Outlook and Debates

We’re at the very start of the DAO journey.

As such there are a lot of different outlooks, debates and open questions on the way forward, including the fundamental question of whether DAOs are a structure that the world needs at all. Some of these questions are more technical, others cultural. Since our expertise is mainly in the latter, we would like to conclude this first chapter with some of the current debates we are following in the DAO space.

Some of the areas of debate that are being raised are:

  1. The role of different ideological tenants within the crypto space, such as crypto-libertarians and crypto-commoners

  2. What role can decentralized governance play at an organizational vs. societal (institutional) level?

  3. Is there an ‘ideal/optimal size’ for DAOs?

  4. How do you manage the gradual process from being a centralized organization to a DAO?

  5. How to protect DAOs from the Tragedy of the Commons?

Let’s dig into one of these questions: How much soft governance will different types of DAOs need?

By soft governance we mean the off-chain processes that build trust and collaboration between the people involved in the DAO. As explained in chapter one, some of the processes that can build group cohesion and off-chain coordination are weekly calls or other meetings, working groups, and asynchronous communications. Some other less obvious forms of soft governance include the influence of thought leaders and founders on the DAO’s members.

It’s easy to have soft governance in groups of 150 (Dunbar’s number) or smaller, as each individual knows who each person is and how each person relates to every other person. Once a group grows beyond that number, there are simply too many people for relationships to play a crucial role in collaboration, accountability and sense making. At this stage traditional organizations split into departments or the organization chart or team structure helps people know who to interact with (e.g. managers interact with their subordinate and other managers).

Now if we consider a functioning DAO with 10,000 agents, there will be hundreds of proposals being voted on and boosted at any one time. Some of the thinking inherent in why blockchain will provide the infrastructure that can enable this type of coordination without having to develop a traditional organizational structure is because we can take decision making power out of the hands of a few and into the hands of many. This is possible because actions that occur are more easily accountable, transparent and cooperation costs are minimized.

Hard governance can be thought of as actions that happen on the protocol level outside of soft governance or human relationships. For example, when using Alchemy in a DAO; hard governance looks like agents carrying out actions like submitting proposals, staking on the proposals of others and voting. Theoretically this can all be done without the need for calls, conversations and interactions with other people. Is removing or reducing this ‘soft governance’ in fact an objective and purpose of developing DAOs - to remove facilitation from governance that can be error prone and corruptible? Will doing this create more human freedom, or lead to more human control? How will it make the life of the average citizen better?

These questions are heavily debated and it is important not to take them lightly. As those experimenting with new models such as DAOs, we have a responsibility to ask these difficult questions and be mindful of unintended consequences.