The problem with Decentralized Autonomous Organizations

DAOs are new, cool… and dangerous

I rather like DAOs💖. They borrow their core principles from organizational theory, and have pushed forward interesting ideas around self-organization and emergence. Yet, everything the crypto community touches turns to poison☠️. DAOs don’t work. Below are the (many) reasons why:

1. 💰Your pay is decided by your peers — members allocate “points” to other members to decide pay. The higher the perceived “value” of the work done, the higher the number of points received, and the higher the financial reward. If that seems too easy, trust your instincts

2. 🗳️Decisions are reached by vote — Those who own the most “tokens” have a louder voice. This is just a way for founders to keep control. Democracy is flawed. Giving more power to some only strengthens those flaws by disproportionately favoring an already powerful minority.

3. ⚖️DAOs have no HR, Health Insurance or legal status — DAOs are new concepts, with a blurry legal status in most countries. They also do away with defined roles, preferring the idea of “emergence”. This makes a large part of society unable to participate in DAOs (too risky).

4. 💪DAOs force absolute transparency — The ability to easily identify contributors may invite unwelcome individual consequences for work done on behalf of a DAO, which in turn may discourage the kind of risk-taking that may lead to technological breakthroughs.

5. 🏗️No one knows what to build in a DAO — There’s a reason corporations don’t have employees weigh in on every decision — it’s a highly inefficient way of getting things done and not everyone is qualified to do so. You need clear structures within which magic can happen.

6. 🤑We are creating an over-monetized society — We created great tools like Wikipedia out of the sheer will to build cool things. Silicon Valley believes this is heresy. For them, everything needs to be tracked and monetized. Smart contracts finally give them the tools to do so.

Despite all this, I believe DAOs have a future. They allow us to experiment with new concepts that are sorely needed if we are to save capitalism. We need to learn from them, and from the people that aim to build them.

This article is a very short summary of a longer article which you can find by clicking this link. I encourage you read it if you enjoyed the above.