DAOs and Token-Driven Organizations: Promises vs. Reality
Organizing is the foundation of the human enterprise. The common denominator of building pyramids, flying to space, dealing with wildfires, and running hotels is the need for a well-oiled organization that gets the work done through the coordinated action of people entrusted with parts thereof. Almost every product and service we use requires a joint effort of many orchestrated through a management mechanism that determines how to carry out work effectively.
Recently, a new form of organization that develops and maintains digital services characterized by actors’ self-selection into roles and tasks and grassroots-driven decision making. These organizations call into question well-established notions of organization and work. Participation in these organizations is voluntary , comparable to the dynamics we observe in open source software development communities like Linux. Typically, actors coordinate with a changing set of collaborators who can freely enter and exit the organization. Instead of formal organization structures and legal grounds to induce, enforce, and motivate cooperation, participants rely on crypto tokens to govern operational activities and strategic decisions. Thus, participating actors are token holders that have a stake in the success of the organization (“skin in the game”). In lieu of managers relying on command and control, the management mechanism of these organizations relies on tokens to provide members with remunera-tions for their contributions and the ability to vote on key decisions. Being financially involved in achieving organizational goals incents token holders to participate in voting sessions on resource allocation, equity sharing, and proposals for new features or initiatives for the organization. This issue of Amplify focuses on organizations emerging and forming around crypto tokens deployed on blockchain networks.
These token-driven organizations are often framed in the context of decentralized finance (DeFi) services and decentralized platforms. The International Monetary Fund estimated the cryptocurrency industry to exceed a collective market capitalization of US $2.5 trillion in 2021, 1 while the DeFi sector retained assets valued at more than $78 billion in February 2022, marking a 10x growth multiple in the span of 12 months. 2 Overall, blockchain technology has enabled new organizational forms that rely on token-driven management and coordination mechanisms challenging traditional forms of organizing.
In the past few years, a growing number of decentralized communities and Web3 projects that push the boundaries of possibility and fuel the imagination of a better world through technological and social innovation. A decentralized autonomous organization (DAO) is a new form of organization that aims to orchestrate work and appropriation of shared capital independently of central control to attain espoused objectives through self-executing rules encoded in crypto tokens.
Task management in decentralized autonomous organization
In the emerging platform economy, blockchain technologies are reshaping the digital economy. Moreover, disintermediation and decentralization have broken new ground for platform organizations and management mechanisms and instigated the concept of a DAO (Decentralized Autonomous Organization). Recent literature on operations management has called for further research on governance issues related to DAOs.
Findings reveal that strategic decisions arrived at through voting have a positive impact on platform operational performance under certain conditions, whereas operational decisions resulting from voting have a negative impact. Moreover, the moderating effects of voting task execution characteristics on the relationship between completed decision tasks and operational performance. These findings have important implications from both theoretical and practical perspectives.