DAO: Characteristics, Challenges, and Countermeasures of a New Organizational Model

Introduction

The book "Reinventing Organizations" categorizes human organizational forms into five types, among which the teal organization is regarded as the ideal future organizational form, characterized by distributed decision-making, self-management, and evolutionary purpose. The decentralized autonomous organization (DAO) that has emerged in recent years represents the cutting-edge practice of the teal organization concept. This article will explore the core characteristics of DAO, the governance challenges it faces, and the strategies to address them.

Core Features of DAO

A DAO is a new form of digital organization based on blockchain and cryptocurrency technology. As of August 2024, there are over 50,000 DAOs established globally, with more than 10 million governance token holders and a collective treasury scale exceeding $21 billion.

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

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

2. Governance: Decision-making power is shared by all members, adopting a decision-making mechanism of democratic consultation and voting.

3. Participation Method: Members voluntarily participate in community building and governance processes.

4. Organizational Goals: A dual objective of both commercial profitability and achieving the common interests of the community.

In summary, a DAO can be defined as: an organizational form based on blockchain, smart contracts, and cryptocurrency technology, where decision-making authority is shared among all members, and community members voluntarily participate in democratic decision-making based on proposals, aimed at achieving business profit and community common interests.

Governance Challenges Faced by DAO

Despite the ideal organizational vision of DAO, it faces numerous challenges in practice:

1. Centralization trend of decision-making power: Governance tokens are gradually being controlled by a few "whales" or voting alliances, and there is also a phenomenon of power stratification in the organizational structure.

2. Voter apathy and short organizational lifespan: Most members have low participation, and the average lifespan of a DAO is only 18 months.

3. Balancing commercial interests and public interests: Finding a balance between efficiency and democracy is a significant challenge.

Coping Strategies

In response to the challenges mentioned above, the DAO is exploring various strategies:

1. Innovative voting mechanisms: such as quadratic voting, quorum voting, reputation-based voting, etc.

2. Economic Incentives: Redistributing tokens through bounties, staking pools, and other means.

3. Delegated Voting: Allows members to delegate their voting rights to trusted representatives.

4. Optimize communication mechanisms: enhance conflict resolution capabilities, ensure equality in communication, and improve negotiation quality and efficiency.

Conclusion

DAO represents humanity's exploration of better organizational forms, but there is still a gap between ideals and reality. No organizational design is flawless; the key lies in the constant weighing and adjusting during the governance process. DAO is not the ultimate solution to all organizational issues; we should consider when to adopt the DAO model. What are the boundaries of the DAO? Which decisions are suitable for collective wisdom, and which require decisive action? Although a perfect DAO may be difficult to achieve, the core values it pursues will continue to drive the optimization and progress of human organizational forms.