What problems still need to be solved by the DAO that is working hard?

The DAO has grown significantly this quarter. Since the beginning of October, DAO’s TVL has increased by 90% to $15.2 billion.

Messari researcher Roberto Talamas recently quoted DeepDao’s data on Twitter, saying that since August, DAO members have increased by 133% to more than 1.6 million entities, spanning 164 organizations.

This year, the number of DAOs with 7 figures or more has increased by nearly 400%, from 12 to 58; DAOs with more than 100 members have increased from 41 to 71, an increase of 73%.

What problems still need to be solved by the DAO that is working hard?

A novel innovation in the field of encryption is to reimagine the way organizations operate-DAO. For example, DAO stands for Decentralized Autonomous Organization. It uses a flat and fluid structure instead of a layered and rigid structure where the community makes organizational decisions through a voting process. Every member of the community has the right to vote, and when they reach a consensus, the update/change will be implemented automatically.

DAO brought the idea of ​​collective ownership. Basically, if everyone in the DAO has a stake, then everyone’s motives should be relatively consistent, which will allow the organization to develop in an equal manner. In the early stages of most projects, this method is very effective. The community is composed of hundreds of people who are very enthusiastic and willing to build. Everyone contributes their own strength to the project and works in harmony. However, when the DAO becomes larger, with tens of thousands or even hundreds of thousands of members, it will begin to see many problems. I will discuss these issues in more detail below.

Before discussing these issues, I just want to say that this article does not mean that I think DAO should be completely abolished. They just need to be redesigned to be more effective when expanded. Cryptocurrency has brought the concept of an ownership economy. Participants and users of protocols and products in the economy can now own a part of it, instead of just spending money repeatedly in the economy, and a few people at the top can benefit from it. Therefore, to some extent, the concept of DAO allows people to organize around this concept.

Incentives for members

As mentioned earlier, when DAOs are relatively small, they are very interesting and efficient. However, as they grow into a larger community, there will eventually be a large number of people who don’t really care about contributing value to the agreement. The Discord, Telegram and community forums of the Big DAO are full of comments such as “token economics upgrade”, “why the number does not rise”, “token release”, “token airdrop”, “developers are sleeping?” and other comments. Many people just want to get the most value from the agreement and leave. Few people will study the code and suggest improvements, or contribute to improving the media or other elements of the project. It essentially becomes a situation: 10%-15% of the members have a long-term vision and want to do something useful, while 85%-90% of the members just want to make the most money and then leave.

The greed of most participants caused the free-riding problem. Only a few people have truly contributed value and put in all their efforts, while most people just sit in the chat channel and do almost nothing except occasionally observing, dictating, and making memes. The site’s founder Andre Cronje (Andre Cronje) said it best is “DAO”. There are thousands of people who lack long-term vision and expertise. They just yell at you aimlessly, and as a core contributor who works tirelessly, this can make you frustrated.

Governance mechanism/voting

In this case, there are two main problems. The first is about the majority vote versus the minority vote. The DAO governance system assumes that because most people vote for the upgrade, it means that the upgrade is good. However, as is usually the case, irrational members usually do not make wise decisions. The decisions of irrational members are influenced by emotions, group thinking, and a little bit of personal greed, which means that usually, first-selection upgrades may lead to sub-optimal results. In the end, DAO will eventually fall back to the same situation we are in today. Malicious actors will start lobbying non-participants and non-thinkers to make decisions that benefit them rather than the agreement itself, and eventually the DAO will melt into the same melting pot of politics, drama, and bureaucracy that we are trying to avoid.

The second problem is that a token-one-vote system or voting rights are proportional to the personal token holding system. This is a major flaw in the DAO design. Because a person holds the most tokens does not mean that his views are the most effective/helpful. Normally, people with large amounts of money can buy most tokens, which will always affect voting. If the DAO is large enough, someone can buy tokens and use the governance system to systematically harm the organization. It is essentially a system very suitable for games. This is not a system that can be widely adopted, because unfortunately, not everyone in the world we live in has good intentions.


As organizations start to expand, a key factor is that they need to be flexible, because sometimes they encounter a crisis or need an important decision, in which case they need to react quickly. This is impossible in DAO. When dealing with people from all over the world, it may be difficult for you to get a response within 24 hours, so it is almost impossible to stay agile. In addition, because they are decentralized, when they have more participants, they become very chaotic and unorganized. There are so many people with different knowledge, skills, and experience, and they all have the same or similar levels of power. Therefore, DAO will eventually have many non-participating members or members who provide net negative values. Traditional organizations can have thousands of people working because they have a hierarchical system and only a few decision makers organize each person. In the long run, DAO will only be weakened by its structural design, because everyone is doing their own thing inconsistently. It is chaotic.


The ultimate goal is to be able to work efficiently in a distributed environment, so that everyone in the organization can speak out without affecting the overall performance of the organization. This is still an early stage concept, and we will continue to improve it. It will be very interesting to see different versions of DAO and how people optimize this design for different industries. The future is bright.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-problems-still-need-to-be-solved-by-the-dao-that-is-working-hard/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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