Decentralized Autonomous Organizations (“DAOs”) are blockchain-based structures that enable the coordination of people and resources through a formalized, transparent, and binding set of rules deployed on a public blockchain in a decentralized way.
Compared to more traditional LLC structures, it is easier for a DAO to take on responsibility and create innovation. However, DAOs have to balance between decentralization and efficiency constantly.
DAOs have evolved and moved from a more monolithic to a modular structure, allowing for more specialization and scalability through delegation.
By using a DAO structure, decision-making can become effectively more transparent, secure, and autonomous.
Quorum voting is likely to inhibit DAOs from moving quickly. This poses a risk in periods where fast decision-making is of importance, such as periods of market distress. As of now, not all decisions are best reached by a broad consensus.
Soulbound tokens might play a more critical role for DAOs in the future as they help to signal qualification and skills.
Having a plutocratic system that is controlled by wealth and income is undesirable not only since it can lead to class conflict, corruption, greed, and hedonism but also because it goes against the hopes of many that increased adoption of cryptocurrencies and crypto-native products will lead to more equality.
As of now, the majority of proposals are driven by just a few DAOs. Over 65% of all proposals come from just 10% of DAOs.
While voting increased, the majority of DAO participants still only voted less than 2 times, with more than 50% of users only having voted once. DAO proposals are heavily skewed towards a small number of decisive votes.
The Rise of Decentralized Autonomous Organizations
Binance Research (Stefan Piech)
Jul 27th, 2022