The Need for Baby Steps in DAO Development

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By Edson Ayllon, Product Manager at dHEDGE

When blockchain projects reach a certain level of hype, they often head down a turbulent path if they flounder publicly. Such projects steal attention from blockchain’s march forward in transforming every industry it touches. Yet there is one facet of Web3 that has mostly avoided this fate: DeFi and Decentralized Autonomous Organizations (DAOs).

DAOs possess revolutionary qualities for work and finance, but blurring the line between reality and fiction here, as is often done in the Metaverse, should be discouraged. DAOs would benefit from taking a different approach to set foundations and gradually scale interest, circumventing the typical hazards ailing other Web3 projects. Focusing on concrete, realistic progress for DAOs is essential to legitimize the underlying values that DAO frameworks offer.

Rethinking the corporate ladder

Centralization is highly ingrained in most prominent organizations today, so it’s not a hard concept to imagine. If you work for a traditional company, it’s very likely that the people calling the shots are high-level, C-suite executives who rarely, if ever, consult with employees before making decisions. This is what makes an organization centralized—having a clear food chain of governance and hierarchical corporate structure. Not to say that centralized organizations are bad per se, but there is room to question their effectiveness in a highly-digitized and flexible work ecosystem.

DAOs challenge this concept by remodeling the social and financial aspects of a company to have no central authority, democratizing corporate structures through automated smart contracts. This means no C-suite or corporate ladder, but instead an emphasis on communication at all levels of an organization’s decision-making. On paper, it sounds like a pie-in-the-sky idea that could never work in a practical setting. But such autonomous, collective corporate governance has existed for decades. Think of it almost like a digitized co-op.

Companies are struggling to get employees excited about returning to the office, and the pandemic has created space for workers to question their place and the credibility of traditional centralized workplaces. Embracing DAOs or some version of a decentralized company structure could alleviate some of the issues facing modern work. For businesses, DAOs offer a diverse and social way to manage key corporate decisions. Likewise, the social nature encourages employees to take initiative and widen their scope of contribution in a company regardless of title or hierarchy, ultimately improving organizational cultures and employee values.

Since the core of a DAO operates on decentralization, an avenue is created for employees to meaningfully engage with their organizations and feel substantial impacts on how a company is run. DAOs offer the most comprehensive answer to the reality check created by the unsavory impacts of Web2 and hyper-connectivity on modern work culture in traditional business structures. However, ensuring these changes have the widest impact possible involves taking baby steps and gradual development to avoid the pitfalls of both Web2 and currently developed blockchain technology. After all, no one wants to get their hopes up over something so broad like work culture and corporate structures only to be met with a letdown when nothing changes.

Sounds neat, but how can we implement it?

It’s hard to imagine something more jarring than showing up to the office to find your boss replaced by a smart contract. But there are ways to examine the benefits and concerns employees want, yet fail to receive from traditional organizations through incremental DAO integration.

Transparency and trust in decision-making are priorities that some organizations struggle to reconcile, with 80 percent of employees desiring insight on how key decisions are made in an organization. A DAO is built on the foundation of an automated and consensus-based smart contract, allowing employees at all levels to see how a decision is made with full transparency. Although relatively mundane, having a clear organizational constitution that can only be altered by a group agreement already alleviates a massive concern from ordinary team members.

Pandemic-fueled labor shortages and the ongoing “Great Resignation” across industries illustrate a widening gap between worker expectations and organizational limitations to address them. Sixty-three percent of workers leaving their jobs cite the inability of employers to address their mobility concerns, underscoring a need for companies to invest in employee growth. This should be an easy fix, and DAOs offer the solution.

DAOs govern organizations collectively, requiring a voting process over the will of a C-suite boardroom to fashion the operating protocol of a company. Employees are able to be forthright on their needs being implemented and aligning incentives, as the best-serving protocol for company interests runs on a consensus. Although this process is originally meant to create value for token holders within the DAO, it can be retooled to face organizational and operational issues.

There is a strong appeal in being the next tech sensation considering the breakneck pace of advancement in the Web3 and blockchain spaces. However, often the loudest in the room has the least to offer once a flashy project falls under the microscope or is perceived as a failure in the court of public opinion.

DAOs differ from average Web3 projects because the concept provides a truly operational solution to tackle issues in corporate governance. The backbone already exists and can be used as a foundation to create useful business implementations, though they might not be quite ready for adoption yet. To withstand scrutiny and be accepted enthusiastically, DAO initiatives should take a step back and deliver concrete benefits on a smaller scale to successfully restructure corporate operations.

Author Bio: Edson Ayllon is the Product Manager at dHEDGE. Edson pursued an education in Energy Engineering at Pennsylvania State University. Through a growing interest in finance, he surveyed several asset classes to begin investing ventures, growing interest in the blockchain asset class. After testing psychological concepts such as the perceived value that contributes to the supply and demand-driven prices, he later became interested in the technology behind blockchain assets, and the emerging businesses he sees growing from that sector.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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