Isomorphism in DAO Governance

Institutional isomorphism is one of the core theories of sociological institutionalism. three kinds of isomorphism exist in DAO: normative, mimetic, and coercive isomorphism.

Isomorphism in DAO Governance

The term “institutional isomorphism” refers to the structural and process similarities of independent organizations. In the past, information dissemination and adoption of similar practices was slow and often limited to organizations within a single country or region. However, in the emerging institutional field of blockchain networks and decentralized autonomous organizations (DAOs) [1], which benefit from near-instant global communication via the Internet, isomorphism has developed more rapidly.

Note: Institutional isomorphism (IIT) is one of the core theories of sociological institutionalism. in 1983, American scholars Paul J. DiMaggio and Walter W. Powell published in the American Sociological Review The concept of institutional isomorphism was first introduced in the article “Revisiting Cage Theory: Institutional Isomorphism and Collective Rationality in the Organizational Field” in the American Sociological Review. The so-called isomorphism is a “constraining process” in which there is a force that drives a unit to become similar to other units when faced with the same environmental conditions. The central question that DiMaggio and Powell seek to explain is: Why are the structures and practices of organizations increasingly similar in modern society? What forces are driving organizations toward homogenization so that their forms, structures, and specific practices become more and more similar and convergent?

Based on DiMaggio and Powell’s observations, they argue that there are two forms of isomorphism, namely competitive isomorphism and institutional isomorphism. Competitive isomorphism is a concept derived from “population ecology”. Competitive isomorphism emphasizes the causal relationship between homogeneity and market competition. In contrast to the similarity caused by competitive market pressures, the concept of institutional homogeneity emphasizes the importance of legitimacy and the “logic of appropriateness” of the homogenization process. In modern organizational life, organizations compete not only for customers and resources, but also for political power and institutional legitimacy. As DiMaggio and Powell put it, “the concept of institutional isomorphism is an effective tool for understanding the politics and rituals that permeate so much of modern organizational life.

In their 1983 paper entitled “The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in the Organizational Field,” DiMaggio and Powell [2] discuss three forms of isomorphic change: normative, mimetic, and coercive.

Normative isomorphism is driven by specialization and is reflected in professional vocabulary, job descriptions, educational requirements, and other common norms and standards that guide individuals in a given domain to think and behave in similar ways.

Imitation isomorphism is driven by imitation, where organizations are often faced with uncertainty, including a lack of clarity in the external environment, internal goals, and strategy. A common way to deal with uncertainty is to imitate other organizations, especially those that are perceived as successful or exemplary.

Forced assimilation is driven by external forces, and organizations may be pressured by external authorities to conform to certain expectations. Typical examples include legal or regulatory mandates, reporting or oversight obligations, and pressure from entities that provide funding or other necessary resources to the organization.

The degree of isomorphism in DAO governance requires empirical research [3] before it can be claimed that, despite surface-level differences among independent DAOs, the entire field is converging on a relatively small number of core ideas and practices.There are some technical similarities in the governance of DAOs. For example, all DAOs rely on digital information and communication technologies (ICT), particularly blockchain networks and innovative cryptographic protocols, but also on more traditional digital infrastructure and services such as the Internet, social media, and online collaboration platforms (most notably Github, Discourse, Discord, Twitter, and Telegram). But there is more evidence that the “Cambrian explosion” of blockchain-based economic and governance experiments is increasingly being offset by all three forms of institutional isomorphism discussed through DiMaggio and Powell. Here are three examples

Normative isomorphism.

The blockchain industry has its intellectual roots in the punk and open source software movements. This has influenced the acceptance of different ideas and practices within the industry and has helped to generate specific design preferences, social norms, and intellectual dispositions. An example of this is decentralized applications that adopt the principles and spirit associated with their underlying networks [4].

Thought leadership and advice from reputable individuals or organizations is a key source of normative guidance for DAO governance. Although not universally adopted, examples include preferences for software-based automation over human participation and the use of deletion mechanisms to counter voter apathy. Similarly, such concepts as “social scale,” “governance minimization,” “trusted neutrality,” “progressive decentralization “and “protocol politicians” are normatively relied upon in designing governance mechanisms for a variety of different DAOs.

In addition to expertise in network operations, software development, and cybersecurity, other areas of DAO governance are increasingly specialized (e.g., financial management, financial analysis, or coordination of governance proposals and voting procedures.) The specialization of DAO governance promotes homogenization. In the future, the growing importance of professional networks, industry associations, and industry-specific education and training programs may amplify this trend

  1. mimetic isomorphism (MIM)

Many DAOs have adopted the governance mechanisms established by the earliest public chains. Most importantly, this includes the use of network-specific tokens to incentivize work, assign access or voting rights, and suggest standard processes for making changes to the system (often following the example suggested by BitcoinImprovement, itself inspired by the BitTorrent enhancement proposal)

The founding documents describing the core features of a given DAO usually include an (explicit or implicit) ideological position on the relative merits of formal versus informal, on-chain versus off-chain governance [5]. Based on initial positions, many DAOs are consciously or unconsciously emulating Bitcoin and Ether (limited on-chain governance combined with semi-formal off-chain governance) or early pioneers based on voting and fund management (e.g. Decredad and Tezos, more extensive on-chain governance).

Faced with a high degree of technical uncertainty and inexperience, DAOs often integrate tested code, operational processes and governance tools being used by other DAOs, which is all the more important for DAOs because many blockchain projects are committed to open source and highly composable software if created for the same platform, as is the case with decentralized finance (DeFi) and governance on ethereum applications on Ether. Examples include the widespread adoption of Gnosis multisig wallets, compound’s governance contract, and snapshot tools for off-chain voting. In other ecosystems that support interoperability between different networks and DAOs, the use of common development frameworks such as Cosmos SDK and Substrate [6] will inevitably produce some simulated isomorphism.

  1. Forced isomorphism

The goal of many blockchain networks and DAOs is to achieve meaningful decentralization and resistance to censorship, which is a unique challenge from a regulatory perspective. Operating in a legal gray area – as innovative technologies often do – encourages regulatory arbitrage such that the core entities involved in DAOs reside in jurisdictions that take a more permissive view of their activities. One way to explain this is that current regulations drive DAOs to adopt similar legal and organizational forms. This homogeneity is likely to increase as blockchain-related regulation becomes clearer and stronger.

Engaging in commercial activities where funds flow from the organization to its contributors or from its users to the organization means that economic entities involved in DAOs may be subject to various taxes and tax returns. The administrative process of fulfilling these obligations may standardize the relationship between the various DAOs, similar to how tax and reporting requirements drive isomorphic changes in more traditional organizations. There is also the possibility that the ICT-native and inherently global nature of DAOs will eventually trigger a more globally harmonized tax and record-keeping regime [7].

In addition to governments and regulators, blockchain networks and DAOs may develop a reliance on other external entities. This may include funding sources, hardware manufacturers, or other organizations (including other DAOs) that provide the necessary resources for the operation of the DAO. In some cases, this dependency may become large enough to allow, among other things, external entities to pressure the DAO to adopt certain practices. The extent to which decentralized network operators or other participants in DAOs are subject to such pressure is currently unclear and may go unreported for a long time, especially for organizations that have a small number of members but quietly succumb to external forces.

Many of the characteristics that lead to isomorphism in the unorganized field have been applied to DAOs. these include technological uncertainty, relatively few established organizational models, an increasingly specialized workforce, and increasing interaction with state agencies. On the other hand, DiMaggio and Powell also argue that the propensity for isomorphism is greater when the organization’s resource supply is centralized or when the organization is dependent on external entities for support and legitimation. This is the opposite of what many DAOs are aiming for, which is maximum decentralization and sovereignty. Given that DAOs are often set up to run entirely new experiments, the growth of isomorphism in DAO governance is not a foregone conclusion, even though the anecdotal evidence discussed above seems to support this.

Most DAOs face a similar set of fundamental questions. what is the purpose of the DAO? How is the contribution to this goal determined, and how is the DAO initially allocated resources and time, and what is the appropriate legal structure for DAO participants? The different degrees of homeostasis in DAO governance are simply a reflection of how different organizations answer these questions. More or less similarity should not be the goal for any DAO. Rather, each organizational practice – isomorphic or not – should be independently evaluated before deciding whether it is to be resisted or accepted.

More important than the differences or similarities between organizational practices is the impact of those practices on the people involved and on society as a whole. It is natural for humans to conform to the more popular views in their respective fields, or at least to the views of those they admire or rely on. Regulators, investors, prominent commentators, and the most successful DAO members should therefore be aware of the normative impact that their words and actions may have on the way DAOs are structured and governed by their subjects. For once certain patterns of thought and behavior have been widely adopted, it is often difficult to reverse the systemic tendencies that these patterns engender.

As long as conditions are conducive to the free expression of the human imagination, there will always be differences in how different groups organize and what they create. But human beings also imitate each other,,following the example of existing organizations,,living in a society where – whether they like it or not – certain institutions have acquired the power to prescribe and perform certain actions. the field of DAOs is fully embedded in this reality in the interplay between diversity and innovation on the one hand, and individual forms and institutionalization on the other. The more transparent, communicative and critically self-reflective this field is, the more likely it is to avoid the typical shortcomings of the more traditional forms of organization to which it tries to offer alternatives.


[1] Throughout this article, “DAO” refers generically to all public blockchain networks, applications, and their respective communities, whether or not these were previously described as decentralized autonomous organizations. The exact definition and distinction between “blockchain networks”, “decentralized applications”, and “DAOs” is an important topic for discussion. For the purposes of this paper, however, all of these are considered to be the same organization that combines open source software protocols and distributed computer networks with more traditional forms of offline and online collaboration.

[2] DiMaggio, P. J. & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in the organizational domain. American Sociological Review, 48(2), 147-160.

[3] I define governance as the process of applying any design features or control mechanisms that maintain and direct the system. Importantly, this includes the “permanent” establishment of some mechanism within the system (institutionalization) or function that does not require active human participation to accomplish the task (automation).

[4] For example, the principles and spirit behind Uniswap (an automated exchange protocol and one of the most popular decentralized applications) are directly inspired by Ether. See the Bankless Podcast interview with Uniswap founder Hayden Adams.

[5] See paper numbers 4 and 5 here.

[6] Disclosure: The authors’ work was funded by Placeholder, an investor in BTC, ETH, and DCR.

[7] As I have previously highlighted blockchain networks (and ICT in general) are essentially bureaucratic technologies capable of creating an increasingly global and automated system to manage information and facilitate transactions related to that information (the defining function of all bureaucracies). As the ICT revolution matures, whether and to what extent such systems should integrate tax reporting or other regulatory requirements currently imposed on organizations by national governments or supranational bodies may become a major topic of debate and a global governance challenge.

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