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- As an internet and blockchain-native entity, DAO offers several advantages over traditional business. However, the world is yet to witness a DAO protocol that is fully decentralized.
- DAOs are struggling to be fully decentralized because they are trustless, unlike conventional organizations. DAOs are instead run by smart contracts.
- By taking small incremental steps, the idea of decentralization can be turned into reality. Many successful DAO protocols such as Uniswap are still not fully decentralized.
DAOs are fundamentally meant to be “decentralized”, however, many biggest DAO protocols including Uniswap are not. Currently, many DAOs are operated by a group of members who are in charge of taking major decisions. Now, the question arises of whether DAOs are completely centralized.
Often, DAOs are compared to democratic nations and their workings. In a democratic nation, on an ideological level, the people in the country take the decisions, however, only a few powerful individuals hold the power to derive laws and make decisions. Pretty much like large organizations, the key policies would only be determined by the board of directors; however, shareholders are allowed to vote.
DAOs have more appealing qualities than conventional organizations. It has no hierarchy or central management. Therefore, everyone involved in the protocol has equal rights to act on the proposal.
Community members vote on future-oriented proposals of protocols, after the proposal gets agreed upon, they are then executed in smart contracts. Incentives act as motivation and promote community collaboration. A protocol that attracts more users, in turn, increases the token’s value, which is what token holders want.
Why DAOs Are Yet To Become Fully- Decentralized?
It’s quite challenging for any protocol to achieve full decentralization, despite it appearing to be fully decentralized.
When anyone can make the decision and does not have enough liability, the core team has difficulty trusting such a system. Depending on a large community with no straightforward consequence creates anxiety within the group and prolongs the decision-making process, impacting the company as a whole.
A community-led organization with a probable short-term gain in mind is one of the main qualities of a DAO. However, the founders still need to trust the community’s ability to make the correct decisions based on a long-term goal and vision.
No absolute restrictions or liabilities are placed regarding who can join a DAO community, which makes it difficult for the core team to trust their intentions. Therefore, a more rigorous recruitment process is needed for ensuring the new DAO member’s integrity.
Decentralization Need To Be Dissolved
DAOs need to happen in stages if they have to remain true to their nature. To maintain common prosperity inside the organization, a certain level of control is an absolute need.
Gatekeepers or Councils might be needed for effectively maintaining the key values of the company, at the same time, the concerned communities should be empowered enough to make decisions and craft proposals.
Uniswap, MakerDAO, PieDAO, Decred are some of the successful DAOs that have different systems of gatekeeping where before being accepted, the proposals have to go through various stages.
Common Prosperity Still Just A Notion
The majority of DAOs are still in the early phases of developing a full-fledged DAO. One of the examples of the company that has broken down its structure to be fully decentralized is Shapeshift, a global trading crypto platform.
The bottom line is that the notion of creating common prosperity is still pretty much the idea only and yet has to be implemented in reality. Whatever the case may be, DAOs represent a revolution where control is distributed. Individuals and groups can very much thrive in a transparent way.
By learning and improving, we can as a whole participate in making DAO truly decentralized.
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Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
