Binance Research: DAOs Need Theoretical Research to Grow Up and Scale

Binance Research has published a report that examines the current status quo of decentralized autonomous organizations (DAOs), proposes a working taxonomy for them, and looks at relevant industry efforts. 

Binance Research, the market research and analysis arm of Binance, released a new report on decentralized autonomous organizations (DAOs), proposing new ways to conceptualize and classify them while offering key actions that need to be done to foster growth in this nascent field. 

In its new report titled “Theory and Praxis of DAOs,” Binance Research defines a DAO as “an organizational form that coordinates the efforts and resources of members via an a priori binding, formalized, and transparent set of rules that are agreed upon in a multilateral fashion.”

Binance Research noted that DAOs are currently experiencing new popularity, as shown in the emergence of several new projects, Working prototypes of DAOs have already taken a wide variety of different forms, such as blockchains, ecosystems, protocols, natural resources, and mutual insurances. 

However, the conceptualized theory surrounding DAOs can still improve, according to Binance Research, adding that DAOs that are capable of truly scaling and coordinating a large number of members have yet to arise.

The report identifies areas for improvement for DAOs:

* Incentive models rooted in game-theoretical research. These models are needed to align interests between members and the DAO. Pursuing soundly researched models can also help DAOs avoid byzantine behavior, govern commons, and overcome issues such as the prisoner’s dilemma. Well-designed incentives are also required to help DAOs overcome the problem of extremely low voter turnouts for governance decisions. 

* Conscious design decisions.  As part of its proposed taxonomy, Binance Research also outlines multiple ways to design the following four key elements: multilateral agreements, resource management, discussion processes, and voting processes.

The report also addresses the two options for DAOs and the law:

* Legal entity with legal personhood: integrates a DAO into the existing legislative environment as it allows direct control over off-chain resources and engagement in legally binding agreements; usually enabled by regulation such as BBVA or ITAS.

* Legal entity without legal personhood: this is closer to the purist vision of an organizational form that is independent of the existing legislative environment; usually enabled by “qualified code deference.”

Read the full report here.