Governance impacts of blockchain-based decentralized autonomous organizations
An empirical analysis
Olivier Rikken (TU Delft - Information and Communication Technology)
M. F.W.H.A. Janssen (TU Delft - Engineering, Systems and Services)
Z Kwee (TU Delft - Economics of Technology and Innovation)
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Abstract
The rapid rise in blockchain-based Decentralized Autonomous Organizations (DAOs) offers policy-makers and decision-makers new opportunities to automatically execute decisions and processes that help enhance transparency, accountability, participation and trust. Yet, many DAOs have a limited lifespan. There is little empirical evidence of the effect of governance elements on the viability of DAOs. Using 220 on-chain governed DAOs, this paper analyses how governance elements (accountability, decision/voting, and incentives) influence the viability of DAOs in the long-term. The findings show that DAOs without weighted decision-making and without incentive structures are more viable than those with weighted decision power and incentive mechanisms. This suggests that financial and share-like DAO governance elements do not or may even negatively contribute to the long-term viability of DAOs. Also, voting power distribution is found to have a statistically significant influence on DAOs’ viability. We further propose a preliminary theory that relates governance elements to the long-term viability of DAOs. These insights will help policy-makers in designing more viable DAOs. Future research should investigate how DAO objectives, the chosen deployment infrastructure and the type of users can impact the long-term viability of DAOs.
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