Advantages & Disadvantages of A Dao
Cryptoswede has previously addressed what a DAO is and what it is designed to accomplish. Our readers have also been shown the relationship between a DAO and the Dapps of the Ethereum platform. Now it is time to take a look at the benefits and liabilities that a DAO could confer. Like any technological model, a DAO is not perfect. Here are the advantages and disadvantages of a decentralized autonomous organization.
The overarching advantage of a DAO is that it aims to solve problems that plague modern-day corporations and organizations. Most of these issues have to do with the management of organizations, and a DAO can resolve that by implementing an autonomous structure. The problem with traditional organizations is that they have a top-down structure which works to invalidate contributions from anyone that isn’t at the top of the pyramid.
Every investor in a DAO has a unique opportunity to help shape how the organization is run. Stakeholders at any level can submit proposals and ideas for improvement. The consideration of those ideas is not consigned to some boardroom that is staffed by management that is out of touch with its shareholders.
Another advantage is that there can be no squabbles or power plays in a DAO thanks to its autonomous structure. The idea DAO would have a set of rules and polices that are prearranged. Stakeholders would have access to those governing principles before they make their investment. Once the rules are established, the DAO carries them out without the need for management. Everything happens as it is supposed to happen, when it is supposed to happen.
Proposals submitted to a DAO would tend to be well-constructed beforehand because it would cost money to make such a proposal. This would greatly eliminate ideas and proposals which are sheer nonsense. This makes for a more efficient organization.
Finally, transparency is a great advantage of a DAO. Everything that happens in the organization becomes a lasting part of the blockchain. It is recorded in the distributed ledger and preserved for all time. Those who hold stake in the DAO have input into how funds are spent and managed. Everyone bears the same responsibility.
There are some drawbacks to a DAO. Many of these were exposed by the DAO project which failed miserably due to issues with computer code. If we are to learn anything from DAO’s failure it should be that even a decentralized autonomous organization is only as good as those who establish its code.
There are some institutions like the Massachusetts Institute of Technology, that believe it is not a good idea to give such control to a large number of investors. This is especially true where financial matters are concerned. MIT believes that the world is simply not prepared for this type of organization.
There may be some merit to this criticism. After all, DAOs and blockchains and cryptocurrency are all still new technology. There is much to be learned, many mistakes to be made, and much to be proven before one can say with authority that a DAO could be a viable future business model.