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DAOs, The Democratic Approach To Building Organizations


At the crossroads of decentralization, tokenomics and governance, a new concept fundamental to the Web3.0 landscape has emerged: DAOs. These decentralized autonomous organizations represent the essence of the libertarian and social spirit that has blossomed with the advent of blockchain technologies, aiming to evolve the current governance structures towards a new status quo with more balanced power relations and the possibility for everyone to finally participate in the decision-making bodies of the structures that influence their lives.

 

DAOs are new legal structures akin to "joint ventures" that quantify the contribution of participants within them. Their implementation is made possible by blockchain networks supporting smart contracts such as Ethereum, Algorand and Avalanche. This way, anyone can participate, and there is no need for trust between participants. The rules then defined are immutable and transparent, and the contracts that govern them can support the organization by giving it the ability to store and transit secure data. Each DAO creator defines its rules before transcribing them into executable code that can be deployed on the network; once this is done, the code is untouchable. In general, the form of governance is carried out through tokens, purchasable by all, which make it possible to quantify the voting power of each participant called to pronounce and to make new decision proposals for the organization. To summarize, what characterizes a DAO are the non-hierarchical management, transparency, open access and of course a democratic approach to decision making.


The power of decentralized governance is the opportunity to improve and democratize many existing services, extending to almost all types of administrations. Because any member around the world can contribute and participate, DAOs have a very low barrier to entry compared to conventional enterprises. They are also potentially very inexpensive to implement because many tools already exist to build them in a modular fashion. But beyond a better optimization of processes, the passion for DAOs comes from their appeal to the democratic values of all, to the need to see one's opinion recognized, and finally to the will to empower a society by putting in the hands of ordinary individuals the keys to establish what are the priorities and the relevant actions for all.


This remains a very immature technology, and many challenges will have to be solved before it can be democratized, especially on the issue of security. The strength of the DAO is also its weakness, the immutability of smart contracts prevents attackers from changing the rules in their favor, but also prevents the organization from reacting and patching security threats efficiently. And a computer system, as it becomes more complex and grows, cannot avoid having vulnerabilities. Therefore, DAO implementations are currently limited to simpler versions compared to the potential of the technology. Moreover, in a context where flash loans allow anyone to access almost unlimited funds, quantifying voting power with monetary resources is rendered irrelevant.


After the hack of "The DAO" in 2016, the idea had lost popularity, but it has since revived thanks to the work of developers working on technical innovations, improvements to governance mechanisms and voting solutions. Many projects are now flourishing, including in the financial field with grant funding organizations or decentralized investment funds, or in the creative industries by forming "headless" fashion brands, perfumes and filmmaking communities.


In conclusion, a libertarian ideal is gradually being built through audacious decentralized organizations, and despite the challenges they face, continue to grow and shall be an integral part of the society of tomorrow.