Many people believe that DAO will be the next big thing, following gaming and NFT. So, how promising is this market segment? What obstacles do DAOs still face? Let’s find out in the article.
Challenges are holding back the development of DAO
Reduce obstacles and promote participation.
DAOs are frequently required to generate some type of shared motive for the members. And if the overall goal of these DAOs isn’t compelling enough, they’ll have a difficult time reaching out. The question is, “How can all of the incentives that DAO members potentially obtain be quantified?”
Maintain operational efficiency.
DAO companies will, of course, have to take a decentralized approach. This guarantees that they can readily access the proper needs of consumers and participants in the long run. Decentralization of the apparatus, on the other hand, leads to poor administration and operation. “How to establish confidence among persons engaging in the organization in order to “lubricate” the decision-making process?” is the question.
Distribute information to participants
Voting is a common activity for DAO organizations. However, when it comes to delivering information to users, the voting procedure to make a broad judgment meets several challenges. “How to provide information/opportunities to the appropriate people at the right time?” is the question.
The solution to the Motivational Issue
One option presented is to combine money “reward” with a spiritual “reputation” incentive. This will increase user motivation to continue with DAO and help its long-term development.
RabbitHole is presently pursuing a “bug bounty” solution (or a reward for completing activities on the site). Furthermore, organizations like as Gitcoin and Coinvise conduct contests, hackathons, and award teams with outstanding contributions.
Along with monetary compensation, the DAO may explore monetary compensation in terms of reputation — reputation for participants. It might be XP experience points or awards for their contributions to the network.
The solution to the management issue
Another issue with Ethereum projects is the expense of on-chain voting, which requires users to pay a not-so-small charge to verify each time they vote. As a result, a few projects have moved voting off-chain to platforms such as Discord, Telegram, or Snapshot.
One disadvantage of off-chain voting is that it will once again concentrate administrative authority in the hands of a few management members (or those holding the Multi-sig key in the system).
Another approach to the governance challenge is to establish companies and persons who are permitted to function within the DAO organization. However, as previously said, ensuring the decentralization of this approach is still difficult.
Below is a summary of the current voting types.
The answer to the information issue
DAO organizations must preserve transparency in addition to achieving decentralization. As a result, the stage of transmitting information to consumers is critical. Llama is one of the projects that generate a cash flow statement to assist users in tracking system activity.
Another answer to this problem may be Analytics platforms, snapshots, and making information simpler to “read” for those with responsibilities inside the business. Platforms that offer this feature include Etherscan and Tally.
There are still many intriguing as well as “troubling” issues concerning DAO organizations. However, for the sake of this paper, please limit yourself to the existing issues and potential remedies.
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