Balancing DAO Governance: The Interplay of Organizational Structure, Decision-making, and Sustainability

Description

The proposed research seeks to explore the characteristics and dynamics of decentralized autonomous organizations (DAOs), which are novel online organizations powered by blockchain technologies. DAOs are rooted in cyberlibertarianism principles and advocate for individual freedoms, devoid of authoritarian oversight. Participants voluntarily contribute time or monetary resources and, in return, receive blockchain-based tokens representing the organization’s ownership shares. Any member can participate in DAO’s governance by proposing strategic or operational motions, with decisions being made by collective discussion and voting. The value of these decisions is subsequently realized in the market performance of the ownership tokens. By the end of 2023, thousands of DAOs are managing virtual assets worth approximately half a trillion US dollars. While DAOs, characterized by their decentralized structures, democratic decision-making processes, and transparent incentives, are believed to possess the potential to transform business and political models, an emerging trend suggests some DAOs have deviated from their foundational ethos. Specifically, certain DAOs appear to lean toward centralization to improve competitiveness in the volatile cryptocurrency market. This highlights a paradox: While DAOs necessitate both adherence to decentralization principles and effective decision-making to sustain, these two critical components may intrinsically conflict. Hence, the objectives of this study are twofold:1. To assess the feasibility of establishing a structurally flat, democratically governed, market competitive, and enduring autonomous organization.2. To investigate the intricate relationship between organizational structure, decisionmaking process, and decision outcomes that shape a DAO in practice. Our methodology involves analyzing at least 88 DAOs’ empirical data, spanning from their inception to current operations. We collect the token ownership and transactions, informal chat histories, formal proposal initiations and deliberations, voting records, and tokens’ secondary market performance of these DAOs. Through longitudinal segmentation, we assess evolutions in DAOs’ degree of decentralization of organizational structures, level of democracy in the decision-making processes, quality of decision outcomes, and, eventually, member retention. Specifically, computational social science methods, such as natural language processing and social network analysis, are employed to measure these constructs. We use meta-analysis for assessing DAOs’ overarching evolutionary trends and panel regressions for hypothesis testing regarding their governance mechanisms. Our findings aim to guide stakeholders, including DAO members, investors, researchers, policymakers, developers, and the broader public, in comprehending the intricacies of DAOs in a volatile market landscape, or, arguably, any other organization in a complex environment. Ultimately, this research could pave the way for innovative paradigms in future economic and political organizational designs, possibly revealing a synergistic relationship between egalitarianism and broadly defined performances.