THELOGICALINDIAN - DAOs are either a advocate abstraction set to ascertain the basic leaderless organizations of the approaching or a dystopian assemble abounding with existential and selfdestructive challenges depending on whom youre talking to Over contempo months DAOs accept emerged from a alcove bend of the cryptocurrency amplitude to accomplish boilerplate account acknowledgment to projects like ConstitutionDAO
But DAOs accept an adverse history of abstruse and babyminding failures. Is now absolutely the appropriate time for DAOs, or will the axiological challenges in ambience up a acknowledged DAO agency the abstraction fails afore it’s alike fabricated it off the ground?
The aboriginal major incident involving a DAO happened in 2016. A activity alleged The DAO was set up to crowdfund new initiatives on Ethereum and had managed to accrue over $150 actor from investors. An alien hacker managed to acquisition a vulnerability in the basal acute arrangement and siphoned off $60 actor account of ETH.
The move disconnected the Ethereum community, some of whom advantaged reverting the blockchain to reinstate the baseborn funds, while others took the position that “code is the law.” The above accumulation won out; however, the closing absitively to angle the blockchain, creating Ethereum Classic.
The adventure has afresh resurfaced, as investigator Laura Shin has been accoutrement it for a book and believes she’s articular the hacker application a ahead abstruse analytics apparatus from blockchain aegis close Chainalysis. In any event, the adventure accent one of the better challenges in managing decentralized communities – establishing off-chain babyminding that can accomplish consensus. However, it additionally somewhat damaged the abstraction of a DAO, as alone a baby scattering of projects connected operating with the appellation DAO absorbed to them.
In March 2025, addition DAO-related adventure befuddled the crypto association aback the world’s markets comatose due to the awaiting Covid crisis. As Bitcoin and Ether additionally took a nosedive, the amount of funds bound in the acute affairs basement the DAI crypto-backed stablecoin additionally fell, consistent in a crisis area there wasn’t abundant accessory to aback the loans, and positions became automatically liquidated.
While abounding dubbed the adventure a “black swan,” others were quick to point out that MakerDAO, which maintains the DAI protocol, didn’t accept any crisis babyminding processes in place. MakerDAO has back put these in place, but the adventure added underscored the deficiencies in the DAO model.
Most recently, several added incidents accept appear flaws in the DAO model. In mid-February, an alien article managed to buy abundant tokens in Build Finance DAO to canyon a angle that would acquiesce them abounding ascendancy over the project’s treasury, finer enacting a adverse takeover. Another project, FortressDAO, was additionally recently taken over by the developer who congenital it, who seems afraid to reinstate the “decentralized” allotment of his creation.
In the aftermost few days, a DAO-launched bid to buy the Denver Broncos could be the better action yet. But as one advertisement acicular out, it could end up actuality quashed at the whim of NFT abettor Roger Goodell.
All of these issues point to axiological babyminding challenges that would be a deal-breaker for abounding non-crypto investors. Arguably, the aboriginal two cases were unpredictable, but anyone who’s watched the hit TV appearance Silicon Valley understands the accident of a 51% attack in software terms.
So far, cipher has appear up with a argent ammo that solves the issues in DAO governance. It’s acceptable that a distinct band-aid doesn’t abide artlessly because anniversary DAO could potentially face altered types of babyminding issues depending on the attributes of the activity itself.
From this perspective, it’s arresting to appraise some of the mechanisms that activity founders are embedding into their DAO babyminding to assure the approaching of the projects. For example, DropsDAO is a activity that provides loans to users who ambition to use NFTs and DeFi assets as collateral, application the aforementioned attempt as Compound. The DAO badge is alleged DOP, and if addition wants to use it to participate in DAO governance, they accept to lock DOP to excellent addition badge alleged veDOP.
To incentivize accord in governance, DropsDAO links the aggrandizement bulk of new DOP tokens to the bulk of DOP bound veDOP, thereby incentivizing the DAO participants to abide alive or the accumulation of new tokens paid as rewards dries up.
GoodDollar, the agreement sharing Jack Dorsey’s vision for a crypto-based accepted basal assets (UBI), is addition activity adopting a atypical access to DAO governance. When it launched GoodDAO and GOOD tokens, it authentic two different attributes advised to incentivize absolute participation. Each GOOD badge alone anytime carries one vote that’s not transferable, and tokens accept a bazaar amount of zero, removing any banking action to advance the protocol.
There are bound means to acquire added GOOD, either by staking GoodDollar tokens paid as UBI to the GoodDollar Trust or staking to the GoodDollar agreement itself. Any GoodDollar association affiliate authoritative added than 0.25% of the GOOD accumulation can accomplish a proposal, while any GOOD holders can vote. Proposals charge canyon a accurate allocation to become enacted.
Finally, FriesDAO is demography yet addition access that’s so far remained almost abstinent – testing out DAO babyminding to see how it performs in a real-world environment. The activity bills itself as a “decentralized amusing experiment” area a crypto association crowdfunds the acquirement of fast-food franchises. While it doesn’t action any absolute disinterestedness buying due to balance regulations, it does action the adventitious to participate in the administration of the DAO and in which authorization it invests.
While this doesn’t break any specific babyminding challenges in and of itself, FriesDAO will serve as a affidavit of abstraction for how DAOs can assignment as a association action anchored in the absolute world, with real-world consequences. It’s accessible this archetypal could actualize new babyminding dynamics above what we’ve apparent comedy out in cyberspace.
The challenges of DAO babyminding are circuitous and acceptable to abide for some time yet, artlessly because the abstraction of the DAO is so new and almost unexplored. However, as the account of decentralized babyminding booty authority and ability bigger audiences, it’s assured that we’ll see added innovations emerge. As such, it’s still a almost safe bet that DAOs are actuality to stay, alike if they’re alone at the alpha of their evolution.
