Why will DAO be great again? How to make DAO great again?

armonio.eth
2022-08-19 14:01:22
Collection
Confronted with the long-arm jurisdiction of global powers, DAOs will have to deal with the pressure of interference from real-world authorities in the near future.

Original: armonio.eth, “Make DAO Great Again”

Preface

This article is written at a time when the survival of the digital cryptocurrency industry is at stake, and the "autonomous dream" of web3 is collapsing. The U.S. sanctions against Tornado Cash (TC) have shattered the dreams of many idealists. This world has neither a just and benevolent God nor an Eden from the Bible, nor will there be a revolution that happens overnight. All idealists must be prepared for tough battles. Under the shadow of the old power, everyone is trapped in outdated and decaying systems, unable to break the deadlock of the game. Knowing it is bad, yet having to swallow the bitter fruit of order.

When certain powers have infiltrated every aspect of the material world, web3 and the metaverse, which must inevitably interact with the material world, will be disturbed by the powers of the material world. Only under a culture of democratic freedom and a decentralized organizational structure can stronger powers be born and coalesce in the crypto world, allowing web3 and the metaverse to escape the control of real-world powers as much as possible, and even reverse-engineer the unfair old systems and old world. We once had great confidence in the anonymous crypto world, but recent U.S. extraterritorial jurisdiction makes one ponder: does "let the web3.0 revolution happen in the U.S." really mean "code is law, but the code must comply with U.S. law"?

Table of Contents

I. Why DAO Will Be Great Again

1.1 The Concept and Value of DAO

1.2 The Future of DAO is an Unstoppable Historical Trend

1.2.1 The Inheritance of Ideas

1.2.2 The Inheritance of Organizational Ecological Development

II. The Current State of DAO Development

2.1 The Ecological Structure of DAO

2.2 The Current Functions of DAO

2.2.1 Efficient Public Financing

2.2.2 Basic Trustworthy Democratic Decision-Making

2.2.3 Decentralized Fund Management

2.2.4 Member Behavior Labels, Identities, and Profiles

2.2.5 Dispute Resolution Mechanisms

2.2.6 Reports

2.3 The Development Trends of DAO

2.3.1 Closely Focused on Specific Businesses

2.3.2 Composable, Modular, and Refined

2.3.3 Dynamically Adaptive

2.3.4 Optimistic Mechanisms

2.4 Compliance and Regulation of DAO

III. How to Make DAO Great Again

3.1 Breaking Out of Cognitive Limitations

3.1.1 Cognitive Limitations to Traditional Paradigms

3.1.2 Establishing Organizational Structures More Dependent on Trustworthy Information Technology

3.1.3 Adopting Organizational Mechanisms More Adapted to Trustworthy Information Technology

IV. Conclusion

I. Why DAO Will Be Great Again

The concept of DAO originated from the indigenous people of the digital cryptocurrency world. Between 2013 and 2014, the pioneers of blockchain were both trying new blockchain experiments and summarizing the theoretical foundations of BTC's success. The definition and value logic of DAO were established at that time. BTC became a great social experiment. Without the need for a centralized organization, we achieved constrained currency issuance. The credibility of BTC's issuance rules surpasses that of any central bank in the world! Under the enormous wealth creation effect, DAO as a term became fashionable.

Various organizations absorbed the experiences brought by pioneers like The DAO and Moloche DAO, and a wave of investment-type DAOs sprang up. Over the years, countless decentralized projects have emerged, all backed by communities claiming to be DAOs. With the flourishing development of DAOs, why do we need to shout the slogan "Make it Great Again"? Because the concept of DAO has long been hijacked. Otherwise, how did the so-called "decentralized finance" like Aave and dydx manage to block business related to TC accounts while achieving "permissionless" decentralized characteristics?

1.1 The Concept and Value of DAO

When discussing the definition of DAO, one cannot be overly limited to its literal meaning or historical discussions by notable figures; it must be discussed alongside the value of DAO. On one hand, the term DAO has been around for less than ten years, and the practical implementation of DAO has just begun, with its concepts and theories continuously evolving. On the other hand, if DAO as an organizational form inherently has no value, then the dispute over the name of DAO also loses its value.

Since the time of Hobbes, humanity has realized that without a coordination mechanism, the relationships between people form a jungle law. The philosophy of the dark forest will drive up the costs of cooperation, which is detrimental to the development of productivity. Once we delegate some personal rights to an organization, we inevitably cultivate a Leviathan that can arbitrarily deprive us of our rights. Whoever controls this organization can gain power that does not rightfully belong to them. In such an environment, who would dare to transfer rights to an organization without caution? The modern history of humanity has been a balancing act between public rights and private rights.

Theoretically, a DAO generates an organization whose rights cannot be easily controlled by individuals or a particular group. Not only does usurping power require enormous costs, but maintaining a monopoly on power will also incur high costs. Such an organization allows people to confidently delegate power to it, thereby making social governance more efficient. The emergence of smart contracts provides humanity with such an opportunity.

DAO is an organization formed around open and trustworthy smart contracts. (Here, the term smart contract adopts the original definition by Nich Szabo in the 1990s: "a set of promises, specified in digital form, including protocols within which the parties perform on these promises").

image

DAO is an organization formed around open and trustworthy smart contracts.

The power of DAO is biased towards checks and balances, and the relationships within the organization are inclined towards equality. In a DAO organization, we abandon the flat organizational relationships that can only be maintained between individuals and allow smart contracts to reside within, coordinating organizational relationships. Then, through trustworthy computer systems, the operation of smart contracts becomes credible, thus forming robust organizational relationships.

This is DAO, an organization characterized by decentralization and autonomy through computer technology. Decentralization provides a guaranteed execution environment for smart contracts, allowing organizational members to obtain external conditions for autonomy. The autonomy of organizational members expands the economies of scale of the organization and enhances its value. This is the significance and inevitability of the existence of DAO organizations.

The concept of DAO has long had its embryonic form in human history, and the power struggle between DAO organizations and government power has also been foreshadowed. The wheels of history are unstoppable.

1.2 The Future of DAO is an Unstoppable Historical Trend

1.2.1 The Inheritance of Ideas

DAO is a continuation of the will of classical liberalism.

Even before the emergence of BTC, both the industry and academia were continuously researching decentralized organizations and decentralized decision-making. As early as the beginning of the 20th century, even if not the subject of research, "decentralized organization" frequently appeared in social research literature. The technological conditions at that time certainly did not support computers and information technology. The so-called decentralization could not achieve our current level of "atomization"; it was more about distributing power across different departments. Spiritually, decentralized organizations reflect the liberal ideological phenomenon and are a social practice of today's mainstream values. The decentralization of organizational power has always been humanity's pursuit. More abstractly, from the British constitutional monarchy to the American separation of powers, the history of human political civilization is a history of the decentralization of organizational power. Decentralized organizations are part of this, and the arrival of DAO carries the historical mission of liberating humanity. The liberation of humanity by DAO is not about overthrowing the rulers but about demanding benefits from the flaws of the system.

In 2015, David Ronfeldt categorized the social organizations that have existed throughout history into several forms:

image

Forms of organizations that have existed in human history.

He believed that even with the realization of the organization form of tribe + hierarchy + market, social problems still exist, and the network organization form of the information age will rise. This coincides with the research of others. Malone believed that information technology expands the efficiency boundaries of corporate organizations, allowing companies to establish networks and enhance external resource acquisition activities.

Elinor Ostrom argued that the conclusions drawn from the tragedy of the commons under the assumption of non-public and private are overly simplistic. Because there exist other organizational forms that transcend private ownership (companies and markets) and public ownership (states and governments), market failures can be addressed. In response to the classic economic problem of the "tragedy of the commons," Elinor Ostrom proposed eight principles for solving the problem:

- Clearly defined property rights boundaries;

- Occupation and supply rules consistent with local conditions;

- Collective choice;

- Monitoring;

- Graduated sanctions;

- Conflict resolution mechanisms;

- Minimum recognition of organizational power;

- Decentralization.

She believed that as long as these principles are implemented in relevant organizations, humanity can avoid situations like the tragedy of the commons and other market failures.

In exploring solutions to these economic dilemmas, Elinor Ostrom emphasized the costs of institutional change and advocated for the introduction of cost mechanisms, analyzing and judging the difficulties of resolving public resource allocation dilemmas from a dynamic perspective. Blockchain technology and the structure and function of DAO precisely meet these needs. Thus, DAO can effectively reduce the costs of institutional migration and subsequent maintenance, ultimately bringing greater welfare to our society.

In practice, radical reform attempts like the Hagerberg tax and quadratic voting have already occurred first in the decentralized crypto world. With no historical burdens, economic behaviors like taxation, voting, and auctions are more transparent, and the information environment is superior, making participation in organizational governance in the blockchain environment much easier than in the traditional world. Excellent characteristics attract adventurers from around the globe, and the transformation of the old world by DAO has already begun. Some companies participating in the digital cryptocurrency industry are also exploring the possibilities of DAO. We look forward to the digital cryptocurrency world becoming a testing ground for excellent systems, ultimately spreading these outstanding technologies, ideas, and systems to traditional companies and government organizations.

1.2.2 The Inheritance of Organizational Ecological Development

Not only can the concept of DAO influence existing organizational forms, but DAO can also inversely influence the decisions of other organizations. We need not attribute an inviolable divinity to the power of any one organization. The state is, after all, a form of organization. Stephen Krasner believes that there is no sovereignty as we usually understand it; policymakers create policies to maintain power. Traditional multinational corporations often do not adhere to behavioral norms. The emergence of DAO adds new variables to an already chaotic game environment.

DAO is a super organization that experiences rapid business growth, possesses substantial cash flow and assets, and transcends geography and sovereignty. As long as it develops large enough and is widely distributed globally, DAO can also inversely influence the decisions of other organizations. Non-governmental organizations influence national policies in two ways: active lobbying and passive policy competition. For superpowers like the United States, which possess extraterritorial jurisdiction, they often can only resort to lobbying. Last year, lobbying expenditures by the crypto industry in the U.S. Congress skyrocketed, with public lobbying costs exceeding four times that of 2018. Coinbase, Ripple, and the Blockchain Association were the largest spenders. In the future, decentralized forces will also emerge behind these lobbyists.

image

The cost of government lobbying expenditures in the crypto industry has risen sharply.

Another route is the policy competition among countries. As a high-return, high-growth emerging industry, countries around the world hope to develop the Web3 industry. How to create better policy support to attract entrepreneurial projects, create jobs, and improve overall national welfare will become a starting point for policy-making in various countries.

If we firmly believe that the structure of DAC and DAO is a superior system compared to corporate systems, with economies of scale greater than traditional companies, we should believe that more and more DAOs will influence the global political landscape. The following diagram shows the scale and power of multinational corporations worldwide. Currently, governments are increasingly realizing that they cannot afford to ignore multinational corporations. In 2017, the revenue of just Samsung, a single multinational corporation, matched half of South Korea's economy; Walmart's revenue alone exceeded 10% of the U.S. economy. Multinational corporations bring wealth, jobs, and votes, and have become part of a nation's soft power. Countries need to manage their relationships with supranational economic entities.

When the economic scale of BTC, ETH, and other decentralized products is large enough to impact the economies and societies of various countries, governments and enterprises will have to face a game situation where the interests of an increasing number of decentralized organizations are at stake. Decentralized forces will also infiltrate the power systems of various countries. Currently, the annual revenue of ETH as a chain is only a mere $8.4 billion, not even making it to the top rankings. As the crypto world occupies an increasing share of the global economy, the traditional world will inevitably be influenced by crypto.

II. The Current State of DAO Development

After more than ten years of development, DAOs have begun to form specific ecosystems gradually. As long as the value generated by DAOs exceeds their operating costs, there will be room for Pareto improvement in our society, and the prosperity of DAOs will be unstoppable.

2.1 The Ecological Structure of DAO

image

The Ecology and Stack of DAO

As an organization, the purpose is to operate resources to achieve goals. Taking resources that the organization can control as an example, they can be divided into capital, labor, and other external resources, corresponding to the capital, labor, and land that enterprises can grasp. Due to the specialization and modularization of DAOs, many DAOs currently only involve one type of resource in a particular business, aiming for optimal allocation of that resource. Therefore, DAOs can be classified into three categories based on the resources they control: Capital DAO, Labor DAO, and Resource DAO. These actual scenario DAO organizations have abstract functional needs such as voting, treasury management, task rewards, and dispute arbitration, so they must be built on the infrastructure of DAO. The efficient operation of all infrastructure relies on the support of a reputation system, so the foundational layer is the reputation system.

The reputation system is still in its infancy within DAO organizations, so it is necessary to elaborate a bit more. We often say, "To do a project, you need to find the right people to do the right things." Traditional companies recruit employees using a platform + headhunter + HR mechanism. First, this is a centralized task, and many interviewees will agree that selection sometimes entirely depends on the interviewer's mood. Headhunters also have their own agendas. But selecting the right people to enter the organization is the goal of the process. In the past, personal resumes were often false and difficult to verify, so everyone needed to combine assessments and due diligence for hiring. In the Web3 era, the credibility of personal data has greatly increased, and human resource management can be more entrusted to smart contracts. People can be utilized effectively. For example, we can let someone skilled in dispute resolution play a more significant role in arbitration.

2.2 The Current Functions of DAO

Nearly a decade of development has led to the maturation of certain functions of DAO.

2.2.1 Efficient Public Financing

In 2021, there was a DAO project that caused a sensation outside the circle: ConstitutionDAO. A group of interesting young people raised $47 million from an unspecified crowd in the digital cryptocurrency world in less than ten days using the online financing tool JuiceBox. Although they ultimately lost the auction to traditional old money, the speed and scope of fundraising were unimaginable compared to previous crowdfunding forms.

2.2.2 Basic Trustworthy Democratic Decision-Making

Decentralized voting mechanisms led by Snapshot determine voting eligibility based on account information. Aragon's Vocdoni module utilizes zero-knowledge proofs to achieve anonymous voting. Voting is conducted using private keys as identification, and smart contracts count the votes. The authenticity of the voting is protected by cryptography, making it more trustworthy than traditional voting counting methods.

2.2.3 Decentralized Fund Management

Gnosis.safe has realized the management of multi-signature accounts. This has achieved decentralized fund security and property management for DAO organizations. Aragon's optimistic voting mechanism further transfers the power of multi-signature accounts entirely to DAO organizations. DAO members can directly decide the flow of treasury accounts through off-chain voting on Snapshot, eliminating the need for treasury managers. This removes opportunities for managers to seek rents, achieving true decentralization of fund management.

2.2.4 Member Behavior Labels, Identities, and Profiles

User behavior labels, user identities, and the establishment of user characteristic profiles have already matured in the Web2 era. From business logic to technical implementation, we have a group of industry veterans. However, the current number of Web3 users is very small, and the data is still limited. In the short term, the user experience of Web3 is still far from that of Web2. Therefore, attracting genuine Web3 users (not just speculators) will take time. In the short term, the integration of Web2 data into Web3 is imminent, and many projects are considering doing this, such as Wormhole3.

2.2.5 Dispute Resolution Mechanisms

Colony employs optimistic principles, allowing DAO members to propose initiatives by staking tokens. If the proposal is not challenged, it will be executed. If challenged, it enters the voting process. Similarly, Aragon, a giant in DAO tools, has also established a dispute resolution mechanism called Aragon Court. In Aragon Court, members of the arbitration panel must stake tokens, and the majority in the panel can share arbitration fees and the staked amounts of the minority.

Dispute resolution mechanisms are a crucial component. DAO organizations are those that command real-world resources through smart contracts, and rigid contracts often cannot flexibly respond to the environment. Many flexible scenarios cannot rely on computers to issue commands. As we know, human instructions can lead to disputes. Therefore, dispute resolution is essential.

2.2.6 Reports

Currently, there is no specific reporting system tailored for DAO organizations. However, many decentralized products themselves are DAOs, and the reports of these products reflect some attributes of DAOs to a certain extent. Lido is a good example; their data reports are approved by the DAO and funded by the treasury.

In the future, as DAOs become more robust and disposable resources increase, the demand for neutral reports will rise. The market will see the emergence of specialized organizational reporting products.

image

Lido's outsourced reports.

2.3 The Development Trends of DAO

2.3.1 Closely Focused on Specific Businesses

Any organization must have a clear goal. Having a clear business can unite the organization. Practice shows that once a DAO lacks a clear direction, it will lack internal driving force and fail to form combat effectiveness. The larger the organization, the more goals it has, and the more conflicts between those goals will arise. Conflicts will not only unfold in terms of resources but also in mechanisms. An incentive mechanism suitable for one scenario may not be suitable for another. For example, when providing liquidity for an organization, we can incentivize liquidity providers based on the duration of their holdings. However, for an organization's operational personnel, their contributions cannot be measured by this asset logic. Therefore, when formulating rules, it is essential to first break down complex businesses into multiple simple tasks and goals, then gather resources for individual tasks and establish rules.

Efficiency comes from specialized organizations doing specialized things. This is where SubDAOs come into play. The smooth operation of Bankless DAO has made the concept of SubDAOs deeply ingrained. SubDAOs are not only a refinement of business but also a decentralization of power, facilitating the realization of decentralization.

2.3.2 Composable, Modular, and Refined

Composability and modularity are typical features of the Web3 era. They rely on permissionless decentralized services and products, supported by the incentive conditions created by token economies. In the future, we will see many organizations in DAO governance that complete public opinion aggregation in Snapshot, manage treasuries through Gnosis Safe, and finally distribute rewards based on task coefficients calculated from user reputations by platforms like SourceCred and FirstBatch. Unlike the Web2 era, DAOs in the Web3 world can connect to larger hierarchical ecological DAO organizations through token economies, becoming their SubDAOs. The fairness of the distribution mechanism makes random combinations of DAO organizations possible: regardless of whether they are inside or outside the organization, regardless of hierarchy, the necessary incentives remain intact.

As composability strengthens, only modular products with better user experiences will be able to capture business. To enhance user experience, on one hand, big data recommendations based on DID can push more suitable functional modules for users' specific needs, and on the other hand, product teams will analyze user needs more meticulously. Currently, many rough functional modules reflect that the industry is still in its early stages, with insufficient competition.

2.3.3 Dynamically Adaptive

DAO is a relatively loose organizational form without a clear extension. Entry and exit from a DAO are permissionless. Many people participate in multiple DAOs, simultaneously playing roles in different DAOs. This is a fantastic attribute, meaning that the diffusion of knowledge and technology within DAO organizations is higher than in traditional corporate systems. Unlike corporate systems, theoretically, DAOs do not have organizational interests and do not require permission. Therefore, it is easy for DAO organizations to exchange resources with one another. This includes not only the flow of personnel but also smooth mergers and independent mechanisms. Modularity is a method to reduce organizational dependencies and is also a means of decentralization.

2.3.4 Optimistic Mechanisms

Optimistic mechanisms are an important component of DAO organizations. Even with complete transparency of information, holding a general meeting or shareholders' meeting to review the details of DAO's work tasks can lead to sluggish processes and a loss of vitality and creativity within the organization. Intentional decentralization, fully trusting partners' decisions, and providing space for partners to showcase their talents are particularly important. Introducing a reputation mechanism can further distinguish this optimism, reducing risks and improving efficiency.

Correspondingly, we also need to establish constraint mechanisms. The operational mechanism of optimistic rollups inspires us: in the case of data transparency, asset collateral + a certain period of cross-challenges can allow everyone to supervise everyone. Using distributed supervision to control distributed work. This is very Web3.0.

2.4 Compliance and Regulation of DAO

The recent U.S. sanctions against TC have had a profound impact on the crypto circle. Vitalik has already voted on Twitter, stating that if institutions like Coinbase and Lido dare to refuse to package TC transactions, a broader referendum will be initiated to destroy the ETH staked by these institutions.

DAOs can be compliant or can transcend sovereignty. However, great DAOs must transcend sovereignty. This world does not have only one sovereignty; there are also conflicts of laws and regulations between sovereignties. Even China's state-owned enterprises cannot retain their positions in the U.S. stock market. How can blockchain and web3, which are distanced from traditional powers, navigate the global political landscape? Therefore, global compliance is merely incidental; selective compliance is the decision-making environment faced by DAO organizations.

Currently, many institutions are beginning to engage in compliance activities. For example, Astra is recruiting experts from traditional Big Four auditing firms, government, and financial giants' compliance departments to provide one-stop compliance services for project parties. Many projects focused on DID are also striving to integrate into traditional regulatory frameworks. Especially for DeFi projects, which covet the vast markets of traditional finance, there is an urgent need for compliance. Ultimately, projects will fork, forming different camps. The question of whether to operate under sovereignty as a supplement to traditional business information technology or to become a supranational entity will confront many projects. Compliance issues are part of the consensus of decentralized projects. There will be no compliant projects that abandon consensus. CZ has also stated on Twitter: "Future decentralized projects will be more anonymous and more open-source."

III. How to Make DAO Great Again?

DAO is not just a developing theory but also a developing concept. From the birth of this concept to today, more and more organizations claim to be DAOs. DAOs are continuously evolving. Theoretically, the future of DAOs is promising. In reality, however, there is often much thunder but little rain. For the practice of DAO, one must first reflect before daring to act. The exploration of DAO must not passively wait for the completion of infrastructure.

3.1 Breaking Out of Cognitive Limitations

3.1.1 Cognitive Limitations to Traditional Paradigms

A16Z believes that DAOs can serve various forms of organizations: non-profit organizations, communities, cooperatives, companies, and investment funds. This thinking paradigm is accepted by most people. However, which category should BTC, the world's first and largest DAO, belong to? The above organizational forms are not widely networked. The existence of Dunbar's number means that any traditional decentralized organization cannot exceed 149 people; otherwise, it must have a hierarchical structure. The trustworthy information brought by trustworthy information processing capabilities significantly enhances the potential for large network structures. BTC is precisely this type. This understanding paradigm incorrectly applies past organizational forms, placing people at the center of the organization. New technologies will inevitably create new organizational forms. Interpreting DAO through old experiences will only hinder our innovation regarding DAO.

The true DAO organization serves smart contracts, supplementing their shortcomings.

image

DAO VS Traditional Decentralized Organizations

Further understanding the characteristics of DAO helps us grasp the research paradigm of DAO more deeply. The program (smart contract) is at the core of the organization, which does not mean that humans yield importance to the program. Rather, in the realm of DAO, human existence is meant to supplement the shortcomings of automation. Such organizations have not existed in history. In the past, organizations were always human-centered; now, they are program-centered, with humans on the periphery. This does not mean that current DAOs do not serve humans; rather, they serve programs. It indicates that programs manage humans, and programs also serve humans. The forks based on human will in Ethereum precisely illustrate that humans are the true service objects of DAOs.

The goal of DAO is to focus on the application scenarios of programs. The design of DAO should aim at the needs of programs and use humans as tools. DAO is the bridge between programs and reality, serving as a channel for programs to request external resources from humans.

3.1.2 Cognitive Limitations to Ideology

DAO is rooted in liberalism. From its inception, we certainly aimed to disrupt traditional hierarchical systems, hoping to establish an equal organization. However, structural hierarchies do not equate to power inequalities. DAOs can support not only super-large flat organizations like BTC but also super-large hierarchical organizations.

Taking Bankless DAO and Gitcoin DAO as examples, these larger DAO organizations have developed various SubDAOs. Practice has proven that such hierarchical divisions are beneficial for DAO organizations to achieve their goals.

3.2 A New Deconstruction of DAO through Blockchain Technology Stack

When DAOs are constrained by their inefficiencies, blockchain technology is also addressing its impossible triangle. We will find that the formation of consensus power in DAOs is similar to the node networks of blockchains; it is also a power-redundant network. DAOs face the impossible triangle of efficiency, decentralization, and security. Not only are the dilemmas similar, but the causes are also similar.

From a network structure perspective, both blockchain and DAO are multi-node networks. To reach consensus, a blockchain requires all validators to verify possible blocks. A DAO needs its members to read proposals and submit votes to form decisions. Verifying blocks can put pressure on blockchain nodes, which is similar to DAOs. The difference is that DAO decisions can be uniformly collected through voting systems, while blockchains can easily encounter single points of failure if they uniformly collect data. Unlike blockchains, the nodes of DAOs are people, who are inherently unstable and process information more slowly.

When voting efficiency is low, the founding team often shoulders the decision-making burden. Many project-related matters are often decided after the fact. Some powers are exercised through voting, while others are directly delegated by the founding team, giving the team considerable discretion. This is the centralization of DAO.

As DAO nodes, people live in the real physical world. It is difficult to isolate from reality, facing various threats from power and influences from interests, which can undermine the security of the entire DAO organization.

From the perspective of program-centric understanding and comparison with blockchain, I would like to throw out some ideas for potential improvements in DAO organizations:

3.3 Exploration Directions for DAO:

3.3.1 Targeting Application Scenarios More Suitable for Trustworthy Information Technology

Whether based on infrastructure like BTC or ETH, or investment-type DAOs or collectible DAOs, all significant DAOs share a notable characteristic: smart contracts provide order for organizations, significantly reducing the management costs of flat network organizations. The more smart contracts manage, the less humans need to manage, leading to lower network operating costs. By selecting suitable scenarios, the value generated by DAOs is more likely to exceed their operating costs, making survival more probable. For example, DEX, Lido, or YFI all aim to reduce users' management costs. DEX no longer requires users to actively provide buy/sell market signals; Lido allows one-click deployment of token staking without users needing to assess node security; YFI automatically seeks higher-yield mining pools.

3.3.2 Establishing Organizational Structures More Dependent on Trustworthy Information Technology

With the support of trustworthy information technology, the relationships between people, between people and organizations, and between organizations have undergone subtle changes. After deeply embedding trustworthy information technology, the trust costs among parties have significantly decreased. According to Dunbar's number, the number of interpersonal relationships a person can maintain is 148, which limits the scale of organizations. Expanding organizational scale through hierarchy can lead to bureaucratic inefficiencies. However, with the support of smart contracts, we can both expand organizational scale hierarchically and prevent the emergence of bureaucratic tendencies. This reduces the costs of scaling and delays the arrival of diseconomies of scale.

In addition to hierarchy and networks, can we try some dynamic organizational structures or even composable organizational structures? Information technology expands the possibilities for organizations, and we must break the shackles of old thinking.

3.3.3 Adopting Organizational Mechanisms More Adapted to Trustworthy Information Technology

Organizational mechanisms also need to align with information technology and fit the scenarios.

For example, Wormhole3 uses graphene technology to upload low-security social data to the blockchain through low-level key proxy servers without user awareness. High-level keys are held by users, who can withdraw them at any time. This achieves a balance between user security and convenience, providing users with the opportunity for zero-cost on-chain behavior. Thus, users' social behaviors become potential proof of user workload. When users' social behaviors meet certain attributes, they can obtain a series of incentives, including tokens and reputations, based on on-chain data.

In the future, proactive governance within DAO organizations will become very frequent. If we use a corporate system, currently the consensus mechanism of DAOs is similar to requiring shareholder meetings or board approvals for even the purchase of a roll of toilet paper. If we break free from the shackles of hierarchical organizational thinking, we will certainly think of forming a tree-like SubDAO structure, categorizing and delegating the highest powers hierarchically. The lowest level of power delegation can reach individuals. Power delegation can currently be safeguarded by optimistic mechanisms, where individuals stake DAO tokens and personal reputations to gain limited powers. For SubDAOs, abstracting individual subjects as "legal entities" is also feasible. (DAOs as "legal entities" can also establish reputation systems.)

Conclusion

Kevin Owocki, the founder of Gitcoin, once said: "For the first time in history, we have a transparent, immutable, programmable foundation on which to build new institutions. Even if the founders are corrupt institutions, it will not corrupt."

Vitalik has stated: "I believe there is no doubt that DAOs will become increasingly important."

Nietzsche once said: "What does not kill me makes me stronger."

And DAOs are indeed resilient. Facing the long arm of world powers, in the near future, DAOs will inevitably have to confront the pressures of interference from real-world powers.

The future of DAO will surely be brighter!

Related tags
ChainCatcher reminds readers to view blockchain rationally, enhance risk awareness, and be cautious of various virtual token issuances and speculations. All content on this site is solely market information or related party opinions, and does not constitute any form of investment advice. If you find sensitive information in the content, please click "Report", and we will handle it promptly.
ChainCatcher Building the Web3 world with innovators