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DAOs have redefined the way we perceive organizational structures and the philosophy of networks.

Unlike traditional centralized systems, a DAO doesn’t have vertical or horizontal exposure.

It distributes decision-making and execution to all members of the organization simultaneously in proportion to their stake and contribution.

This approach ensures an equitable and democratic distribution of resources and responsibilities, fostering a sense of unity and collective ownership.

Every action and contribution is valued, encouraging a collaborative and inclusive space where the combined efforts of individuals create a harmonious and prosperous community.

If centralized organizations are visualized as pyramids or matrices, a DAO is a probability cloud where each particle has a weight and level of activity.

This structure establishes complex and efficient relationships where investors, contributors and community members collaboratively propose and implement ideas.

The transparency afforded by blockchain technology enables clear consensus, ensuring the protection and acknowledgment of each party’s responsibilities and interests.

The cornerstones of successful DAOs

Community engagement

This is about motivation. If the community can create proposals easily, know their vote has an impact and get rewarded for valuable actions, the DAO community will prosper.

Everything needs to be transparent and supported by good statistics, ergonomic dashboards and more. Users need to see a path for personal and career growth in a DAO.

That’s why opinion leaders can make DAOs and communities more prosperous.

Ambassador programs, influencers and anyone with a platform can tell the world how exciting and beneficial a DAO is.

Transparency and decision-making

DAOs powered by blockchain technology provide full visibility, allowing anyone to trace every vote and proposal submission, enhancing inclusivity and equity in decision-making.

In contrast, achieving this level of step-by-step transparency is unimaginable in conventional Web 2.0 organizations, where accessing comprehensive information isn’t as straightforward.

DAOs represent a groundbreaking level of openness and integrity, setting a new standard in organizational transparency.

Incentivizing community members

Motivation is important users must value their time and benefit from their contribution. Sadly, not many DAOs let all users monetize their time.

For a user to get involved, they need to see why they should be a part of the DAO both for the mission and for their self-interest.

Tokenomics

It’s crucial to analyze a DAO’s token distribution system. Unfortunately, for many DAOs, tokens are just there for the hype and have little actual use.

There is some networking effect potential, but make sure to DYOR on a DAO and their governance token.

Read through the tokenomics of many different DAOs, and you’ll start seeing patterns that will lead you to know which questions to ask.

Reputation systems

Solutions that discourage sybil attacks and help people build a sustainable, on-chain reputation help with reputation. Soulbound tokens ‘stick’ to their initial owner, for example.

When a user’s actions can be evaluated as part of a reputation system without violating their privacy, more responsible DAO governance will follow.

How can DAO members evaluate the risks and rewards

Farming interacts with DAOs by bringing high rewards but also high risks. Many protocols have been hacked even the biggest ones.

Remember how the recent hacking of Curve almost brought down DeFi? We need to be very careful and prioritize security first.

DAO members determine whether the token is worth the money, and the good news is that a good DAO has tools to protect its members.

They can set aside a small portion of the treasury for farming or use the experts among them to notice red flags.

A DAO can even propose a withdrawal of all liquidity from farming if the reward token price drops below a certain amount.

DAOs are very powerful but only as powerful as the sum of their members and the processes they put in place.

The beauty of DAOs is that geographic borders and time zones don’t really matter.

You can have one member submit a proposal in Shanghai and go to sleep while another wakes up in Kyiv and improves it with constructive criticism.

Then, members from all over the world vote on it, and when ready, a member somewhere else executes the transaction.

Just imagine how much more effective any organization could be when there is always someone awake at any given time. They can take advantage of more opportunities and be aware of more threats.

DAOs are built on automatic smart contracts that do whatever they are programmed to do no matter what time it is.

DAO members can even set up very specific notifications to know when something important is happening, so there are many ways to manage your time and participate from anywhere in the world.

The future of DAOs

More than anything, DAOs need to be flexible to succeed despite the trends.

They must align incentives, meaning that every member needs to know which actions will help a DAO succeed to get rewarded.

I think people are tired of DAOs where only the team or whale investors make decisions – a DAO model where nobody votes or everybody votes to get airdrops is dead.

The future will see DAOs where expertise and intelligent participation matter, people can make a living and members can make the world a better place.

We call these DAOs meritocratic, anti-plutocratic and equitable, and they will see a lot more use cases and a lot more DAO success stories.


Dmytro Kotliarov is the co-founder at DeXe DAO Studio and a contributor at DeXe DAO Protocol.

 

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Featured Image: Shutterstock/DrDrawer




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