The Hidden Shortcomings of (D)AOs -- An Empirical Study of On-Chain Governance

Feichtinger, Rainer; Fritsch, Robin; Vonlanthen, Yann; Wattenhofer, Roger

doi:10.48550/arxiv.2302.12125

Cited by 5 publications

(2 citation statements)

References 19 publications

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“…While we are writing this article, several scholars have expressed their scepsis about DAOs. For example, the empirical analysis of Feichtinger et al, 2023 shows that existing DAOs do not live up to their promises. They are characterised by a high degree of centralised ownership, high costs for on-chain transactions, and many pointless transactions.…”

Section: Discussionmentioning

confidence: 99%

Decentralized autonomous organization design for the commons and the common good

Van Vulpen,

Jansen

2023

Front. Blockchain

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The current internet economy is characterised by a historically unprecedented bundling of private sector power over infrastructures. This situation is harmful for overcoming problems where collective action is needed, such as for governing digital commons. Organisations that run on collectively owned decentralised infrastructure are able to overcome this centralisation of power. These common decentralised autonomous organisations (DAOs) could help in fostering digitally enabled collective action. However, currently we have no clear view of how a DAO designed for commons governance would operate and be governed. By creating a conceptual prototype of a DAO governing a common, we provide a clear path of how common DAOs should mature and which tools are needed to create them. In this research, we created a governance framework for common DAOs by combining 16 works on technology for commons governance. The framework reveals that common DAO governance consists of three areas: 1) Governance structure, 2) Enabling technology, and 3) Community governance. We provide governance mechanisms that together describe an implementation of Ostrom’s common governance principles in a DAO. This work is a synthesis of previous research on technology for collective action. The proposed framework aids in standardising DAO governance for the common good and may contribute to a large scale roll-out of commons DAOs.

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Section: Discussionmentioning

confidence: 99%

Decentralized autonomous organization design for the commons and the common good

Van Vulpen,

Jansen

2023

Front. Blockchain

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“…Evidence of this process is the prevalence of public, open experimentation and failure. Indeed, we are already seeing many web3 governance failures (Feichtinger et al, 2023), such as poor engagement in community voting, the emergence of voting blocs or concentrations (i.e., 'governance whales') and as DAOs over-reach in their capacity to make efficient decisions (and thus re-centralisation). But these failures are the outcomes of experiments and from which agents learn and adapt.…”

Section: Exchange Governance and Innovationmentioning

confidence: 99%

The exchange theory of web3 governance

Allen

Berg

Lane

et al. 2023

Kyklos

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Blockchains have enabled innovation in distributed economic institutions, such as money (e.g., cryptocurrencies) and markets (e.g., decentralised exchanges), but also innovations in distributed governance, such as decentralised autonomous organisations. These innovations have generated academic interest in studying web3 governance, but as yet there is no general theory of web3 governance. In this paper, we draw on the contrast between a ‘romantic view’ of governance (characterised by consensus through community voting) and the ‘exchange view’ of governance from public choice theory (characterised by an entrepreneurial process of bargaining and exchange of voters under uncertainty). Our analysis is the first to argue that the latter ‘exchange view’ of governance is best to understand the dynamics of governance innovation in web3, providing the foundations for a new general theory of governance in this frontier field. We apply the ‘exchange view’ of governance to three case studies (Curve, Lido and Metagov), exploring how these projects enable pseudonymous, composable and permissionless governance processes to reveal value. Our approach helps illuminate how this emergent polycentric governance process can generate robustness in decentralised systems.

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