How Powerful is DAO?

As I know many projects have faced some problems using DAOs, and we don’t consider this system to be perfect because the actions of some users can contradict the interests of the rest, like in any society. When some users have a high enough share of the project’s tokens, they can make a convenient offer that plays in their own interest only and the ones who are against will lose with their opinions. Seems like it contradicts the idea of DeFi at all.

I know that one person can create a massive number of wallets, and without incurring any losses, make a profit at the expense of other users or what’s wrong destroy the project. That’s not democratic at all. But still I’m glad this solution was once introduced. The idea of DAOs focusing on serving all members of the community and addressing the challenges via manual intervention by managing everything through smart contracts is great. I believe it has the enormous potential to revolutionize how organizations work if the system is developed.

Well there is one more or less successful example of DAO in Yearn Finance. At least the one that I know. They have special committees that hire professionals engaged in improving the protocol, and users can vote for the election or removal of members of these committees. Committees prepare updates to the protocol, which are further submitted to the DAO, and this system ensures that users will choose thoughtful decisions and reject disadvantageous ones. To my mind it looks fair and optimistic. But maybe that’s the only side I know? Do you think we can see the prosperous DAO future in the creation of such professional committees? Or there can be other ways to improve the situation? Maybe you have some examples of such projects idk.

That’s the topic I’m getting obsessed about because I wanted to become a DAO member and small investor but as I researched this I found it useless to become one if I do not have a good share of project’s tokens.

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8 thoughts on “How Powerful is DAO?”

  1. You made a very interesting post. Thanks!

    I think the problem comes down to, mainly, in identifying unique users. If you have a fanbase lets say of 10k people and spread your token evenly it would still not be guaranteed that all of them are indeed unique since you can easily buy/set up thousands of bots and more.

    So basically it comes down to how honest the founders are. But even then players can abuse the system like by having a lot of bots for the airdrops.

    So I would say the only solution is to make it harder for people using massive amounts of bots/gmails/other stuff. Any other solution seems flawed, like even if you made a live giveaway where anyone live in a stream would get the tokens at the same time there could be massive amounts of bots. A human can always be emulated by ai online.

    Maybe there still could be a solution like people having to do a puzzle or survey that takes 20 minutes. Another option would be a fingerprint or even faceshot but I am sure both can be abused also and people would lose their anonymity.

    The only way I see to truly randomize and spread it evenly would be to just drop paper slips over cities where really random people will get one of the codes. Then you at least would have to be there in person and there its not as easy to multiply yourself as it is online.

    But open to any other suggestions?

  2. They can be pretty powerful. Look at examples such as NounsDAO, makerDAO and Polygon’s DAO. The latter offers grants and is growing web3 as a whole. They can also be centralized shitshows as well. Depends on the DAO.

  3. My impression is that most DAOs end up replicating the structure of most companies – generally speaking, oligarchic. I’m not sure this is a bad thing, as expertise and performance tend to be more important than everyone getting what they want when there’s money on the line.

    Even if this weren’t the case by design, it would happen anyway. Users across DeFi want to be DAO members for the equity, but overwhelmingly decline to participate in governance. This creates the incentive for a bribe economy where token holders can rent out their voting rights in exchange for higher yield.

    I think these metrics will vary from DAO to DAO, though, as community involvement may be more or less relevant to their mission.

  4. in my opinion DAOs have limitations because they ported the “traditional” governance model, where one share/token/dolar = one vote. The unique characteristics of Blockchain technology allows us to do better and evolve.

    A key development, as previously stated, would be to identify unique holders (or “personify” the wallets). But that is just the first step. In my view a the end game is having experience weighted voting combined with a track record tracking layer. This would allow unique users with a proven track record in that subject area to have overweight voting power.

  5. I didn’t know Yearn finance had a DAO. Nice one. I’m part of the DIA and Bankless DAOs tho.

    DAOs are the foundation of web3, many don’t know this yet.

  6. Then you have to look at Kromatika DOA. The majority of KROM token is in the community’s hand forever. Be part of the community by holding the token on the Tier 1 user friendly exchange.


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