DAO: Characteristics, Challenges, and Response Strategies of Emerging Organizational Forms

Introduction

The book "Reinventing Organizations" summarizes the organizational paradigms in human history into five colors, among which the teal organization is regarded as the ideal form of future organizations, featuring distributed decision-making, self-management, and evolutionary purpose. In recent years, the rise of decentralized autonomous organization (DAO) represents the forefront practice of the teal organization concept. This article aims to explore the core characteristics of DAO, the governance challenges it faces, and its strategies to address them.

The definition and characteristics of DAO ###

A DAO is an emerging digital organization paradigm based on blockchain, smart contracts, and cryptocurrency technology. As of August 2024, there are over 50,000 DAOs globally, with more than 10 million governance token holders and a total treasury amount exceeding $21 billion.

The core features of DAO are mainly reflected in two aspects: decentralization and autonomy.

1. Technical aspect: Utilizing blockchain technology and smart contracts to achieve decentralized infrastructure and automated decision-making execution.

2. Governance: Decision-making power is shared among all members, and the decision-making process follows democratic principles. Governance tokens are issued to ensure members share voting rights, with a typical decision-making process including proposal formation, public deliberation, and voting.

3. Organizational Goal: To achieve both profitability and the dual objective of establishing a sustainable community.

The governance challenges faced by DAO

Despite having advanced organizational concepts, DAOs still face many challenges in practice:

1. Centralization of decision-making power: Governance tokens are gradually being controlled by a few "whales" or voting alliances, forming different levels in the organizational structure.

2. Voter apathy and shorter lifespan: Most members do not actively participate in governance, and the average lifespan of a DAO is only 18 months.

3. Balancing commercial interests and public interests: It is necessary to seek a balance between efficiency and democracy.

Response Strategy

To address governance challenges, the DAO has adopted various strategies:

1. Redesign the voting mechanism: Introduce new models such as quadratic voting, quorum voting, and reputation-based voting.

2. Implement economic incentives: redistribute tokens through bounties, equity pools, rewards, etc.

3. Introduce delegated voting: Allow members to delegate their voting rights to trusted other members.

4. Enhance communication mechanisms: strengthen conflict resolution abilities, ensure equality in communication, and improve the quality and efficiency of negotiations.

Conclusion

DAO embodies humanity's expectations for better organizational forms, but there remains a gap between ideals and reality. No organizational design is perfect, and the trade-offs and choices in the governance process are key to addressing sustainable development challenges. In the future, we need to further explore the applicable scenarios, boundaries of DAO, and the best handling of different decision-making types within it. Although a perfect DAO may be difficult to achieve, the core values it pursues will continue to drive the optimization of human organizational forms.