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Over the last few years, decentralized autonomous organizations (DAOs) have introduced a distinct paradigm shift in blockchain governance. With community decision-making and adherence to hard-coded rules, they have challenged the hierarchies and central authority roles that exist in modern organizations, especially those related to business. have a lot in common. Individuals holding a certain amount of certain tokens in the DAO can allocate those tokens as votes on governance proposals. Once the votes are complete, the final result will be autonomously executed by the smart contract.
In a functioning democracy, however, citizens make laws and elect representatives who govern their societies, and regular elections and an independent judiciary ensure that elected leaders serve the common good. Honest work is guaranteed. DAOs, especially those that also act as business entities, often fail to implement and practice these systems of checks and balances. As a result, many of them maintain centralized or minority control, limit the breadth of decisions that community members have a say in, or suffer from uninformed and disorganized voting practices.
The problem with DAOs begins with the fact that tokens are required to participate in the DAO voting procedure. This means that wealthy individuals can buy more tokens and thus have a greater impact on the outcome of the vote. This type of selective entitlement based on token ownership can lead to biased voting results that are not beneficial to the community as a whole.
Some early users join DAOs based on collective interests and long-term goals, but strictly for quick profits without concern for the sustainability and future of the project. Participating investors will inevitably exist as well. Due to the inherent importance of a tradable governance token to the operation of a DAO, we will invest in a financial Aligning incentives and community interests can be difficult.
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Additionally, large communities can negatively impact decision-making, as voting is often a time- and resource-intensive process. During emergencies and crises, quick decisions can protect user funds, but reaching consensus through community voting slows down the decision-making process. A large portion of the community is often not informed about the latest developments, which can lead to erroneous voting behavior.
At the same time, while it can be helpful for project founders and core teams to be able to act quickly in specific cases, such as preventing hacking and fraud, it is also important to be able to exercise absolute and unfair control over the community. It often happens. long term. For example, the founder of Fei Protocol ghosted Tribe DAO after the latter community voted to repay her for the $80 million hack into her Rari Capital that occurred in April. proposed.
DAOs have the aforementioned problems, but a typical system of checks and balances can solve them.
DAO does not exist in isolation, beyond the socioeconomic divides in our society. So a small section always has a big say in certain things. Democracy teaches us that elected representatives govern and intervene in times of crisis, but that citizens can approve or disapprove of them. There is none. On the contrary, hierarchy with adequate safeguards can complement democratic governance.
A hierarchy-based DAO governance system has multiple advantages. First, check each other’s decision-making ability. If one entity feels that the other entity has been dishonest, it can revoke its governance rights and remove it. Just as the judiciary can overturn unjust laws from the legislative branch, DAO entities can do the same. In this way, checks and balances strengthen democratic values and governance structures.
Related: Waves Founder: DAOs Won’t Work Without Governance Fixes
Second, layered DAOs are more transparent. This is because the project community already knows about the core team’s additional governance rights. This team typically includes the company CEO, developers, project architects, security officers, financial officers, creative directors, and more. Project teams help companies make the right decisions in the formative years and respond quickly to emergencies.
Strategic decision-making becomes more agile and faster with the help of the core team. Additionally, this team is usually responsible for the appropriate expenditure of state revenues for the future development of the project. The core team reports to her DAO group in the middle to prevent the former from becoming overtly powerful and unfaithful. Large project communities can elect intermediate group representatives to protect the interests of the community.
The community is key to full decentralization as it proposes and collectively votes on proposals for protocol upgrades. At the same time, a hierarchical governance structure helps startups make informed and rapid decisions on critical operational issues. A DAO should not take an “either-or” approach by prioritizing either the community or her DAO entities that are layered. Rather, both communities and hierarchical organizations can streamline decision-making and governance.
Successful DAOs do not choose between the community and the core team, but maintain a balance between the two.
Ranmei is CEO of AirDAO, formerly known as the Ambrosus Ecosystem, a DAO focused on building decentralized systems that enable social and financial interactions. Originally born in China, he earned a Bachelor of Science in Information Management and Entrepreneurship from the University of Colorado Boulder before moving to Silicon His Valley. By age 20, he had founded his three profitable startups.
This article is for general information purposes and is not intended, and should not be construed as legal or investment advice. The views, thoughts and opinions expressed herein are those of the author and do not necessarily reflect or represent the views or opinions of Cointelegraph.
