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Smart contracts’ governance: A new order for economic activity?

Recently, a new form of organization—a decentralized autonomous organization (DAO)—has emerged as a novel form of governance. DAO is an organization represented by programmed operating rules that determine who can execute changes to the rules of applications built on blockchains. Through ownership of governance tokens, DAO grants its stakeholders such as users, developers, and contributors a voice in the DAO’s governance process. Today, many decentralized applications that apply blockchain technologies such as DeFi choose to rely on DAOs for their governance, specifically, to submit proposals and to cast votes on decisions. Despite DAOs’ growing popularity in the finance ecosystem and appealing vision of “decentralized governance”, there is little empirical evidence based on investigating governance issues that arise in blockchains. In this project, we will describe the governance structure of DAOs, focusing on the dynamics of key governance characteristics, identify potential governance risks associated with the typical DAO structures and suggest implications for the success of DAOs drawing on governance theories.