Decentralized Autonomous Organizations (DAOs) are one of the most important and impactful contributions that come from web3. They are being adopted already by web3 projects large and small, as the way to decentralize governance of digital platforms in the smart web.
DAOs do not have an executive team, or a Board of Directors. They lack central governance. Members of a DAO take collective decisions by voting on proposals and staking their tokens. Proposals voted by the community are then executed by teams of developers, and funded by the internal token of the platform. A vision shared by most in web3 is that DAOs can enable new business models in the digital economy of the 21st century, such as platform cooperatives, finance and insurance unions, data trusts, smart city unions, etc., run by communities in a democratic way. But can we truly imagine decentralized, web3 instantiations of an Uber, or a Facebook, where the value that is created is shared fairly among the members of the platform instead of being siphoned off by a minority of investors and executives? I think we can, but only if we address several key weaknesses of the current DAO stack. Let me list a few that I consider important for the wider adoption of DAOs.
1. DAOs are plutocracies
Let’s be honest: DAOs are merely duplicating joint-stock governance models by replacing executives with smart contracts. Moreover, decisions in a DAO are taken by majority vote, with a highly unequal distribution of tokens among the members. DAOs are in effect plutocracies, not democracies, and as such they run the risk of resistance and rejection. “Majority rule”, even in a system where everyone has equal number of votes, is still an inefficient and fragile way of running a community, as they run the risk of polarization and disenfranchisement. That is why referenda create more divisions in society than voting for political party representatives in a parliament(think Brexit…). There is a reason why centralized systems of government have been with us for so long: they are better in forging consensus among the disparate interests of the members of the communities (citizens, shareholders, etc.) that they govern. If decentralized governance is to compete it must offer a viable alternative that also forges consensus (and I am not talking about verifying a block on a blockchain… not that kind of “consensus”…)
2. DAOs decision-making is limited
The biggest problems in our world today are complex social, environmental and economic problems, and they cannot be solved without the active participation of impacted communities. Unless technologists rethink communities as equal partners — and not just as “end users” — they will be unable to deliver meaningful and positively impactful innovations. A major factor to rethink is how web3 digital platforms will set and evaluate goals for innovation, as well as manage, govern and distribute the economic and social value that they will create. These decisions are complex and require deliberation. They cannot be taken on the basis of a simple yes/no vote. Members of a DAO should be able to make proposals and amendments to proposals, and there must also be a way for members to discuss amendments and proposals, just as they should in any truly democratic system of governance. DAOs are currently inadequate to support such complex needs, because they lack a deliberation layer.
3. Technology Tunnel Vision
Web 2.0 led to Big Tech monopolies and a digital economy of surveillance and inequity. Web 3.0 promises to change this by including user communities in the governance of digital platforms via DAOs. Unfortunately, DAOs continue to optimize around metrics that confuse “good” with “useful” and “profitable”, and thus propagate an overtly financialized “technology tunnel vision”, with negative social and ethical implications. We must rethink DAOs beyond efficiency. We must introduce effectiveness into DAOs too; i.e. the ability of DAOs to take the correct (morally, socially, and not just economically) decisions.
4. Code cannot replace human trust
Code alone is not enough for large communities to take complex decisions on polarizing issues. DAOs provide efficiency and transparency that are great — and much-needed- things in themselves. But we need to understand that human beings are not machines. They have ideas, biases, and emotions. Time and again human communities have taken collective decisions that were against their economic interests. This means that human communities have values that go beyond maximizing an economic utility. The question, as in every polity, is who decides what value to prioritize. In centralized governance system the answer to this question is easy. But not in DAOs. For a decentralized system of governance to deliver value in complex and potentially polarizing issues there needs to be deliberation.
We need a deliberation layer for DAOs — and we are building it!
Multi-stakeholder organizations such as representative democracies, local authorities, smart cities, NGOs, cooperatives, associations, and multinational corporations, must engage with diverse communities of stakeholders in order to take decisions that enjoy widespread acceptance and consensus. This is exceptionally challenging when diverse communities of stakeholders with conflicting interests are asked to provide views, or advise — on complex issues that require specialist knowledge (e.g. selecting among a number of investment opportunities, managing commons, deciding on policy or strategic direction, etc.) due to stakeholder lack of specialist knowledge on the subject of deliberation and zero or low incentives to participate in deliberations.
At Voxiberate we are building a deliberation layer for DAOs that will complement the current governance stack, solve for the problems of knowledge asymmetry and lack of incentives, and enable the adoption of DAOs by complex human organizations. Our DAO deliberation layer is based on the concept of “Citizen Assemblies”, groups of citizens (or “members of a DAO”) that are randomly selected and are tasked to deliberate on a certain issue. Citizen Assemblies have been shown to deliver an excellent way to engage with diverse communities and enhance trust in public and private governance. We believe we can borrow the principles of the Citizen Assembly concept and use technology to massively reduce the cost of setting up and running citizen assemblies in DAOs at scale.
Follow us on Twitter to learn more.