**TACKLING THE CENTRALIZATION PROBLEM IN DAOs**
DAOs also known as Decentralized Autonomous Organizations are egalitarian, community-driven organizations that run on the principle that code is law and governance should be decentralized and collaborative among members.
DAOs are not without flaws however, chief among them is the plutocratic problem - caused by the concentration of majority tokens in the hands of a small group of people who drive the collective decision-making of the whole community for better or worse. This essay looks at the dimensions of the centralization problem within DAOs from different angles, broadly divides them into three:
-
Users see governance token as yields, not voting tools; in reality there is a stronger financial incentives behind using gov tokens as tools for earning yields, staking and lending. This means DAO members perceive a stronger value-case for using governance tokens as a means of earning passive income versus participating in the governance process. This individualistic approach to using gov tokens rubs eschews the principles of collaboration and group-oriented governance which is the true purpose of these tokens and DAOs. It also suggests that there may be a need to seriously decouple financial incentives from governance tokens as much possible.
-
The quorum for voting focuses on tokens and not voters; which means the voting outcome almost always tilts towards the choice of the majority token holders instead of the choice of the majority voters. This simulates a plutocratic system of governance where decisions are made by a small, rich group of majority token holders. The solution to this is to require a quorum of participating voters for a proposal to be passed instead of tokens.
-
Private sale to investors and founders who invariably become major token holders; this is a bit of a chicken and egg situation, because, without the private investment of investors and founders in the beginning, most DAOs wouldn't take off in the first place. Yet for DAOs to work the way they are supposed to work it's important for them to their divest their majority tokens at some point. The issue here is more ethical and it's probably a good way of judging how much founders and investors believe in decentralized governance for DAOs in the first place.
Faster decision making; slow decision making is one of the major failings of decentralization, and the reason is because more people are required to deliberate and make a decision. This becomes a very grave condition in urgent situations where some proposals needs to voted on as soon as possible. This is where centralization within DAOs can be of good use. The core members of a DAO who often are the founders, investors, early adopters can form the central group of DAOs that can be called upon in situations of urgent priority. Making use of their high level of familiarity and experience with the DAO to make effectively benefical decisions. To make the access to the central group more democratic, new members can join via a reputation score system which evaluates their level of participation and immersion in DAO activities.
Urgent proposals are proposals that need to be implemented as soon as possible. e.g: security threats. the key factor with urgent proposals is the time factor and speeding the decision making as fast as possible.
Important proposals are proposals that need a bit more time to be evaluated and judged, this include proposal for the amendment of the constitution, fee changes, etc.
Weak proposals are usually proposals of little consequence and can most of the can be weeded out by stipulating the staking of stipulated number of tokens to evaluate the level of commitment of the part of the proposer.
file:///home/adedamola/Downloads/Untitled(4).png
PROPOSAL - One/more proposer(s) introduces a proposal to the DAO community. They back their proposal with a stipulated amount of tokens (e.g: 100T).
CAMPAIGN - The campaign stage involves them garnering community support for the proposal's cause. At this stage, at least 25% of the member community need to express their support for the proposal for it to pass through to the next stage. This preliminary vote of support can be done in social media channels like Discord.
REVIEW - The review stage involves the core members of the community whose job here is to filter and evaluate the utility of the proposal, their job here is to judge the usefulness of the proposal to the community based on their high level of experience and investment in the community. The review stage is a unique stage because here you need not just a percentage number of the core-members but you also need them to collaboratively stake a specific high number of their tokens to the proposal to show their trust in it. For example in a DAO community of 1000 members, the requirement for a proposal passing the review stage is at least 670 members in support + 10,000T. Here 67% of the core-membership has expressed their support of the proposal while also committing their governance tokens. Another unique feature of this stage is the possible modifications of the proposal after deliberations between the core members and the proposer.
VOTE - The public voting which can be done on the blockchain is open to the general members of the community once again, and here one member vote is equal to one vote, no matter how much governance token they hold. The proposal needs to win 75% of the voting public on the D-Day for it to be approved.
APPROVAL - This is when the proposal wins the majority vote. It's approved and can now be implemented on chain.
STAGNANT - A proposal goes into the stagnant stage if it's unable to garner 25% support from members in the campaign stage or if it's unable to meet the two conditions of majority vote and target token stage in the review stage. Another possible cause in the review stage is if the proposer and the core-members cannot agree on the proposed modifications to the proposal. A proposal only leaves the stagnant stage if its required conditions are met. Failure to get this, the proposal can be withdrawn after 90 days.
WITHDRAWN - A proposal will be withdrawn if it's unable to progress beyond the stagnant stage and if it loses out in public voting.
file:///home/adedamola/Downloads/Untitled(2).png
The procedure for granting urgent proposals seeks to cut down as many steps as possible, here the proposal moves straight to the review stage, once submitted. The core members do the job here of evaluating and making quick decisions. If the proposal meets the two conditions of securing majority core member votes and the target stake required, it's is voted in for approval. Failure to meet these conditions leads to its withdrawal.
In conclusion, the centralization problem within DAOs can be a solution in itself if utilized towards specific ends. The key is to know when and where to use it and limiting its influence within its sphere of required juridisction. Here, we have seen its utility as a channel for making fast and effective decisions. This ensures unneccessary time is never wasted while also ensuring key decisions are guided by those who have good knowledge and experience with the protocol.