Envisaging a Decentralised Autonomous Association of Professional Accountants

Small business accountants explore a blockchain use-case to collaboratively improve their profession by distributing governance of accounting bodies and turning their knowledge into currency

Nov 17, 2023

Yesterday I hosted an Accountants On-Chain online event for some members of the marvellously supportive Small Business Accountants & Advisers Brain Trust, Australia Facebook group.

The event was prompted by this tongue-in-cheek post by a member:

Hey just putting this out there- since we get more information and support from this group than CPA,IPA, CA - can we set up our own body to compete!

There was an outburst of humorous enthusiasm in comments but some caution, as it could “destroy something beautiful” and “take fees to deliver”.

So I replied:

Hit me up. We can set up a DAO (Decentralised Autonomous Organisation). It won't cost us anything if we contribute know-how and support in a Value 4 Value model. Here's one I'm a member of: lawfidao.com Australian lawyer-led

… because my main role in the group is having a blockchain answer for every problem!

I’m Electra Frost. I’m a Fellow member of one of Australia’s three professional accounting bodies, the Institute of Public Accountants, a registered tax agent, and a Chartered Tax Adviser. I'm also a member of Blockchain Australia, and firmly believe in the convergence of the accounting and blockchain industries as their ethics and futures in finance are aligned. Today, I want to share my vision for redefining and restructuring association in the accounting profession through socially transformative decentralised open-source technologies, specifically blockchain and Decentralised Autonomous Organisations (DAOs).

The Need for Change

In my long career as a public accountant and a blockchain enthusiast, I've realised the immense potential of Bitcoin and open blockchain in redefining how not-for-profit and professional associations represent and benefit their stakeholders. Traditional centralised models are becoming obsolete in the face of digital transformation. This is where public blockchains and DAOs come into play, offering a new paradigm of transparency, efficiency, member-driven governance and value creation.

Initially, when I was thinking of an applied blockchain project for my advanced diploma, I was concerned that our professional education was not keeping pace with rapid changes in the economic and technological landscape. It’s so difficult for blockchain industry people to find accountants, bookkeepers and tax agents with the knowledge and technical skills to support them. Reasons for this that are beyond the scope of this article, so let’s fast forward to the solution - peer to peer CPD in a DAO!

How much do our CA/CPA/IPA post-nominals really inform the public about our experience, expertise and ethics? Imagine if our professional recognition and standing was backed by the accreditation of our peers, through network consensus, independently of our professional memberships. Changing times - we can learn and earn more, using blockchain.

But why stop at CPD? That problem is a mere symptom.

There are other problems in our profession to solve, which I read about every day in the SBAABTA group.

The more problems solved, the more value is created for more people, right?

So….. back to first principles.

Understanding Blockchain and DAOs

Blockchain is a governance technology, it’s also an accounting technology but is so much more than a technology for financial transactions; it's a foundation for building transparent, immutable, trust-based systems. It offers the ability to scale exponentially and reach consensus as additional users are added to the network.

You can simply think of blockchain as a daisy chain of transactions. Each block in this chain is validated and added to the existing chain, ensuring that no one can alter the history. This immutability is part of what makes blockchain a game-changer.

Now, imagine applying this technology to create a DAO – a decentralised, autonomous organisation running on smart contract code for potentially millions of strangers to do business with each other in a super automated, trustless, verifiable way, without any third party processors or central authority.

Rules without rulers

A DAO operates on these P2P and consensus driven blockchain principles, while ensuring that every decision, every transaction, is transparent and immutable. It's a radical shift from traditional hierarchical structures to a flat, distributed model of governance and value creation.

Who decides who can call themselves an Accountant?

It was shocking to be reminded that anyone can call themselves an accountant when Joe Kaleb posted in LinkedIn:

”We all know that the term “accountant” is not regulated in Australia like are the terms “solicitor” and “tax agent”. In other words, anyone can hang out a shingle and call themselves an accountant even if they don't have any educational and professional qualifications as well as relevant experience.

The Institute of Public Accountants (IPA) has suggested restricting the use of the term “accountant” in a submission to the Parliamentary Committee inquiry set up in the wake of the PWC controversy: (Page 7: Gaps in coverage: unregulated professional service workers)

The IPA has told the Joint Parliamentary Committee on Corporations and Financial Services that there are thousands of people who can legally call themselves accountants without being subject to any accountability framework or governance requirements. “

David Young offered an insightful solution with a bit of history:

Agree - perhaps it’s time for a return to the old Public Accountants Registration board. If my memory serves me correctly it was the CA’s and CPA’s that advocated it be disbanded in favour of the professional bodies taking over its functions.

If the three accounting bodies can’t agree to work together on this, we don’t need to wait. Collaboration over competition!

100,000+ members in a DAO can efficiently reach consensus on what an accountant is and who can publicly wear the digital badge as validated by their peers, to restore our reputations and standing in the public’s view.

(Fearless advocates for the recognition of high calibre BAS Agent bookkeepers as management accountants and business advisors, Heather Smith and Lielette Calleja, will be delighted!)

The Roadmap to Decentralisation

The roadmap for a DAO - or let’s say a Decentralised Professional Association (DPA) - would encompass development of a Whitepaper, a minimum viable product (MVP) and community (MVC), a blockchain token economy model, smart contract design and decentralised digital IDs. There are also many organisational structuring, governance, legal, tax, financial management, marketing, membership and industry liaison considerations for the Establishment Committee (Founding Members).

Members of a Decentralised Autonomous Organisation (DAO) typically consult in meetings to reach consensus on the above through a combination of digital communication platforms and blockchain-based voting mechanisms. They discuss proposals, strategies, treasury allocations and operational decisions in virtual meetings or forums, and then use smart contracts on the blockchain to facilitate transparent and secure voting.

To DAO or not to DAO… yet?

It’s not possible or legally advisable to go in “DAO first”. Decentralisation is the goal, not the starting point. The Establishment Committee starts centralised to ensure members are protected. We’re dealing with accountants and lawyers here!

Initially, these activities would be conducted by the Founding Members forming an Establishment Committee that meets over centralised digital platforms, in public view for transparency and trust. This “normal” initiation should attract members who do not need to be intimidated by the technology. Initially, this process should ensure that every member's vote is recorded and immutable, reflecting the collective decision of the group in a democratic and decentralised manner as closely as possible to how it would be done on smart contracts in a fully decentralised DAO.

This roadmap is not just a plan but a vision for highly scalable learning, earning and reputation management ecosystem where continuous professional development (CPD) content is upgraded and accessible through a decentralised, autonomous education system in which members’ contributions of knowledge and reputation become a form of currency.

The model I envisaged to decentralise professional education and credentials was initially inspired by participation in The School of Bitcoin open project (under the auspice of Digital Playhouse Foundation, led by education technologist Kieran Nolan).

I am also deeply grateful to Joni Pirovich of BADASL, the Creator Spirit (founder) of LawFi DAO, and to the knowledgeable contributors on its DAO Day Meetings that I learned so much from in 2022. This DAO is still going, and it needs accountants and tax agents, so stay tuned! (more collaboration on the roadmap)

A New Vision for a Post-Facebook World: SBAABTA DAO

The SBAABTA DAO is a mind provoking proposal for restructuring and redefining accounting industry association using decentralised technologies, building on the foundations of a large mutually supportive social media group of small business accountants, advisers, tax agents and BAS agents.

“But why can’t we just do it in Facebook?”

Unfortunately, nobody owns their content on Web 2.0 platforms like Facebook, and there is no mechanism to compensate them for the time and knowledge they contribute to the group, helping one another to overcome the various challenges faced in public practice… and with professional associations and the Tax Office.

However, they could be earning if interacting in a Web 3.0 digital environment (on a Bitcoin blockchain layer, for example), through leveraging the largest most secure networks in the world that the resilient organisations of tomorrow are being built on.

Scenario 1: Tom shares a useful business valuation tool with his peers

Web 2.0 Facebook: Owns Tom’s data. There is no mechanism for Tom to be paid. Tom hopes some people use his services or take out a monthly subscription.
Web 3.0 DAO: Tom own his data. Say, as an NFT that interacts with digital wallet of $CPD coin. Every time someone connects their digital wallet and uses his valuation tool, or their AI agents harness it for a client solution, Tom is automatically paid.

Scenario 2: Dana requests submissions so she can represents tax agents’ woes at an ATO consultation

Web 2.0 Facebook: Dana is not paid and her reach for submissions depends on Facebook’s algorithm. Or Dana only contacted members of one professional body. Consequently, tax agents in the group were excluded from having a say. She probably spent a lot of time manually preparing and communicating it too.
Web 3.0 DAO: All of the group can vote, all accounting body members represented, and Dana is paid from Treasury. Her time was saved by using AI-driven encrypted tools to develop the survey and presentation from group content (comments). Those whose comments informed her efforts are automatically rewarded as every person’s contribution in the system can generate currency.

This is the ownership economy in action. There are many other examples of governance and CPD value unlocks that SBAABTA DAO Founding Members are thinking about since the webinar, that will be discussed in the next one. A basic knowledge of blockchain opens up a myriad of possibilities.

The SBAABTA DAO we hypothesised would be designed to not just incentivise and reward its members for certain contributions (Value 4 Value) but to create the largest, most influential and effective decentralised consensus-driven digital membership to solve real problems faced by small-to-medium practitioners in our profession, thereby offering a unique value proposition to its members. It's about creating a system where decision-making is democratised, and all value is distributed to contributors.

A Note on User Experience

The user interface and experience (UI/UX)of the SBAABTA DAO platform, however, may need to look and feel a bit like Facebook so members transition easily. Experience with Web 3.0 digital wallets will require some learning but no more than for MyGov ID. Familiarity with new platforms takes time and gamification may help.

Decentralisation in Practice

In a DAO, the traditional organisational hierarchy is dismantled. Instead of a top-down approach, decision-making is distributed among all members. This model eliminates the need for a board of directors and their associated costs. Smart contracts execute decisions made collectively by members, ensuring transparency and efficiency.

Just as Bitcoin, the Genesis Block for a Peer-to-Peer Electronic Cash system, removed the need for intermediaries such as banks, blockchain-based organisations, such as DAOs, significantly reduce the costs of agency by aligning the interests of certain token holders (like stake holders or share holders, with governance rights) with those of the organisation.

In these structures, token holders are not just investors or passive participants; they are active owners and decision-makers. The use of blockchain technology ensures that governance is decentralised and transparent. Every token holder has a stake in the organisation and the power to influence decisions directly, typically through a voting mechanism encoded in smart contracts.

This setup eliminates the need for traditional management layers and reduces the costs associated with intermediaries, as decisions are made collectively by token holders, ensuring that their interests are directly represented and managed without the traditional agency costs found in conventional corporate structures.

See - Jason Andrew’s bold piece - “Eyebrows raised over Chartered Accountants ANZ’s $90m payroll bill”
... it was intensely discussed in SBAABTA!
Jason says: “Keeping a member body accountable to the members is important – we all have a role to play in that.”
I agree.
Blockchain fixes that. We all have a role in a DAO.
So put a line through ‘Employee Benefits and staff related costs”!

The Role of Bounties, Contributions and Leveraging our IP

In a DAO, tasks are organised through bounties. These are tasks for which individuals can apply, and upon completion, they are compensated transparently. This system ensures that the most skilled individuals are chosen for tasks, fostering a merit-based ecosystem. It's a radical departure from the traditional employment contract model, where managers delegate work down the chain.

We can envisage a blockchain based organisation also empowering each individual with the opportunity to turn their intellectual property into digital assets that can generate passive income (royalties) when used by others, using smart contracts and AI for an automated revenue stream.

There would be no employment contract claiming ownership over the intellectual property you created because no-one is an employee. Everyone is a freelancer in a network of value creation and distribution, with its impact growing in proportion to the number of users — a theory supported by Metcalfe's Law. With this in mind, a system could be designed that provides an provision for contributors when they are unable to actively contribute - i.e., a basic living wage.

The future of work is freelance.
The future of taking leave and superannuation guarantee is a Decentralised Universal Basic Income (UBI).
The future of revenue generating intellectual property is digital assets (for example, working paper templates).

Turning knowledge into a tradeable currency

As we illustrated above with Tom and Dana example of resource sharing and representation, in a blockchain protocol, knowledge contributions can become currency where information and expertise are directly tradable and valuable. Through tokenisation, knowledge can be quantified and exchanged like a currency on blockchain platforms. Subject matter experts can be rewarded with tokens for contributing their insights, by directly solving another accountant’s client problem, or contributing to a knowledge base… or more.

These tokens can then be used to purchase services, access premium content, donated to causes, or be exchanged for other currencies for example. There is no need to pay monthly or annual subscriptions to a membership body or to any CPD or software providers. All benefits are earned and a balance of decentralised social credit is maintained. Member $CPD may also be borrowed or earning interest as lending capital in a pool, i.e., decentralised finance, depending on laws.

Not only is the sharing of knowledge incentivised but also ensures its authenticity and quality. Blockchain's transparent and immutable ledger with use of off-chain Oracles (e.g. legal databases) in an AI-driven marketplace potentially allows for the tracking and verification of information sources and contributions, with automated remuneration of contributors.

These are just high level ideas and not a proposal. Founding members would research the technology, seek legal advice, and consult with the SBAABTA group on their preferred incentive models.

Legal, Tax and Regulatory Challenges

Although a DAO is an ideal structure for operating and organising economic and social activity on blockchain and in web3, generally, I recognise and am experienced with the challenges in establishing a DAO, especially in terms of legal and regulatory compliance. It's not a straightforward path, as DAOs don't fit into existing legal or tax structures in Australia. Running a DAO without an incorporated legal structure may expose its members to certain liabilities and adverse tax outcomes. While the legal, tax and regulatory landscape is unclear in Australia, founders of digital organisations look into registering a foreign entity to commence their journey to full decentralisation and borderlessness.

However, these challenges for Australians are not insurmountable. In most regions they haven't yet made specific rules on how DAO payments should be taxed, either. We need to think innovatively and explore regulatory equivalents that align with the decentralised nature of DAOs, or at least with an early stage DAO, and we can collaborate with the LawFi DAO working group which is paving the way.

Note - DAOs don’t need countries. Members are global.

My view is that our tax systems should accept that DAOs are just computer coding and networks, and therefore are non-entities. For tax purposes, they can be pass-through entities.
It follows that only the earnings of members should be taxable, in their jurisdiction of residency. Smart contracts could take care of the PAYG withholding and payments if the Tax Office is interconnected on blockchain, as it should be. We can help with that, for a bounty!

The DAO can have a special working group for that. It will be a force to be reckoned with.

The Minimum Viable Community

Starting a community-driven project like a DAO requires a critical mass – a minimum viable community. This is especially true in the accounting profession, where influencing CPD standards is crucial. We need to assess the viability and competitive advantage of this model against traditional CPD providers and consider how it can benefit not just individual accountants but the entire profession. This will be determined by the founding members who will prepare an education campaign and invite consultation and submissions from the SBAABTA Facebook group, the three accounting bodies and our other industry associations.

Inclusivity and Disintermediation

Disintermediation in blockchain technology removes the costs of agency by eliminating the need for intermediaries, such as banks or brokers (such as with Bitcoin peer to peer payments), thereby reducing transaction fees and administrative expenses. This extends the disintermediation of various organisational costs, including payment processing fees, middleman commissions, subscription fees, and the costs associated with contract enforcement and compliance.

In a DAO context it doesn't mean excluding people; it's about inclusivity. It's more about removing unnecessary intermediary ROLES (not the people themselves) while ensuring that everyone has a voice and a role to play.

A decentralised model has the potential to allocate greater value to peripheral contributors, rather than centralising it among those at the top of the hierarchy.

Removing the costs of agency but not the people

Directors on company boards are agents and their salaries often represent a significant organisational cost, as they compensate for the expertise, decision-making, and governance responsibilities of board members. However, blockchain technology and disintermediation can potentially reduce these and other agency costs by streamlining decision-making processes and enhancing transparency, leading to more efficient governance structures requiring less intensive oversight and, consequently, possibly lower compensation for board directors.

However there is no reason, in my mind, why the three accounting bodies and other associations cannot join the DAO and contribute their expertise, influence, votes and resources in return for a share of the rewards.

The leaders and teams that make up our accounting bodies are are highly skilled, committed and valued people; many do excellent work for our profession. Organisation member bodies of a DAO could be substantially rewarded for contributions in this leaderless co-opetition model. For example by making submissions to Parliament and influencing consensus across the industry on meeting and being accountable to professional education and ethical standards.

The advocacy of our professional bodies would be strengthened by our streamlined collaboration and our economic incentives to support them.

Disintermediation, in a Decentralised Professional Association context, is a rising tide that lifts all boats.

My Personal Journey and Call to Action

My journey with blockchain started with putting Bitcoin on the balance sheet for clients 10 years ago, which over the years grew my curiosity and evolved into a passion for integrating it into my professional practice. I've set up a Bitcoin ASIC miner and Lightning node on my desk, as I am committed to maintaining the decentralisation of Bitcoin and Lighting network.

I'm constantly exploring how cryptography and blockchain technologies can be applied to small businesses and entrepreneurship, and in the accounting field. I

In 2021 I co-founded the Digital Playhouse Foundation, a registered charity “advancing social and public welfare” through making access to converging and emerging technologies for those most at risk of falling behind. Accountants On-Chain is the knowledge sharing project I lead to support the charity’s social mission, and we are actively Building on Bitcoin with our Stacks Australia Chapter. Co-founder, Gordon Christian, has prepared a Whitepaper proposing to decentralise our charity as a DAO to create transparency over how donations and grants are applied.

My new accounting practice model, ElectraFi, supports accountants to retain and upskill with their clients adopting crypto in a business context and is compatible with this DAO mission.

I invite you to join me in this journey. It's not just about my vision; it's about our collective future in the accounting profession and as small business advocates. We need about 100 intellectually adventurous and reliable people with diverse professional backgrounds to lead this project forward. It's about building a community and culture, not just a technology solution.

Decentralisation is about culture. The technology is adjacent to that.

Why the Future of Accounting is on Open Blockchain

The future of accounting lies in embracing these new self-empowering, highly secure and privacy-centric open-source technologies. Blockchain and DAOs offer a novel way to solve the problems we complain about daily and fully leverage our social capital. It's not just about efficiency; it's about creating a system that is fair, transparent, and member-driven. More centralisation in accounting, however well intentioned and consultative, just costs more of our valuable time and membership fees. Closed systems and private blockchains are not the answer.

“The future of blockchain kind of looks like the future of email. Open system for all users. No central parties control. No walled gardens preventing interoperability. Long term protocol stability.”
- Paul Brody, EY Global Blockchain Leader (read his book: Ethereum for Business)

Finally! (thanks for reading this far!)

As we stand at the cusp of a new era in accounting merging with the future of finance on blockchain rails, I encourage you to think about the possibilities that blockchain presents in an organisational context.

Subscribe to my blog here, for more insights and discussions on these topics. As we small business accountants are the majority of the accounting industry, and we onboarded the population to the digital and cloud revolutions, we’ve got this… NEXT let's collaborate, innovate, and lead the charge in transforming our profession for the better and be the role model for all other industries in the blockchain revolution.

This vision for decentralising accounting with blockchain and DAOs should not remain a theoretical exploration. With a bit of study (recommended books below), a practical, actionable plan can be the result of a collective effort. By embracing these awesome technologies, we can improve our profession, making it more equitable, efficient, and be future-ready with HOPE.

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