An overview about the benefits of decentralised governance
Human beings have entered into the DAO era and this cannot be avoided.
— Stephenson, the father of Metaverse
Everyone has their own interpretation of what a DAO is, but they all share a common logic: members vote with tokens and open source codes automatically execute the voting results. This reliable system eliminates human error and members can manage the community's finances as a collective.
In the next Metaverse, DAOs could be at the core of governance models, as they return regulatory and governance power to the community, promoting the full decentralisation of Metaverse.
What is decentralised governance?
Economic activity has traditionally been organised through corporations, legal entities that can enter into agreements and control ownership. These agreements and common assets are managed through a system of corporate governance where executive officers control day-to-day operations by reporting to the board of directors, which in turn reports to shareholders.
On the other had, decentralised governance, refers to frameworks for managing collective action and common resources outside the existing legal system.
- 'Decentralised' does not mean that all DAOs must be completely decentralised! Instead, we might expect to see different levels of decentralisation in the various DAOs.
Why do we need DAOs?
- Transparency
Transparency is the key for DAOs. Compared to traditional organisations, DAOs offer less ambiguity. DAOs eliminate human error and manipulation of funds.
Since the DAO budget exists on a public blockchain, members can understand what happened to each transaction and ensure that funds are used for the purpose for which they were collected.
Therefore, the community can check expenses, funding, plan fulfilment and more.
- Mitigating risk
Decentralised governance gives power directly to token holders, removing executive teams that could become targets of censorship, manipulation or corruption. Relying on code to enforce agreements also reduces dependence on external legal systems.
- Open source
It can facilitate cooperation and overlap between different types of stakeholders in the system. Discussion sites are generally open to 'everyone', giving token holders and the community the opportunity to share their thoughts.
- Efficiency
The technology-centric nature of DAOs can also help automate easy tasks using smart contracts that could further free up employees' time for more critical and creative work.
- A global advantage
Traditional organisations and the regulations that govern them often limit an individual's ability to join companies outside of their home country.
On the other hand, DAOs have easy global access and a lower barrier to entry. They are designed for access to anyone from anywhere in the world and support pseudonymous transactions.
When should you say 'no' to a DAO?
The fact that smart contracts are self-sufficient with an unshakeable faith in the power of blockchain has led to the belief that there is no need to create a supporting legal entity, and with the logical differences between jurisdictions, they could be considered de facto societies.
As a consequence, their members could be jointly exposed to personal liability for all DAO actions and debts.
The recent action of the Commodity Futures Trading Commission contro Ooki DAO has created some concerns in the community about the path that regulators might take against DAOs.
Only a coherent regulatory framework can provide the legal certainty necessary for DAOs to thrive without being hampered by regulatory contraddiction and legal gaps.
