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Decentralized Autonomous Organizations (DAOs) are heralded as the future of governance that will unlock a more equal approach to decision-making. However, decentralizing leadership is not a magic solution that will lead to immediate good results. To truly get the most out of decentralized organizations, steps must be taken to regulate weighted voting and tokennomics. If not carefully balanced, DAOs can go bankrupt, and some of his DAOs have already gone bankrupt.
A DAO provides a model for managing a project or company that distributes voting rights to all members. There is usually no central authority, only collective will. While this may sound fair in theory, the opposite may be true in certain governance models.
Perhaps the most problematic of all structures are DAOs that work with token-based voting systems. Despite being built to be decentralized, token-weighted governance, in which users with the most tokens have the largest share of voting power, unintentionally hands over control to a few wealthy participants. , potentially stripping it from many of its participants. increase.
Related: DAO focuses on community over profit.this is the reason
This can do more damage than centralization alone. A token-based voting system could lead to hostile takeovers of DAO tokens by his whales and other malicious actors. For example, the acquisition of Build Finance DAO. In February, the DAO fell victim to attackers who held enough assets to push through with a proposal to take full control of the project.
Due to the token-based governance model, this takeover was entirely by the rules, with little recourse for developers and the community to do other than fork the project and start from scratch. Clearly, asset allocation weighted voting is not the best method.
The bottom line is that asset-weighted voting is not an ideal vehicle for a decentralized governance system. Especially if you’re trying to replace a legacy model. The long-term goal is to enable companies, organizations, and even nations to run using a decentralized system that not only gives every individual a meaningful voice, but also takes into account what its members have to offer. is to Identity powered by various forms of personalized blockchains and meritocratic voting structures may be what is needed to strike the balance.
Imagine a new model where voting members are evaluated against specific key performance indicators (KPIs). These may include engagement and development metrics within the DAO, and failure to meet these KPIs may result in the user’s voting rights being reduced or removed entirely. Adopting this approach ensures that all entities make decisions that benefit the community as a whole, not just themselves.
It also applies to almost every aspect of the platform, including future technology development and how community funds are distributed. It can even create new social organizational structures for charities, environmental groups, and entire governments, offering greater motivation than capital gains alone.
Related: Decentralization, DAOs, and Current Web3 Issues
Already, the NFT community has demonstrated that collectively beneficial behavior can be encouraged, such as participating as a prerequisite to being whitelisted for NFT drops. It’s not uncommon for successful Web3 projects to offer some sort of collaborative, mutually shared goal. Existing leadership systems do not provide direct incentives to participate. For example, in modern governments, citizens vote for individuals who are placed in centralized positions of power. Web3 and DAO demonstrate how things work differently through mutual benefit and incentivized participation.
It’s just one vision, but the basic premise remains the same. New structures need to be considered to ensure decentralized organizations do not rot. Too many attack vectors impacting critical projects. These issues need to be addressed sooner or later if DAO governance grows into a global movement and we see implementations beyond cryptocurrencies.
Sasha Ivanov is the founder of Waves Platform, a global public blockchain platform with a market cap of over $5.4 billion in 2022. Crowdfunded with 30,000 BTC, representing the second largest successful crowdfunded blockchain project (after Ethereum). The name refers to his background as a theoretical physicist and the recently discovered gravitational waves predicted by Einstein a century ago.
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.
