A DAO SHAKE
DAO DAO DAO! I tell my friends the word is starting to sound like a scam one. Peek into an ecosystem and there you have it, a pile of DAOs. Few getting things right, many I’ll say are yet to even know their purpose as a DAO apart from reaching ‘metrics for success’.
Many DAOs are still in a stage of errors and trails so they are bound to get a lot of things wrong while starting out. One major issue that the DAO faces is that of governance and treasury management. DAOs started out as a kind of crowd funding organization where users supplied ETH to receive a token which signified their economic interest in the DAO as well as their voting rights. We have come a long way from there I must say. DAOs aren’t fully autonomous because decision frameworks to ensure a DAO is governed effectively must be put in place by someone. For them to fully function to the best of their abilities, they might need to break out of such rigid frameworks as provided by the Parent organization. Governance sits at the top of DAOs operation just like any other normal organization. But in this case, governance is said to be decentralized with a few governors bringing proposals and pushing them out on communities to give it their approval. Community participation is at minimal levels with governors doing all the ‘DAOing’. With such practices in sight, let’s ask ourselves this question. ‘What is the future for such DAO?’ If you ask me, I will say an autocratic government with muted community members who are being deprived of the core benefits of a DAO. How can they ‘DAO’ when there’s no room for participation? This is supposed to be an organization and not some round table of a few. The DAO is meant to replace corporate organizational structures, but most are far from it. Just like in theory, more NODES (members) on the network makes it more fault tolerance and reduces the influence of a Node. When there is huge participation from members, expected outcomes are highly positive with room for little or zero corruption.
Many DAOs are governed by people with little or no understanding of how to run an organization, while others don’t understand how a DAOs treasury should be managed. Prior professional financial knowledge is required at the very minimum as a prerequisite. Seeing this in most DAOs recently doesn’t come as a surprise. I understand that the DAO idea is to give everyone a chance at something at least. But I think knowing the skill set of members should play a role in putting people into offices. Doesn’t mean people without skills can’t get into offices to take up responsibilities. GOVERNANCE is one thing, while the TREASURY is another. Distinguishing between these components of the DAO is very vital to its success. Governance ensures everyone in an organization follows appropriate and transparent decision-making processes and that the interests of all members are represented. Administering a treasury is a whole new ball game entirely. With assets running into millions, seeing someone without prior professional financial knowledge lead such a wing is a red flag at sight.
The purpose of governance is to help build an environment of trust, transparency and accountability necessary for fostering long-term growth, financial stability and social welfare.
Administering the treasury shouldn’t be in the hands of governance as this will reduce checks and create room for corruption. The treasury should be managed by community members with prior financial knowledge or skill as this will increase participation and ensure checks on governance. People want to stay informed; they want to participate in such areas like collectively managing their resources. They want to know where their money is going and to what use. They want accountability. We have seen governance structures come into power and ruin treasuries worth millions due to the absence of accountability and checks in these structures. The DAO is not far from it. Trying new ways by which governance and treasury management could be administered better is necessary for any growing DAO as this will determine its future to a large extent.
Remember these are just my thoughts and might sound stupid to you. Regardless, I’d love to know what you think.