Experts on the path to the DAO: pros, cons, prospects Experts on the path to the DAO: pros, cons, prospects

#DaoPoliticsS01 cover forklog
#DaoPoliticsS01 cover forklog

DAO Politics is a series of podcasts from ForkLog, in which we, together with invited experts, understand how decentralized autonomous organizations, and talk about their conceptual and technological foundations. In the first issue, crypto enthusiast Stepan Gershuni, bitcoin maximalist Tony (21 Ideas project) and trader Ton Weiss answer questions about the prospects, advantages and disadvantages of DAO.

1. DAO is an organization that does not have a single point of control and, accordingly, a single point of failure. The autonomy of the DAO is expressed in the approach to decision-making, their execution and control over this process using the blockchain, smart contracts or other digital tools. This fundamentally distinguishes decentralized organizations from traditional corporations or public institutions with classical bureaucracy. DAO is a qualitatively new format of organizations that live on the Internet and are managed by a community of contributor users.

2. One of the main advantages of the DAO is the consistency of the economic goals of the participants. Management in such organizations is based on its own token, which acts as a means of reward or punishment, stimulating actions in the interests of the project. This is a qualitative difference between DAO and traditional companies, in which the interests of shareholders, management, ordinary employees and customers can be fundamentally different.

Another important advantage of DAO is openness. It is easier for decentralized autonomous organizations to attract new participants who can influence the development of the organization. Since DAOs originated and exist on the Internet, they operate more quickly and efficiently in the global space.

3. The key advantages of DAO in practice can turn into their own disadvantages. First of all, we are talking about the speed of decision-making. Participants must negotiate openly and democratically, which leads to lengthy discussion and voting processes. DAOs are more complicated than classical corporations, they need to spend more resources on organizing work. It is also likely that different groups of participants in the organization will seek to direct common funds to different projects.

4. The advantages of such organizations can be realized in traditional companies. An example is Elon Musk’s deal to buy Twitter, after which the billionaire began to conduct user surveys in order to find out the desires of the audience. According to critics of the DAO, this demonstrates that it is possible to be a centralized company, but interact directly with customers to develop the project.

Questions are also raised by the legal aspects of the functioning of the DAO. In particular, if the organization does not have a CEO, then there will be no one to bring charges of conditional sale of unregistered securities. The opposite situation can also cause some concern: if the majority of participants vote for something that the creator of the DAO does not like, he will not be able to prevent the implementation of the decision in any way.

5. Bitcoin is the first DAO. This argument is often invoked by supporters of decentralized autonomous organizations to prove their cost-effectiveness. Bitcoin can be called the first structure of its kind that was born and still exists on the Internet without a single group of leaders that makes all decisions. Modern DAOs appeared 10 years after digital gold and learned many lessons during this time. Organizations like Gitcoin, ENS, Optimism Collective, Token Engineering Commons are more thoughtful and deep, their policies are more complex.

Opponents of this argument believe that the first cryptocurrency should not be considered a DAO, but rather a “decentralized autonomous organism” or “decentralized system”. Finally, there is an opinion among bitcoin maximalists that in the future only bitcoin will remain among DAO-like structures, since “everything else does not require DAOs and tokens.”

6. DAOs have every chance of becoming a “really working mass phenomenon”, but their development requires experiments and criticism. Experts note that over the past year, the segment has made huge progress due to the desire of people to increase efficiency and decentralization. So, in modern DAOs, they are increasingly switching to a delegated system: people give tokens to delegates who receive a salary for reading documentation and voting. For example, Arbitrum DAO provides for both direct and delegated voting of participants. This partly reflects the system of representative democracy that exists in most countries and tends to work effectively.

At the same time, according to the observations of analysts, they actively tried to introduce the DAO for speculative purposes. This is confirmed by the outflow of liquidity from the protocols during the bear market. Skeptics also point to the fact that at present DAOs rarely seek to perform utilitarian functions that are understandable and accessible to the mass consumer.

This is a brief retelling of the DAO Politics podcast episode, hosted by crypto enthusiast Stepan Gershuni, bitcoin maximalist Tony (21 Ideas project) and trader Ton Weiss.

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