- All
- Engineering
- Blockchain
Powered by AI and the LinkedIn community
1
Technical complexity
2
Legal uncertainty
3
Coordination problems
Be the first to add your personal experience
4
Cultural barriers
Be the first to add your personal experience
5
Human factors
Be the first to add your personal experience
6
Here’s what else to consider
DAOs, or decentralized autonomous organizations, are a form of community governance that rely on blockchain technology and smart contracts to enable collective decision making and resource allocation. DAOs have been praised for their potential to empower communities, promote transparency and accountability, and foster innovation and collaboration. However, DAOs also face some significant limitations and challenges that may hinder their effectiveness and viability. In this article, we will explore some of the main limitations of using a DAO for community governance.
Top experts in this article
Selected by the community from 5 contributions. Learn more
Earn a Community Top Voice badge
Add to collaborative articles to get recognized for your expertise on your profile. Learn more
-
6
- Lisa McClory Digital Technologies Lead at D2 Legal Technology ★ Lawyer and legal technologist specialising in AI and digital assets…
3
- Elijah Spina, PhD Cannabis, {Data}, Biotech ✓ Zero → One → GTM → PMF~ It's All Networks, Always Has Been. ~
1
1 Technical complexity
One of the limitations of using a DAO for community governance is the technical complexity involved in creating, maintaining, and interacting with a DAO. A DAO requires a robust and secure blockchain platform, a set of smart contracts that define the rules and logic of the organization, and a user interface that allows members to participate and vote on proposals. These components require a high level of technical expertise and resources, which may not be available or accessible to all communities. Moreover, a DAO may face technical issues such as bugs, hacks, or network failures, which can compromise its functionality and security.
Help others by sharing more (125 characters min.)
- Elijah Spina, PhD Cannabis, {Data}, Biotech ✓ Zero → One → GTM → PMF~ It's All Networks, Always Has Been. ~
- Report contribution
Thanks for letting us know! You'll no longer see this contribution
DAOs can often be less complex than traditional organizations to start up and maintain. The simplest description of a DAO is "a group chat with a bank account". This type of DAO can be created in minutes using a multi-signature wallet tool like Gnosis Safe at nearly zero cost. In this case, coordination occurs in the chat group before members execute transactions on-chain via Safe.DAO launchpad tools, such as Aragon, often include template operating agreements and the ability to delegate rights to specific people or groups (e.g. proposal and voting rights). Rights are then enforced by code, instead of lawyers, which dramatically reduces overhead cost of implementing governance at any scale.
LikeLike
Celebrate
Support
Love
Insightful
Funny
-
- Report contribution
Thanks for letting us know! You'll no longer see this contribution
🔍 Exploring the limitations of DAOs for community governance, Wyoming's DAO LLC structure offers a captivating lens 🔍Wyoming is carving a niche for DAO LLCs, but not without strings attached. DAOs there must unveil the public keys of forthcoming smart contracts at inception - a conundrum for fluid DAO models. A static year? It culminates in automatic dissolution, a challenge for DAOs where decisions are seldom. And while decentralization hints at anonymity, Wyoming's Corporate Transparency Act begs to differ. It's clear: as DAOs pivot governance paradigms, the tango with legalities persists. The big question remains: Are DAOs truly the unbridled future we anticipate?
LikeLike
Celebrate
Support
Love
Insightful
Funny
2 Legal uncertainty
Another limitation of using a DAO for community governance is the legal uncertainty surrounding the status and regulation of a DAO. A DAO is a novel and experimental form of organization that does not fit into the existing legal frameworks and categories. A DAO may not have a clear legal identity, jurisdiction, or representation, which may pose challenges for its recognition, enforcement, and liability. A DAO may also face legal risks such as compliance, taxation, or litigation, which may affect its operations and reputation. Additionally, a DAO may encounter ethical and social dilemmas that may not be adequately addressed by the current legal systems.
Help others by sharing more (125 characters min.)
- Lisa McClory Digital Technologies Lead at D2 Legal Technology ★ Lawyer and legal technologist specialising in AI and digital assets ★ Honorary Reader in Law at Queen Mary University of London ★ ESG at Society for Computers and Law
(edited)
- Report contribution
Thanks for letting us know! You'll no longer see this contribution
DAO developers can reduce legal complexity by planning and considering law, tax and regulation at an early stage in the project. This would include many factors, such as tax and regulation, and proactive steps developers can take might include:- using formal, legal rules to govern any voting, resource allocation, participation and responsibilities between participants, written in natural language, code or as a hybrid code-language document;- putting in place legal processes for resolving disputes;- using legal entities where appropriate - for example, to manage any offchain functions of the DAO, or to bridge the link between proposal outcomes and the treasury, rather than relying on human community members.
LikeLike
Celebrate
Support
Love
Insightful
Funny
3
3 Coordination problems
A third limitation of using a DAO for community governance is the coordination problems that may arise from the diversity and scale of a DAO. A DAO may consist of a large and heterogeneous group of members who have different interests, preferences, and incentives. A DAO may also have a complex and dynamic structure that may change over time. These factors may make it difficult for a DAO to achieve consensus, alignment, and cooperation among its members. A DAO may face challenges such as information asymmetry, collective action, free riding, or governance capture, which may undermine its efficiency and legitimacy.
Help others by sharing more (125 characters min.)
4 Cultural barriers
A fourth limitation of using a DAO for community governance is the cultural barriers that may limit the adoption and acceptance of a DAO. A DAO represents a radical shift from the traditional and centralized forms of organization and governance that most people are familiar and comfortable with. A DAO may challenge the existing norms, values, and expectations of the society and the stakeholders that a DAO interacts with. A DAO may also require a high level of trust, openness, and participation from its members, which may not be easy or desirable for some people. A DAO may face resistance, skepticism, or hostility from the external environment or the internal culture.
Help others by sharing more (125 characters min.)
5 Human factors
A fifth limitation of using a DAO for community governance is the human factors that may affect the performance and satisfaction of a DAO. A DAO relies on the rationality, autonomy, and agency of its members, who are supposed to act in the best interest of the organization and the community. However, human beings are not always rational, autonomous, or agentic. Human beings may be influenced by emotions, biases, heuristics, or social pressures, which may lead to suboptimal or irrational decisions or behaviors. Human beings may also have different needs, motivations, and goals, which may not be fulfilled or aligned by a DAO. Human beings may also experience conflicts, disputes, or grievances, which may not be resolved or addressed by a DAO.
Help others by sharing more (125 characters min.)
6 Here’s what else to consider
This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?
Help others by sharing more (125 characters min.)
-
- Report contribution
Thanks for letting us know! You'll no longer see this contribution
Significant challenge is the fact that decision-making in DAOs can become slow and inefficient as the number of members grows, making it challenging to achieve consensus on matters. For example, a DAO managing a decentralized social platform might struggle to swiftly agree on content moderation policies due to a large and diverse membership base. Additionally we cannot forget that, legal and regulatory frameworks are still catching up with DAOs, posing compliance challenges. For instance, DAOs distributing tokens as incentives may face ambiguity in tax regulations, causing legal complications. These limitations necessitate continuous innovation in security, scalability, and legal frameworks to unlock the full potential of DAO'S
LikeLike
Celebrate
Support
Love
Insightful
Funny
6
- Elijah Spina, PhD Cannabis, {Data}, Biotech ✓ Zero → One → GTM → PMF~ It's All Networks, Always Has Been. ~
- Report contribution
Thanks for letting us know! You'll no longer see this contribution
An organization can choose to be as decentralized as its automations allow.DAOs are still in the early part of their technology development curve. This results in DAOs with lower net profitability compared to centralized alternatives. However, there are potential emergent phenomena that can spur innovation in conditions of bottom-up governance that could not occur in top-down conditions.As decentralized governance technology improves we will see a broader range of use cases where it results in increased net profitability relative to centralized governance models.
LikeLike
Celebrate
Support
Love
Insightful
Funny
1
Blockchain
Blockchain
+ Follow
Rate this article
We created this article with the help of AI. What do you think of it?
It’s great It’s not so great
Thanks for your feedback
Your feedback is private. Like or react to bring the conversation to your network.
Tell us more
Tell us why you didn’t like this article.
If you think something in this article goes against our Professional Community Policies, please let us know.
We appreciate you letting us know. Though we’re unable to respond directly, your feedback helps us improve this experience for everyone.
If you think this goes against our Professional Community Policies, please let us know.
More articles on Blockchain
No more previous content
- Balancing security and interoperability in blockchain networks. How do you navigate the complexities? 1 contribution
- You're navigating a team with diverse blockchain knowledge. How can you foster seamless communication? 1 contribution
- You're facing blockchain protocol conflicts. How do you align different platforms seamlessly? 1 contribution
- You're leading a decentralized team on a blockchain project. How can you unite their efforts for success? 1 contribution
- Dealing with partners of different blockchain levels. How can you bridge the knowledge gap effectively?
- Here's how you can enhance your leadership in the Blockchain industry with emotional intelligence.
- Your organization is adopting blockchain technology. How can you ensure stakeholder trust remains intact? 7 contributions
No more next content
Explore Other Skills
- Programming
- Web Development
- Machine Learning
- Software Development
- Computer Science
- Data Engineering
- Data Analytics
- Data Science
- Artificial Intelligence (AI)
- Cloud Computing
More relevant reading
- Blockchain How do DAOs challenge traditional governance models?
- Blockchain What are the most effective strategies for designing DAOs that align with community values?
- Web3 How can you navigate decentralized governance?
- Web3 How can you use DAOs for better Web3 governance?