Free of the hierarchies and power dynamics in traditional companies, DAOs can allow Web3 organizations to do better, writes Arjun Kalsy of Mantle.
From its inception, many have been debating the need for decentralized autonomous organizations (DAOs) and the true benefits that these entities bring to the Web3 ecosystem. Early 2016 saw the hack of The DAO, which led to significant financial losses for the Ethereum ecosystem and eventually divided the Ethereum community between Ethereum and Ethereum Classic. Today, DAOs are gaining significant popularity and adoption, but remain subject to significant regulatory uncertainty due to the lack of clarity on their legal status and regulatory framework that ensures their compliance with existing securities laws.
Governed by a set of rules enforced on the blockchain, DAOs serve many purposes and offer a multitude of benefits such as the optimization of community collaboration and a new, leaderless structure that allows decisions to flow from the community upwards. What was once considered a theoretical consideration and a potential use case has emerged to become one of the most innovative vehicles in crypto that will spur the next wave of user adoption in Web3.
The power of collective collaboration
Without a traditional hierarchical structure and power dynamics that are typically observed in Web2 organizational structures, DAOs have the potential to create new opportunities for collaboration and coordination on a global scale with increased transparency and accountability. The autonomy of action that DAOs hold enables the community to unlock innovation, which is otherwise missed in hierarchical setups, through the power of collective collaboration. The decentralized nature of DAOs also allows for the community to redistribute ownership, empower communities, and ultimately gain significant waves of fractal growth that would otherwise not be possible. As different needs emerge, members are empowered to make contributions and leverage the decentralized network to gain influence, win bounties and earn voting power.
While there is no one-size-fits-all model of decentralized governance to follow, DAOs have several unique advantages when it comes to empowering the ecosystem for infrastructure building, including a multitude of ways that allow the community to fully optimize resources and allocate them adequately towards building both technology and ecosystem. As such, without effective governance, DAOs would be ill-equipped to make the decisions necessary to achieve their goals.