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Published on 
October 20, 2023
 Lecture: 
min

DAO and Decentralized Governance: Feasible or Utopia?

The recent rise of blockchain technology and its use cases has paved the way for radical innovations in the field of governance. Decentralized Autonomous Organizations, known as DAOs, have embraced this revolution, advocating for a shift in the power dynamics that were once centralized in the hands of not always identifiable elites. But the question remains: Are they achievable in practice or do they remain a utopia?
DAO and Decentralized Governance: Feasible or Utopia?

A brief recap of DAOs

DAOs are, by design, autonomous and decentralized entities built on blockchain technology. They operate through smart contracts, enabling their members to interact and participate within their ecosystem. Each member has voting rights proportional to their involvement, promoting transparency, democracy, and collective decision-making. DAOs aim to eliminate traditional intermediaries by enabling more direct and equitable governance, representing an innovative model for organizational, corporate governance and even government.

A new-brand world? 

In the 18th century, Condorcet formally theorized the advantage of collective intelligence in reaching an optimal decision. In general, the more individuals can freely express their opinions, the higher the probability of the decision being accurate. In other words, the more people vote, the more likely the majority is to give the correct answer.

DAOs promote this theorem by relying on the following principles:

  • Decentralized voting: All members of a DAO have the opportunity to participate in decisions by voting. Votes are initially individual, and the influence that certain key opinion leaders could exert remains limited.
  • Equity in decision-making: Depending on their involvement in the DAO, each member carries a certain weight.
  • Continuous review and adjustment: The ease with which proposals can be initiated allows DAOs to review and adapt their decisions, effectively optimizing collective choices.

Growing challenges

Drawing on blockchain fundamentals, DAOs can exclude those unfamiliar with this ecosystem due to the complexity of the technology. The web3 ecosystem still has much to do in integrating the retail audience. Despite the deployment of new tools (also used by Erable°), this entry barrier effectively limits the potential impact of DAOs.

We also note that DAOs, by design, strive for fairness among their members. Depending on their involvement in the ecosystem, members have a weight in the decision-making process. Most current DAOs rely on a token-voting system. The idea is that to participate in the governance of a DAO, ownership of an asset (in the form of a token) is necessary. This token is typically a coin traded on the secondary market. This approach can lead to small groups of whales being more successful at executing decisions than large groups of small-holders, potentially resulting in what is known as the tragedy of the commons.

What about erable°?

The long-term vision of erable° is one which sees an exit-to community. The concept of exit-to community finds its inspiration in the idea of creating a participatory and value contributing culture, with aligned incentives across stakeholders, and with the key assets being co-owned and co-governed by the community.

Of course, achieving this fully decentralized future and ensuring it can function efficiently takes time and hence we believe that eraDAO can serve as an important first step. We will strive to create a framework and leverage tools that will pave the way for an eventual exit-to community - trying and testing what works and what doesn't.

In a few words, eraDAO exists to leverage the power of mass mobilisation and community-driven action in order to contribute to shaping a sustainable, equitable and desirable future for all. We will detail its mechanisms in a series of articles.

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