DAOs will never function without governance reform

Decentralized Autonomous Organizations (DAOs) have been heralded as the future of governance, unleashing a more egalitarian approach to decision-making. However, decentralizing leadership is not a panacea that immediately leads to better results. To truly get the most out of a decentralized organization, steps must be taken to regulate weighted voting and token marking. If it’s not carefully balanced, it can explode internally – and some of it has already happened.

Explaining decentralized governance

DAOs provide a model for running a business or corporation that distributes voting rights to all members. there Usually there is no central authorityOnly the collective will. While this seems fair in theory, the opposite can be true for some models of governance.

Perhaps the most problematic of the structures are DAOs that operate on a token-based voting system. Despite being built to be decentralized, token-weighted governance – where users with the most tokens have the largest share of voting power – can end up inadvertently handing control over to a few wealthy participants and stripping them of the many. As is immediately apparent, this completely undermines the philosophy upon which the DAOs are built and allows rich whales to have a disproportionate opinion.

Related: DAOs focus more on community than profit. Here’s why

This can do more damage than centralization alone; Token-based voting systems can Lead to hostile takeovers By DAO avatar whales and other malicious actors – such as the takeover of Build Finance DAO. In February, the DAO fell victim to an attacker who had enough assets to push a proposal that would give them full control of the project.

Due to the token-based governance model, this acquisition is completely in line with the rules, leaving developers or the community with little recourse but to dismantle the project and start from scratch. Clearly, an asset allocation weighted vote is not the best way forward.

Overcoming DAO Problems

The point is that asset-weighted voting is not the ideal vehicle for decentralized governance systems, especially if they seek to replace outdated models. The long-term goal is to be able to run businesses, organizations and even countries with a decentralized system that gives a meaningful voice to each individual but also takes into account what that member has to offer. The various forms of personal identifiers enforced by the blockchain, as well as a merit-based voting structure, may be what is needed to balance the equation.

Imagine a new model, where voting members are evaluated against certain key performance indicators (KPIs). This can include engagement and development metrics within the DAO, and failure to meet these KPIs can either reduce or eliminate a user’s voting power altogether. Taking this approach would encourage all entities to make decisions that serve the broader interest of society and not just themselves.

It can also apply to almost any factor in the platform, such as future technological developments or how community funds will be allocated. It can also create new social organizational structures for philanthropy, environmental groups, and entire governments—providing greater motivation than capital gain alone.

Related: Decentralization, DAOs and Web3 Current Concerns

Already, NFT communities have demonstrated that they can catalyze actions that benefit the group, such as participation as a prerequisite to being “whitelisted” to drop the NFT. It is not uncommon for successful Web3 projects to present some kind of collaborative and shared goals, and current leadership systems do not offer this direct incentive to participate. Take, for example, modern governments, where citizens vote for an individual in a position of central authority. Web3 and DAOs They show how things could work differently, through mutual benefits and stimulating sharing.

This is just one view, but the basic premise remains. New structures must be explored to ensure that decentralized organizations remain incorruptible. There are far too many attack vectors affecting critical projects, and if DAO governance is to grow into a global movement and see implementation beyond cryptography, these issues must be addressed sooner rather than later.

Sasha Ivanov He is the founder of Waves Platform, a global public blockchain platform with a market capitalization of over $5.4 billion in 2022. It was crowdfunded with 30,000 BTC, the second most successful crowdfunding blockchain project (after Ethereum) . The name refers to his background as a theoretical physicist and to the newly discovered gravitational waves predicted by Einstein a century ago.

This article is for general information purposes and is not intended and should not be considered legal or investment advice. The opinions, ideas and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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