PM — What’s a DAO — and what does it mean for business?

Good afternoon, wonderful people. Welcome to a relatively brisk Monday on this holiday-shortened workweek.

THE BIG STORIES TODAY

#1- Egypt’s budget deficit stood at 3.9% in 1H2021-22, widening slightly from 3.6% during the same time last year, Finance Minister Mohamed Maait told Bloomberg Asharq. The budget deficit is expected to stand at 6.9% by the end of FY2021-2022, after the ministry revised upwards its prior forecast of 6.7%, Maait said last week.

#2- Tourism revenues surpassed USD 13 bn in 2021, returning to pre-pandemic levels after having dropped to USD 4 bn in 2020, Deputy Tourism Minister Ghada Shalaby said. Revenues eclipsed the USD 9 bn target set by the ministry earlier last year, as the sector recovered on the back of travel restrictions being lifted worldwide and a subsequent increase in tourist arrivals.

HAPPENING NOW-

Tourism + hotels law up for House discussion: The House of Representatives is discussing in its plenary session today a draft law simplifying licensing procedures for hotels and tourism companies. The bill was approved last year by the Madbouly Cabinet.

The draft Ins. Act is also on the agenda again today for a joint legislative and constitutional, planning and budgeting, and SMEs committee. The committee had begun discussing the bill, which would make the Financial Regulatory Authority the primary regulator for the ins. sector and make ins. compulsory for SMEs and freelancers, yesterday.

Algerian President and Defense Minister Abdelmadjid Tebboune is due in town for a two-day visit starting today, the Algerian presidency said last night. The statement didn’t provide any information about the president’s schedule.

** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

• What the new incoming Labor Act means for your business: We break down the changes coming to employment practices in the private sector from an overhauled Labor Act as it currently stands.
• Fawry and Misr Capital are launching the MENA region’s first fintech-based money market fund, Fawry Yawmy, which is set to launch on 30 January.
• Evolve Investment Holding plans to launch a gold-backed investment fund that will invest in precious metals.

THE BIG STORY ABROAD-

The latest from Ukraine: Nato members are bolstering their military presence in eastern Europe and have their forces “on standby” as tensions with Russia and a potential invasion of Ukraine continue to escalate. Meanwhile, the US and UK have begun withdrawing embassy personnel from Ukraine amid the rising risk of conflict. The story is on the front pages of the Financial Times, New York Times, Wall Street Journal, and Reuters.

The rising tension is weighing on markets, with US stock futures dropping today and Russia’s RUB falling 1.8%, according to WSJ.

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FOR TOMORROW-

Trading on Nahr Elkhair Development and Investment’s shares is set to begin on the EGX tomorrow, after the bourse gave the green light earlier today.The company will directly list its shares on the bourse, without offering shares to investors via subscription, according to Al Shorouk.

The IMF’s World Economic Outlook Update will be published tomorrow. The report was scheduled to be released last week, but its publication was pushed to give it time to incorporate the latest omicron-related developments.

Don’t expect a particularly pretty outlook, if IMF head Kristalina Georgieva’s statements at Davos last week are anything to go by: By the time 2024 rolls around, the global economy will likely be facing a USD 12.5 tn price tag from the effects of the pandemic, Georgieva said over the weekend. Meanwhile, this year is expected to act as an “obstacle course” for the global economy as geopolitical tensions fuel inflation amid record debt levels, while an imminent monetary tightening cycle from the US Federal Reserve will make it all the more difficult for some countries to face their growing USD-denominated debt piles.

The report will come out a few hours before the US Federal Reserve sits down for its first Open Market Committee meeting of 2022. The two-day meeting is widely expected to see the Fed confirming that March will see the first in a series of 0.25-percentage-point interest rate hikes in a bid to curb rising inflation. The Central Bank of Egypt will follow with its own Monetary Policy Committee meeting next Thursday, 3 February.

???? CIRCLE YOUR CALENDAR-

Startups have until next Sunday, 30 January to apply for the spring 2022 cycle of EGBank’s Mint Incubator. The incubator offers two tracks: A sector-agnostic track for startups at the MVP stage, and a fintech track that accepts early-stage startups both at the ideation and MVP stages. Main founders must be between 16-35 years old. You can apply here.

The Cairo International Book Fair starts this Thursday at the Egypt International Exhibition Center. Members of the public will be allowed to enter without providing proof of vaccination, the Culture Ministry said last week. The two-week event runs through to 7 February.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

☀️ TOMORROW’S WEATHER- The mercury will rise to 15°C during the day tomorrow before falling to 7°C at night, according to our favorite weather app.

The Netflix pan-Arab version of the 2016 Italian film Perfect Strangers is stirring controversy, the National reports. As7ab wala A3az — which shows a group of close friends playing a game where their most intimate secrets are divulged — has drawn criticism for its depiction of same-gender and extramarital relationships since its release last week. It became a top-trending topic on Egyptian social media over the weekend, with thousands arguing for and against it.

MP Mostafa Bakry has lodged a formal complaint about the film and called for Netflix to be blocked in Egypt — even though the film doesn’t specifically depict Egypt, and is produced by Netflix, which is neither Egyptian nor Arab. In a complaint filed at the House of Representatives , Bakry said the film’s portrayal of Arabs doesn’t reflect Egypt or the region’s moral codes, according to the National. Lawyer Ayman Mahfouz, meanwhile, has reportedly threatened to sue the Culture Ministry to have the film removed from Egyptian channels.

Capitalism continues to troll Banksy by selling his art as a fad: Celebrated British singer Robbie Williams will sell three of Banksy’s renowned artworks at Sotheby's Now Evening Auction in London, scheduled for 2 March. The auction will include pieces from Williams’ personal collection, including Girl With Balloon, Kissing Coppers and Vandalized Oils (Choppers). The artworks are expected to sell for GBP mns each. The anonymous street artist’s Girl With Balloon, which fetched GBP 1.1 mn when it debuted in 2018, is expected to have a GBP 3 mn starting price when it goes on auction, Bloomberg reports.

As if we needed to make the influencer “career” path more attractive: Instagram rolled out a subscription feature on a trial basis last week, which would allow some Instagram users to charge for subscriptions. At present, popular accounts / influencers typically monetize their content creation through sponsorships based on their follower base and reach. The service — which prices subscriptions between USD 0.99 and USD 99.99 — would be a way for these influencers to generate a steady stream of income from their content, while Instagram looks to compete with TikTok and other platforms to attract new users and retain its existing user base. The Wall Street Journal has the story.

???? ON THE TUBE TONIGHT-

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How a music festival “played out like a horror film”: Woodstock 99 is a documentary on the infamous 1999 festival that turned into three days of rage, raunch culture and entitlement. The documentary is part of Music Box — a collection of documentary films created by Bill Simmons exploring pivotal moments in the music world. And pivotal it was, as the festival which had encompassed ideals such as the feminist pop-culture explosion and inclusivity turned into a scene of destruction and fires. The event earned itself the infamous distinction of “the day the nineties died.” The documentary follows the festival, but also uses it as a platform to discuss the state of American youth at the end of the millennium and the cultural shift that was clearly demonstrated. The Guardian and Rolling Stone are out with reviews.

⚽ Tonight in the African Cup of Nations: The round of 16 competition continues with a match between Guinea and Gambia at 6pm, while at 9pm Cameroon will face Comoros. The victors of the two matches will meet in the semifinals.

Qualified teams: Tunisia beat Nigeria 1-0 yesterday, while Burkina Faso beat Gabon on penalties after a 1-1 draw. That means that Tunisia will meet Burkina Faso in the round of 8 on 29 January. Egypt goes head-to-head with the Ivory Coast on Wednesday.

???? OUT AND ABOUT-

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The Austrian Cultural Forum in Cairo is organizing an online event titled Literature Meets AI today at 7pm. The discussion will look at how literature reflects and sometimes even anticipates huge technological changes such as the internet and virtual reality.

Arctic Monkeys cover band The Mangabeys are performing tomorrow at The Room New Cairo at 9pm.

???? UNDER THE LAMPLIGHT-

Snowflake CEO’s roadmap to hypergrowth: In Amp It Up, Frank Slootman discusses how he took cloud software company Snowflake from a small enterprise solutions business to a level of growth that achieved the largest software IPO ever. Slootman’s leadership approach is to align people around what matters and execute strategies with urgency and intensity. This doesn’t always have to involve expensive changes, instead improving the organization’s performance through a different management technique towards talent, structure, or the fundamental business model. Addressing the daily challenges executives and entrepreneurs face, the book is a resource for anyone who wants to tap into the full growth potential of a company.

MARKET NEWS-

Sidi Kerir Petrochemicals’ bottom line rose 1,958% y-o-y in 2021 to EGP 535 mn, according to the company’s financials (pdf). Revenues also rose 48% during the year to EGP 5.1 bn. The petrochem company attributed its performance to the stabilization of local and global markets and Sidi Kerir’s efforts to control costs and increase its selling price, the company said in a disclosure (pdf).

MARKET ROUNDUP-

The EGX30 fell 0.3% at today’s close on turnover of EGP 934 mn (17.8% below the 90-day average). Regional investors were net buyers. The index is down 2.8% YTD.

In the green: EFG Hermes (+1.1%), MM Group (+1.1%) and Eastern Company (+1.0%).

In the red: Cleopatra Hospital (-3.8%), Speed Medical (-3.3%) and Raya Holding (-2.8%).

Not just an anarchist’s fantasy: What are DAOs and what do they mean for traditional business structures? Decentralized Autonomous Organizations (DAOs) are online organizations collectively owned and managed by a group of members, with all of its decisions autonomously encoded in blockchain. The decentralized nature of these organizations means they are without the influence of any central authority or government, and typically puts each member of the DAO on equal footing, rather than setting up a power-based hierarchical structure. They are public and transparent organizations that do not require legal backing and are governed by rules that cannot be edited without anyone taking notice.

The blockchain infrastructure: Usually built on Ethereum, DAOs are governed by smart contracts that embed the rules and governance of each DAO in code, eliminating the need for management, bureaucracy, or hierarchy, and allowing them to function autonomously through a consensual protocol. They usually have a funding system that can be used to compensate organization members for their contributions, as well as a structure for investors.

There are different membership / ownership structures: The two main membership structures are token-based and share-based memberships, both of which are crowdfunded by issued tokens. Token-based memberships allow anyone who holds tokens to own equity and vote in a given DAO. Governance tokens may be obtained through trading without permissions on a decentralized exchange, bought or earned by working for the DAO. Share-based memberships, on the other hand, allow prospective members to submit a proposal to join the DAO in return for a tribute in the form of tokens or work.

What’s their purpose and benefit? For one, they eliminate whimsical decisions made by CEOs and dodgy book manipulation by accounts. They also allow people who don’t have any foundation of trust (read: strangers on the internet) to work together using a previously-set transparent code that anyone can verify and no one can alter, creating endless potential for global collaboration. DAOs have totally flat structures, rules that can only be changed by collective member votes, and votes that are tallied automatically. Voting structures can be modified on a case-by-case basis, but are usually weighted against what they’ve contributed to the project, according to CNBC. In fact, all services carried out by and within DAOs are handled automatically, removing human discretion and human error from organizational governance.

How are they being used? DAOs can be especially useful in setting up charities, freelancer networks, and ventures and grants. DAOs can be used for investment, charity, fundraising, borrowing or buying NFTs.

DAOs are part of a trend to decentralize the internet, finance and the future of work and are central to the Web 3.0 space. In many ways, DAOs — which promise to decentralize how people organize for business and other interests — are a core component of Web3. Much like the metaverse and Web3, exactly how DAOs operate is still being formulated (not to mention, regulated).

Will DAOs replace traditional companies? Regulatory and legal frameworks for DAOs are still being formulated, making it difficult for even their staunchest supporters to predict their future with any clarity, but one DAO investor and builder told CNBC that they could be the next LLCs. The same investor said that DAOs remain a risky space and warned investors to “only spend what they can afford to lose.”

The biggest 20 DAOs held upward of USD 6 bn of digital assets last year, according to a 2Q2021 report about Ethereum’s ecosystem by ConsenSys. Some of the biggest DAOs include decentralized finance (DeFi) projects like Compound, Uniswap, Bankless, and Gitcoin

DAOs are gaining traction among high net worth individuals and VCs, with bn’aire Mark Cuban calling them “the ultimate combination of capitalism and progressivism.” In August, Syndicate, a community-based investment protocol for DAOs, raised USD 20 mn in a Series A round led by VC firm Andreessen Horowitz, securing backing from 150 investors, among them former Reddit co-founder Alexis Ohanian, actor Ashton Kutcher and all-around chameleon Snoop Dogg.

DeFi has renewed interest in DAOs. DeFi, an umbrella term for financial applications in crypto (mainly stablecoins) that is geared towards facilitating peer-to-peer transactions and disrupting financial intermediaries, took off last year in tandem with the rise of crypto (explainers here and here on DeFi). Because DAOs provide a way to conduct secure financial transactions and because their rules are recorded on blockchain, they eliminate the need for third parties in financial transactions, making those transactions simpler to conduct.

DAOs got a bad rap because of the massive failure of a fund called “The DAO.” Created as a decentralized investment fund in 2016, The DAO was built on blockchain, but was hacked for the equivalent of USD 50 mn worth of Ethereum as a result of coding errors. To this day, DAOs continue to require majority votes to change bugs or holes in their code, making them vulnerable in that respect.

That said, DAOs are not without their critics, some of whom don’t believe in the automation of decisions that should be governed by human relationships. Others are playing down “the hype” of DAOs as the next asset class after NFTs, even as they see how it is potentially changing how work is organized. One early DAO adopter “jokingly” called them “group chats with a joint bank account.”