance rules.

In a capitalistic world run by organizations creating products and services while constantly looking for ways to improve operational efficiency, Aragon can target various issues related to blockchain access as well as kickstarting the economy through a more accessible, transparent, and borderless value creation.

Efficiency and next generation of organizations

Aragons’ fundamental strength is the compliance with Ethereum. Every company that wants to move into the blockchain space through Ethereum can be incentivized to run those particular activities, management wise, on the Aragon Network. The potential this holds is significant, as Ethereum has already been recognized (as proven by the countless respected organizations part of the EEA) as the primary blockchain to run dApps and smart contracts on. All in all, if someone is incentivized to take advantage of blockchain, especially Ethereum, it is logical for them to use the Aragon Network for management efficiency.

Furthermore, co-efficient ecosystems can be created through the cooperation of blockchain projects, where each party benefits from one another. Various blockchain projects could transfer their operational management onto the Aragon Network and create a borderless system for companies to communicate and exchange value. For example, Civic could create their own network on Aragon and provide its services to the projects on the Aragon Network, or OmiseGO utilizing their platform and allowing projects to use the payment processing services – keep in mind that the opportunities for co-efficiency is limitless in the blockchain driven world.

Moreover, Aragon supports the creation of own ERC20 token on the network, so any company or project can create its’ cryptocurrencies through Aragon while making the most of the platform for operations as well.

Start-ups and external funding

An additional strength of Aragon lies in the external funding sector. With the increasing number of startups and companies looking for investments, the importance lies in making funds easily accessible, which in turn can incentivize economic activity. Furthermore, it can be argued that investing in startups is remarkably inaccessible to the public and mostly happens in a closed environment, making it harder for investors to invest and for companies to acquire funding when needed. This is especially problematic for start-up organizations and kickstarter projects, as they need to be able to raise capital quickly, which traditionally means crowd funding through a third party, applying for a business loan, or bothering friends, relative and connections for investments.

To overcome that barrier, Aragon Core organizations can easily issue new shares in exchange for capital without operating with a third party, both through direct sales and public offerings. This means that investing will become much easier and accessible to both organizations and investors, helping aid the growth of companies in the marketplace and boost the overall economy, as most hindered operations are due to lack of resources.

Modularity

Aragon also acknowledges that different organizations might require additional functionalities for their unique organizational operations. For this, the modular software has been made accessible, allowing additional functions to be developed on top of Aragon Core in the instance where organizations might require features for things relative to their industry/management/governance etc. Effectively, organizations will be able to use the Aragon Network basic constitution and services as a framework and build custom set of rules to address individual needs. That type of flexibility, both through a framework and modular functionality, allows Aragon to become the stepping stone of future organizations who wish to build their infrastructure on the blockchain, making Aragon a power-player in the years to come.

Organizational Set-up

In addition to providing modular software for every company to create their own terms of organizational operation, Aragon has also taken into consideration the basic needs of companies today. This is achieved with the following functionality:

  • Identity: Aragon enables any company to create, transfer or develop their identity by providing means for blockchain benefits.
  • Ownership: Aragon provides semi-automation with the network and creates ease of access to funding, voting and overall governance.
  • Voting: The platform’s accessibility and functionality will simplify the process of voting and shareholder inclusion by making it more efficient.
  • Capital: Through creating a platform for companies to acquire funding more easily and for investors to have access to investing, Aragon can solve a lot of problems of hindered development due to insufficient capital.
  • People: In the end, it’s human beings who build the organizations. Aragon is working to create easy ways for organizations to on-board (identity) and reward (payroll) them.
  • Outreach: Marketing efforts are a necessity and allocating people & budgets for that is inseparable, referring back to links with capital and people.
  • Payment processor: Aragon Core allows to capture payments easily from both customers, investors, and other companies, removing the need for third-party processors with high fees and long transaction times.
  • Accounting: Aragon keeps a record of all the transactions and activities on the network, compiles them and creates reports in a semi-automated fashion.

All of the above-mentioned factors link together and complement each other to create an efficient ecosystem for companies to operate in. Furthermore, taking into consideration that Aragon has also created modular software for companies to introduce additional benefits through personal coding, the platform can provide full functionality and immense benefits for every future organization looking to benefit from blockchain technology.

Removing of human conflict

Finally, by introducing Aragon Network Jurisdiction (further referred to as ANJ), Aragon aids companies by providing tools needed to solve subjectability of human relationships and personal vendettas.

Here is an example extracted from Aragons’ whitepaper:

An investor invests into an organization and receives some voting power. The organization founder then goes rogue and sends all investment money to his personal account. If this was an Aragon organization, the investor just had to make sure that transactions above a certain threshold have to be approved by a majority voting.

ANJ has beneficial incentives for organizations to be a part of it, since:

  • Parties that want to interact with the given organization will want certain guarantees in case there’s a breach of trust not covered by the contracts.
  • Some bugs could be stopped by opening an arbitration that could freeze all activity until the case is resolved.

All in all, the ANJ is there to provide an optional decentralized intermediary between human conflicts and attempts to provide tools, through voting and automated smart contracts tracking, to resolve them. By decreasing probability of manipulation and self-interest within organizations that seek to exploit investor money, investors can have peace of mind in regards to how provided funding is allocated.

Possible hurdles to overcome

While Aragon shows a lot of promise, there are no projects without limitations or problems to overcome based on the current blockchain related developments. We can not forget that the adoption of blockchain technology is still at its infancy, and therefore hurdles need to be considered as part of the ongoing discovery. Here are some possible problems to consider:

Minting

The cost to mint new tokens is determined by ANT holders, which will likely be a contentious decision based on the economic principles of supply and demand. Ultimately, Aragon believes that token holders will eventually decide on a healthy equilibrium for inflation and the market will accurately reflect the optimal minting cost. On one hand, this clearly reflects the decentralized model that cryptocurrencies should display (due to democracy elements and mutual agreements), but on the other can lead to a lot of collective manipulation and conflict within the community. Therefore, Aragon places their trust into the hands of ANT token holders, which is the right thing to do but can also backfire when the majority of tokens are held by a certain group of people wanting to manipulate the currency. Overall, if ANT token wants to display stability in growth, there needs to be a majority consensus within the community.

Development needs

The properties of the Ethereum blockchain present unique opportunities for the creation and management of decentralized organizations, including immutability of records, transparency, and fast transactions. But in order to satisfy multiple requirements that human beings need in order to transact and create value, a layer on top of it needs to be created to align the incentives of everyone participating in the system. This can be tricky from a development point of view, which is why it is listed in the limitations sector. When Aragon is able to make it easily accessible for everyone to create additional layers for individual needs on top of the platform (this functionality is planned, but not yet executed) without issues, then this limitation is void.

Further limitations based on whitepaper:

  • Subjective breaches: Smart contracts can encode most of the possible breaches of contract, but there is always subjectivity in human relationships. An unbiased Aragon Network arbitration system is needed for cases where conflict is not explicitly resolved in the smart contract code.
  • Software bugs: The error is always between the chair and the keyboard. The code can contain bugs so the software needs to be easily upgradeable, and a sound bug bounty mechanism must exist to incentivize potential attackers to claim a bounty, rather than attack.
  • Reward systems: Monetization around certain protocols and systems is unclear at this point. Some players will be key to making organization possible, so a simple reward mechanism is needed.

 

Conclusion

In conclusion, Aragon displays fundamental strength with practical use-cases of blockchain technology and undeniable economic upside potential. In the capitalistic world run by companies, it is only a matter of time when organizations seek to benefit from blockchain technology referred to as the Internet 2.0. However, not all are technology oriented and have budgets to spend on personal blockchain development, meaning that if blockchain sees more adoption, they are forced to adapt to the changing environment. Aragon can step in and provide functionality to make operations a lot more efficient for those organizations, and with already established transparency, development plans and use-cases, it simply cannot be ignored. Acting as a digital jurisdiction that makes it extremely easy and effective for organizations, entrepreneurs and investors to operate, Aragon can become a lot more than just a cryptocurrency, but rather a stepping-stone in aiding the world transition into the blockchain world of tomorrow.

 

References:

Swan, M. (2015) Blockchain: Blueprint for a New Economy. Sebastopol: O’Reilly Media.

Berger, S. (2006) How We Compete: What Companies Around the World are Doing to Make It In Today’s Global Economy. United States: Doubleday.

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