Day 53. DAO Ideals and Impacts.

Thinking about DAOs now and in the future.

Apr 17, 2022

Hey everyone!
Since Ukraine DAO’s inception, we have often been asked “What is a DAO?” Most importantly, we’ve also asked ourselves the question “What should a DAO be?” In my personal view, a DAO is a Web3-native community with a mission. Ukraine DAO, for instance, is a long-term worldwide decentralised effort to support Ukraine. I’m proud to say that Ukraine DAO’s contributors have been doing phenomenal work on that front. Thank you for this opinion piece to Sean, one of Ukraine DAO’s regular contributors. Sean is a writer and editor in the crypto space, and has been involved with Ukraine DAO since mid-March.

If 2021 was the year DAOs began to truly capture the collective crypto consciousness, 2022 may be the year we watch them mature and become more useful and impactful organizations.

If DAOs are to evolve in this way, though, it will be necessary for DAO leaders to define the ideals and impacts they are striving for, learn how to structure and adapt their organizations accordingly, and establish processes to continually check that DAO activities are aligned with these ideals and desired impacts.

Ideals and impacts can sometimes become out of balance. Ideals like perfect decentralization and autonomy may be sought after at all costs; but the resultant real-world impact of the DAO might struggle with avoidable inefficiencies in turn. On the other hand, a DAO might find a quick and easy path towards realizing an impact it’s seeking to make; while unfortunately sacrificing some of these same ideals along the way.

What is the right balance for DAOs, and what will be some of the other principles and concepts at play as DAOs try to live up to their potential?

Paradigms of Human Organizational Models

Many of the key philosophies and principles underpinning DAOs are neither new concepts nor novel schools of thought. Oftentimes, crypto and Web3 simply serve as innovative, useful channels to deliver on pre-existing ideas that may have been languishing under other organizational or societal structures.

In 2014, Frederic Laloux’s Reinventing Organizations presented a thought-provoking analysis of where our progression in human consciousness and human organization may be taking us. That book laid out 7 key paradigms along this progression:

Reactive
Magic
Impulsive
Conformist
Achievement
Pluralistic
Evolutionary

The first 6 paradigms are beyond the scope of this article - the 7th (Evolutionary), which Laloux claims we are entering, is where we can see the relevance to DAOs.

Three key components make up the Evolutionary paradigm:

Self-Management. Pyramids are replaced by self-managing teams, making everyone more powerful.
Wholeness. People can truly be themselves at work, and focus on their contributions and growth.
Evolutionary Purpose. Energy is unlocked when personal and organizational purposes are aligned.

The book may have been published in 2014, but you could imagine a 2022 DAO member laying out similar guiding principles.

Self-Management contains elements of autonomy, particularly with Laloux’s emphases on trust (rather than control) and ability to act in times of crisis; Wholeness reminds me of the genuine relationships people are building in this space as they distance themselves from more traditional work and follow their true interests; and Evolutionary Purpose touches on not only the palpable passion in this space, but also the idea of a DAO’s purpose and actions being aligned with personal members, thanks to the increased fairness of decentralized participation.

Defining Terms

Before we think too much further about DAOs, we need to define our terms. What do Decentralized, Autonomous, and Organization really mean?

An excellent guest post on Tally’s blog did the heavy lifting for us:

Decentralized. Participants are numerous. No one participant should have disproportionate governance rights that can single-handedly overpower and negate countering beliefs held by many other participants. At an absolute minimum this would ensure that no member can ever hold the vote weight required for a proposal to pass.
Autonomous. Being independent and having the freedom to govern itself by way of community engagement.
Organization. A group of people working together in some structure suited towards a common purpose or set of objectives.

So, a DAO should have numerous participants sharing power fairly, and should be structured to govern itself towards the achievement of a shared purpose.

When Is a DAO Actually a DAO?

At this point in time, there are still countless “DAOs” that aren’t really living up to some (or any) of the three definitions above. If you start to get black-and-white with the definitions, you’ll probably start seeing a lot more “Os” than “DAOs.”

For example, many of you have probably heard of projects referred to as DINOs: Decentralized in Name Only. Decentralization seems to get the most scrutiny these days, but achieving Autonomy and maintaining an Organization with a common purpose can be equally daunting tasks.

At worst, there are projects intentionally cashing in on the DAO buzzword, with little to no intention of actually living up to these ideals. However, I don’t think that’s usually the case.

I think what’s far more common right now are projects that have put in serious time to define their vision and goals, with various DAO ideals in mind to enable specific objectives. They’re well-intentioned, but now they’ve come to the seriously challenging stage of figuring out what it takes to technically implement those DAO ideals.

“What tools do I need to use in Discord to track member contributions? Is Discord even the best place to run the main aspects of my DAO? Should voting be on-chain or off-chain? What are the actual voting mechanics, and what are the tools I need to actually set that up?”

These are just some of the questions that DAO leaders are wrestling with when they move beyond the vision and mission stage.

I think the point I want to make here is we shouldn’t have the black-and-white, hard-line interpretation of DAOs that I mentioned above. This space is evolving by the day; of course most DAOs haven’t achieved full decentralization or autonomy. Many are simply striving for these ideals at the moment, and that’s okay.

To evaluate the extent to which a DAO is “truly a DAO”, I think two of the more important questions are:

Are they making a legitimate effort to achieve high levels of decentralization, autonomy, and effective organization, even if they haven’t accomplished those ideals quite yet?
Do they actually have good reasons to pursue those ideals?

Ideals and Impact

On that second bullet point above, I want to raise some questions to ponder…

What is the proper balance of ideals vs impact?
How many DAOs right now are striving for ideals of full decentralization, full autonomy, and perfect democratic organization, at the cost of reducing their ability to achieve their intended impact?
When does a pure crypto ethos need to be softened to some degree in order to achieve quick, effective impact?

Of course, these days I’m thinking about questions like this from a Ukraine DAO perspective - a DAO that prioritizes rapid, effective, social impact for real people on the ground, and is continually striving to become a better DAO by creating impact-aligned governance mechanics. Obviously, not all DAOs have the same “impact” focus as Ukraine DAO. These types of questions won’t be as relevant for them.

However, for those like Ukraine DAO that ARE impact-focused, I believe there is a lot to think about here.

Take decentralization as an example. If we can think of a spectrum going from pure, idealistic decentralization all the way through to a completely centralized operation run by one person…where should an impact-focused DAO fall on that spectrum?

Well, do they want to act quickly and efficiently to help others? A non-hierarchical, fully decentralized structure can sound great in theory, but can turn out not-so-great when actual decisions need to be made rapidly. Sure, you can structure a DAO in a very decentralized way and still enable rapid decision making, but it can be a technically challenging endeavor and require tons of thought and effort to get up and running properly. When urgency of action is THE main factor at play, do you want to align perfectly with all of these ideals or do you want to be able to make things happen right now?

More specifically, think about a hypothetical proposal that suggests donations be sent to a large, well-known aid organization (sounds good, right?), who just happens to be a bureaucratic mess and will likely squander most of the funds they receive. If you have a DAO full of members that are not up to speed on how a local organization can do a much better job affecting impact, and they are instead swayed by name recognition, suddenly you have a proposal passing just because of a big name. If you had perfect decentralization and perfect autonomy, guess what? Thanks to that proposal passing, you would suddenly have funds being disbursed to an organization that is detrimental to the actual purpose of the DAO. Not an “ideal” result.

Hierarchical structures and DAO proposals are just a couple of specific examples. More generally, I think these are questions and considerations for DAO leaders to continue pondering in 2022 and well into the future. Whatever “impact” means for any particular DAO…if you are reducing your ability to achieve that impact by putting in endless time and effort chasing ideals, then you should put serious thought into what type of organizational structure might make more sense. Ideologies can be harmful when pursued without careful consideration (or, even worse, with malicious intent), and DAOs are no different in this regard.

On the other hand, DAO tooling and processes are only going to become easier to use and more intuitive. DAO leaders are going to keep finding ways to equip themselves with what they need, and they will be able to strive for ideals of decentralized, autonomous organization in a far less cumbersome way.

Something tells me we are going to see a trend where ideals and impact become more and more aligned than they are now The best case scenario for the DAOs of the future, and what they should strive for, would be a world where activating these ideals will actually be the most straightforward path towards maximizing impact, rather than being seen as an intellectual and technical challenge to overcome.

I believe that when this ideal/impact relationship becomes more aligned, we’ll be able to see much more starkly the true benefits of DAOs over more “traditional” human organizational approaches.

For reference: