I noticed that in the web3 space people often say that in DAOs we build a plane as it goes.
However, a plane is an already defined concept - we know which elements are needed to make it fly. We are just trying to put the pieces together before it is too late and the plane crashes.
But how I would describe DAOs, is that we are in a dark labyrinth with a box of matches. Why does this phrase fit the concept of DAOs? A labyrinth allows us to explore every aspect of the concept we are going towards. We might know what we are trying to discover in the end but we might also be met with completely different results.
When we do not know where the end is, the best thing we can do is to ask ourselves - where are we now in the labyrinth? What means can we use in this specific moment to reach the destination?
Speaking of DAOs we should ask the following questions:
- What do we want to achieve by creating DAOs?
- How decentralized do we want DAOs to be?
- Should all DAOs be decentralized?
Let this article be a moment of inspiration and self-reflection as we sit lost in that labyrinth called DAOs.
Here are the key aspects covered in the article:
- Why was there a need for decentralization?
- Is it actually good to develop extreme concepts, especially when it comes to DAOs?
- Are DAOs in fact autonomous?
- Are DAOs actually empowering decentralization?
- When are we going to finally succeed in achieving decentralization?
Why was there a need for decentralization and what are its benefits?
When I was writing my thesis about DAOs I found out that up until very recently there was no fair game in the company's organizational structures. In theory, both centralization and decentralization have already existed in the business books. However, the centralized organization kept being applied in management for a long time but there was no working solution for the decentralized organization style.
DAOs simply bring back this balance by creating an applicable solution.
Of course, besides that, there are countless benefits to having a decentralized organization. But this only highlights that we should emphasize improving other organizational systems apart from centralized ones.
With DAOs we contribute to building extremes - and that’s actually good
By bringing DAOs into life, therefore creating the “working” decentralized organization we build a sort of leverage.
One might say that going to extremes is bad, however, it has also plenty of benefits. Thanks to us developing the “extreme” version of decentralized governance, it will be easier to develop the official definition of DAOs and define its explicit borders. We all need it to position ourselves and our preferences better.
Therefore, all organizations do not have to be centralized but they also do not have to be entirely decentralized. Instead, we should adjust these concepts according to the needs.
However, as this could represent the idea of what DAOs are meant to achieve in a long run, there are plenty of obstacles to overcome.
DAOs are still dependent on centralized systems
This is without any doubt the biggest current issue. Why?
Many DAOs are still relying on funds that belong to central organizations. It would be a lie to say that this approach as of now develops decentralized organizations. People who come across DAOs for the first time think that they are truly autonomous, yet the centralized organizations are the ones making it possible for DAOs to survive.
It does not mean that initially, DAOs will forever be dependent on centralized entities. For example, Aragon Network DAO was able to operate for many months thanks to the funds provided by the Aragon Association - the centralized element of Aragon. Only very recently the funds have been officially allocated in the DAO.
DAOs start centralized and then gradually develop into decentralized autonomous organizations.
When does a DAO become a DAO?
So far every DAO started centralized. It is very unlikely (however not impossible) that a big amount of people (let’s say >50) at the same moment
- will have the same vision for a company
- somehow connect at the same time
- with all the resources and
- a mutually equal base to start a business.
It is more realistic to say that most of the DAOs will be started by a single person or a small group of people and step by step, as the idea develops, become truly decentralized.
Again it is good to bring here the example of Aragon that started exactly this way. Although in the past the AN DAO was dependent on a centralized entity, for the past few months I have been watching an exceptional growth of the AN DAO. In fact, the goal of the Aragon Association was to make the AN DAO independent.
In theory, it is a disadvantage, that DAOs for now can only start centralized. However, how the governance later develops is fully based on the initiators and their ethics.
Centralized solutions are still used by DAOs due to the lack of resources.
On the other hand, not only the financial system keeps DAOs partially centralized. There are plenty of applications that are entirely web2 or as my colleague from Aragon would say “web2.5”(partially decentralized) that support DAOs. These most famous ones are the following:
- Coordinape
- Discord
- Medium
- Notion (I tried hyperlinking it, but there was some bug, so here is the link: notion.so)
Besides these, there is plenty of centralized task-specific tools still used in DAOs due to the lack of resources. We need more decentralized solutions, but this obviously takes time.
DAOs are about equality that we do not have yet.
DAOs will not become DAOs if the biggest group of people steering them belongs to one specific social majority.
Without the variety of genders, races, beliefs, and abilities the perspective of DAOs as an organism will remain centralized.
Why? This affects the whole mindset of a DAO. Every single one of us experiences different lives. We are people and as hard as we can try, our perception of truth will always remain subjective. Therefore, there will be no truth and transparency in DAOs if only one type of life experience steers the organization. Only by sharing our various experiences with the DAO community, we will be able to speak about the real decentralized mindset.
Again, without proper morals and values, we will only have decentralized technological solutions and overall these organizations will remain centralized at their core - the people.
We are here for a marathon, not for a sprint.
The last element missing to achieve true decentralization in DAOs is time. My recent observation is one specific quality that many people share in this space. It is full of people who like to live in a fast-paced environment with change and improvements.
However, what is key to bringing DAOs into life is time and patience. Living through learnings & mistakes. Observing & gathering inspiration. And allowing ourselves to explore the decentralization.
So many people want to have a ready answer to what decentralization is and how to govern it forgetting that DAOs are just 5 years old. If a single 5-year-old kid barely knows an alphabet, then why do we expect huge decentralized organizations to give a ready answer to how they should be governed?
There were a lot of deep thoughts, so let’s sum up the learnings.
- DAOs will provide leverage between centralized and decentralized governance that can be applied in real life.
- It will allow companies to have more freedom in choosing their own, personalized governing structure.
- DAOs are still dependent on centralized financial systems and applications.
- For now, DAOs can only start centralized.
- The ethics of the founders will determine if DAOs will be in fact decentralized.
- DAOs need a variety of people in the organization to be truly decentralized.
- DAOs should be a long-term goal, not a short-term solution or a hype.
Do you agree or disagree?
Shout out to these amazing people who inspired me and impacted the content of this article: Cris Cantolla, Eric Hansel, Wayne Scali, and Tyler Penning!
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