Built to Last?

Decentralized Autonomous Organizations: the epitome of decentralization. No fiscal authority for governance. No one is to be held accountable. No central leadership.

Photo by Shubham Dhage on Unsplash

A DAO is essentially governed entirely by its community members who decide on important matters for the company’s structure and future through the means of voting.

Why are DAOs Sustainable?

DAOs are tokenized communities. They utilize the notion of a token as an incentive for the community to become more engaged. Members of the community purchase the native token (the associated cryptocurrency). In exchange, they become holders of the token, and with that one gets voting rights according to the share of their holdings.
Nowadays, most DAOs facilitate themselves as communities with governance tokens and a multisig safe as access to the company treasury and the keys to deploy upgradable contracts(via ENS)

The Notion of Responsible Decentralization

It might be troubling for young and uprising companies to go into full DAO mode. Here’s why:
young startups have a hard time delegating community tokens when the company has not yet been properly established. You’d work with early adopters- the mightily enthusiastic community members who’d die for your idea. Leaving them the governance tokens, and the ability to alter the company's future might be distressing since it is not yet clear in what direction they should be going. You cannot take the risk of bad proposals.
having someone accountable works fine as long as you have the trust of the community and you have set the rules early on
easier to maintain the majority vote: if you set up 10000 tokens and your early adopters take the majority, you are no longer in charge of the operations. You’re out.
That’s why the notion of responsible decentralization was introduced. This means organizations planning to hit that DAO in the future, might be looking into semi-DAO organizational units — like community councils. Let’s say you set up the 10000 tokens again. You’d still hold the majority of 8000(80%) and you let your community take the rest 20%. You’re allowing the trust to kick in, and transitioning gradually into a DAO.

Can DAO’s be exploitable?

Yes. Due to the fact that DAO requires governance, we have seen another layer of governance being added. In an attempt to minimize governance, DAO developers introduced new governance surfaces — mainly the algorithmic ones. We are looking into the likelihood of governance capture.

The DAO: What Was the DAO Hack? | Gemini

Remember The DAO? This contentious event early in the history of blockchain shook the Ethereum community to its core…

www.gemini.com
DAO tokens should be distributed to a variety of ecosystem components and participants. That way, the stakeholders who have their true intentions in mind for the company, can weigh in on the voting process. That gives more governance power to true stakeholders.

Conclusion

We have come a long way in organizational philosophy with the rise of blockchain. It is crucial that DAO is represented by community members that share the same vision for the organization. That can be hard, like really hard.

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