DAO: Characteristics, Challenges, and Response Strategies of a New Organizational Form

Introduction

The book "Reinventing Organizations" summarizes the development of human organizations into five paradigms, among which the teal organization is seen as the ideal future organizational form, characterized by distributed decision-making, self-management, and evolutionary purpose. In recent years, the rise of decentralized autonomous organization (DAO) is a leading practice of the teal organization concept. This article will explore the core characteristics of DAO, the governance challenges it faces, and the current response strategies.

Definition and Characteristics of DAO

DAO is an emerging digital organization form based on blockchain and cryptocurrency technology. According to statistics, there are currently over 50,000 DAOs established worldwide, with more than 10 million governance token holders and a collective treasury scale exceeding 21 billion USD. The core characteristics of DAO include:

1. Decentralization: Decision-making power is shared among all members, with voting rights distributed through governance tokens.

2. Autonomy: Decisions are automatically executed based on smart contracts, reflecting the concept of "code is law".

3. Democratic Decision-Making: Following the principles of consultative and voting democracy, members can autonomously participate in proposals and voting.

4. Dual objectives: Pursuing both commercial profit and striving to achieve the common interests of the community.

In general, a DAO can be defined as: a form of organization based on blockchain technology, where decision-making power is shared among all members, community members voluntarily participate in democratic decision-making based on proposals, aiming to achieve commercial profit and the common interests of the community.

The governance challenges faced by DAO

Despite the beautiful vision, DAOs face many challenges in practice:

1. Centralization trend of decision-making power: Governance tokens are gradually being controlled by a few "whales" or voting alliances, leading to the risk of power concentration.

2. Voter apathy and short lifespan phenomenon: Most members have low participation, with an average lifespan of only 18 months.

3. Balancing Business and Public Interest: There is a conflict between short-term business returns and long-term community building.

Response Strategies and Outlook

To address the above challenges, the DAO is exploring various strategies:

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

2. Optimize economic incentives: Redistribute tokens through bounties, staking pools, and other methods.

3. Implement delegated voting: Allow members to delegate their voting rights to trusted representatives.

4. Strengthen communication mechanisms: enhance conflict resolution capabilities, ensure equality in communication, and improve the quality and efficiency of negotiations.

However, no organizational design is perfect. Instead of pursuing the establishment of an ideal DAO, we should consider: under what circumstances is it appropriate to adopt the DAO model? What are the boundaries of a DAO? Which decisions are suitable for collective wisdom, and which require decisive action? Although these questions may not have standard answers, the core values pursued by DAOs will undoubtedly drive the continuous optimization of human organizational forms.