Decentralization at Core: How DAOs Will Pave Way for Democratic Governance in Organizations
DAOs represent one of the more intriguing governance experiments in recent memory.
By Julia SakovichUpdated
4 mins readPhoto: Depositphotos
Many remain optimistic about the role decentralized autonomous organizations (DAOs) could play in forever shifting ideas about governance.
DAOs are self-governing systems built on smart contracts. Featuring a built-in treasury, DAOs are managed by community members who offer proposals and then vote to ultimately make decisions.
Moving Beyond Traditional DAO Structures
Many of today’s DAOs largely focus on protocol upgrades and funding allocation. This is due in part to reputational concerns stemming from the 2016 hack of ‘The DAO,’ the first decentralized venture capital fund. The thief managed to steal more than $50 million, leading to an Ethereum fork and the creation of Ethereum Classic.
However, some projects are stepping out of what’s been seen across the world of DAOs and bringing innovation to the space. PhoenixDAO is one example. The decentralized platform has the goal of revolutionizing digital identity and authentication by letting users link virtual identities across dApps, apps, and APIs.
Powered by the ERC-1484 framework, data can also be shared in a secure manner as users manage their identity on or off-chain. Community members participate in the governance process through the DAO, to ensure one-person-one-vote. This combined with a one-stop hub for all things PhoenixDAO is going to be an ever growing ecosystem powered by the dApp store.
Projects like Phoenix are a stepping stone to shifting mindsets around governance, where DAOs could begin to revolutionize the decision-making process in the real world.
How the DAO Can Be the Solution to Governmental Frustration
Some speculate the concept of collective leadership seen in DAOs is a powerful tool to foster involvement and inclusion in traditional, real-world institutions.
Aragon chief legal officer Jose Nuno Sousa Pinto explains “What we are looking at is a different type of governance structure, a tool that allows the organisation and governance of thousands of members in different jurisdictions in a completely decentralized form, in the most transparent, immutable, fair process possible.”
Decentralization has become an attractive solution for many frustrated citizens anxious to regain some sort of ability to vote and have a say in how communities are governed.
Many organizations are also searching for new models in areas like public health, climate change, cultural preservation, and inequality – areas where there’s arguments that hierarchical structures have failed.
Blockchain voting has already been seen in several nations, including in the United States during the 2018 midterm and 2020 presidential election. These headlines have helped boost the prospects of concepts like DAOs playing a role in the real world as a tool to eliminate centralized power structures that could reduce overreach and corruption.
Many believe a DAOs system fosters collective leadership and inclusion that invests members in the project’s (or company’s) future, especially since encoding DAO rules in smart contracts avoids bureaucracy often seen in real-world businesses.
To solve some potential pitfalls, some speculate people could start seeing ‘sharded’ DAOs to focus on specific issues or areas. There’s even a belief companies or governments could ‘DAO-ify’ certain operations – balancing traditional decision making with a DAO structure across particular departments.
Ushering In More Inclusive DAOs
Skeptics of DAOs argue many modern organizations (like the United Nations) are not constructed to collect information and respond effectively, and that DAO enthusiasts would just be trying to implement a simpler system on a complex issue. However, if DAO technology could address key aspects of collective governance, progress could be made.
According to Grace Rachmany, these areas include tools to foster inclusive discussion among DAO members, proper presentation of facts and perspectives, and problem prioritization.
Overall, DAOs represent one of the more intriguing governance experiments in recent memory. As the model becomes more popular across the crypto world, there’s great hope their decentralized model will usher in more democratic governance across real-world institutions.
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