Unpacking the D in DAO
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October 17th, 2021

Decentralization is the rallying cry behind Web3, and it’s a noble one. For too long, centralized platforms have stolen audiences and profit from the creators that made all of this *grand hand gesture* possible.

But I also fear that we have hastily declared absolute decentralization** as the panacea to the plagues of Web2. I don’t aim to decry decentralization, but instead to explore hybrid paths forward.

In KERNEL, we call this style of thinking quantum thought:

“Rather than using dualities like 'decentralization good, centralization bad'; or 'DeFi is innovative, fiat is boring', […] recognize that there is no good without evil; no attraction without repulsion, no North with South, no up without down. We could describe this as quantum thought - being able to contemplate both 0 and 1 simultaneously, and the spectrum of probability between.”

Let’s take decentralization and centralization as our 0 and 1.

In their current iteration, DAOs are conceptually marketed as fully decentralized, self-serve organizations.

To use my own journey as an example of how that manifests, the first time I joined a DAO Discord, I was elated to see hundreds of people gathered together in cyberspace to explore what’s possible in a decentralized future. That elation quickly transformed into overwhelm and a nagging question: “What am I supposed to do now?” I scoured the server for direction, but felt extremely lost and disappointed. When there are unclear paths to contribution, participation becomes bleak. It may even also centralize power in unintended ways.

A (simplified!) example of a fully decentralized and participatory governance model:

Let’s say that in your local community, you are 100% in charge of your own decision-making, but it’s your job to stay informed by attending town halls. That’s great, but who will be able to go to all the town halls? Probably not folks who have to work 12-hour shifts or be a full-time caretaker, etc., etc. Those who can actually participate are only those who have the privilege of time, resources, etc. In this case, I would make the case that a representative democracy is much more effective than a participatory one, though representative democracy has its own issues (More on this: How Blue Cities Became So Outrageously Unaffordable , The Tyranny of Structurelessness).

These problems are not lost on DAO organizers/web3 leaders. Many have talked about the drawbacks of decentralization in this regard:

“The success of Web 3 governance models doesn’t seem to lie in a thousand people making a thousand decisions, but rather a thousand people electing a small group of leaders to make decisions for them, and supporting those leaders through usage, distribution, and feedback.” - Alex Zhang, Friends with Benefits

“Failing to formalize real community participation can land projects in an uncanny valley of decentralization theater. A symptom of being caught here is an apathetic community with low participation rates, and a heavy dependency on founding teams. In this situation, formalizing control (e.g. through delegation) may be a better path to building trust, whereas hiding under the pretense of decentralization is a quick way to undermine it.” - Jesse Walden, Variant Fund

In the case of strong centralization (Web2), the solution to these issues would be to create a hierarchy analogous to the C-suite of a traditional company, where leaders are responsible to guide users, but are also padded into legacy positions with the ability to hoard power and wealth, etc., etc. with little intervention (we see these manifest in companies like Facebook, Apple, etc.).

Okay so if absolute decentralization and centralization are both "bad," then how might we move forward?

The answer is unclear and many incredible folks in the DAO community are working on solutions for this, but I propose the following first step: We should not hide under the pretense of decentralization.

Frankly, there is currently inadequate tooling to create effective, fully autonomous DAOs. Consequentially, I'd argue DAOs need strong central leadership right now. DAO theory looks to the co-op and open source models for inspiration, and in both cases there are precedents for leadership (More on this: A Prehistory of DAOs). To preach DAOs as fully autonomous in their current stages is, candidly, a disastrous mismanagement of contributor expectations.

The difference then, between a fully decentralized model and the current Web2 governance, is that DAOs should have early strong leadership but be transparent in building processes and provide material evidence that the team is building devices for progressive decentralization.

These devices may look like robust documentation, strong self-serve onboarding, high-reward bounties, constant voting proposals, token airdrops, other generous and transparent compensation mechanisms, etc. These tools will give members an actionable sense of ownership of the DAO (incentivizing participation), and ensure a stronger transfer of responsibility to community members later when DAO operations are sustainable, having retained enough tokens to benefit from fees and growth.

In sum, there needs to be hard conversations about what it means to start or join a DAO. I believe that rather than rallying around a marketable word like "decentralization," we should first investigate what we owe each other as DAO netizens. This means managing expectations and aligning all contributors to understand the merits of different models of decentralization. Only then will we build a sustainable model for DAOs, and a stronger Web3.

**a quick note: I’m using a layperson’s definition of decentralization to describe the absence of any central roles/hierarchies in an organization; I definitely admit that decentralization as a formal property is much more nuanced, but would argue that it may be unclear (fairly) to someone new to web3/DAOs.

Prescient source and inspiration: Progressive Decentralization: A Playbook for Building Crypto Applications

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