Author: Oguz Genc

Since Satoshi released the Bitcoin Whitepaper, blockchain applications have come a long way in gaining real-world utility. Although the blockchain industry is still very nascent and volatile, innovation has been its central theme.

In our Web3 Research Hub, we aim to explore the past and latest developments in the blockchain industry. Although we will gradually cover multiple components of Web3 in our research, I will focus on the blockchain applications within the scope of organizational analysis and their innovative implications.

The categorical name of such applications has come to be widely known as Decentralized Autonomous Organizations (DAOs). As a starter, let’s look at some definitions from the literature over recent years to understand what a DAO means. 

Wang et al. (2019) define a DAO as a new organization form. They purport that the management and operational rules are typically encoded on blockchain as smart contracts and can autonomously operate without centralized control or third-party intervention. Similar definitions are prevalent in the literature. Hassan and De Filippi (2021) suggest that a DAO is a blockchain-based system that enables people to coordinate and govern themselves. The mediation is done by a set of self-executing rules deployed on a public blockchain whose governance is independent of central control. Bellavitis et al. (2022) concisely suggest that “DAOs are blockchain-native, decentralized organizations collectively owned and managed by their members via smart contracts.”

Since the term “blockchain-based” often implies a presumption of an on-chain operational setting, Santana and Albareda (2022) begin their paper by pointing out that it is not the case in practice. They define DAOs as blockchain-based organizations fed by a peer-to-peer (P2P) network of contributors whose management is decentralized without top executive teams and built on automated rules encoded in smart contracts. Their governance works autonomously based on a combination of on-chain and off-chain mechanisms that support community decision-making.

Many other definitions are provided by industry participants as well. Consensys, a leading multi-disciplinary firm in the Ethereum ecosystem, uses the metaphor of “a very large vending machine living on the blockchain” to define what essentially a DAO is. The list can go on much longer than anyone is willing to read. But to sum up some primary attributes of DAOs, we can deduct the following:

1. DAOs are built on top of public blockchain infrastructures.
2. DAOs are decentralized, at least in the premise of governance.
3. The governance mechanisms have on-chain and off-chain components.

In future articles, we will provide relevant research and opinions on these statements to explore the underlying explanations and whether these analyses are accurate.

Furthermore, we will also see that in practical terms of their current state, DAOs are crowdsourcing platforms that aim to consolidate ‘liquidity’ within an open-source business initiative. We will provide detailed examples of what sort of business ideas have been tested. The upcoming pieces will cover many other topics, such as the advantages and disadvantages of DAOs, a library of research tools and databases focused on DAOs, the state of regulatory developments, and practical use cases.

Any suggestions and exchange of thoughts are welcome. Feel free to contribute to our research on DAOs.

Disclaimer: All generated content is for research purposes only. The author does not and will not provide any investment advice.