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Token Hoarders Defeat the Purpose of Most DAOs: Study

A pair of researchers from the College of Texas at Austin and Princeton College carried out a examine to find out how decentralization impacts decentralization in decentralized autonomous organizations (DAOs). Their findings point out that lots of the challenges to autonomy are associated to particular person customers’ causes for taking part.

Based on their analysis, the bigger the DAO, the extra incentive individuals have to contemplate investing in DAO tokens:

“The presence of traders takes away the subsidy from the customers thus hurting their participation. Extra importantly, traders can even take a majority stake to achieve management of the platform.

In a typical token-based DAO scheme, as a substitute of implementing choices by a CEO or chief, distributed authority is issued through tokens to particular person individuals. This prevents the individuals sustaining the DAO from exploiting the individuals as their tokens act like votes.

Based on the workforce’s analysis paper, “the principle distinction between tokens and securities is that tokens are a declare on the platform’s providers whereas securities are a declare on its income.”

So long as individuals in a DAO are engaged with the aim and are keen to spend their tokens to vote on actions that additional that function or providers and utilities that present worth to the group, the DAO continues to thrive. .

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The researchers modeled The DAO over time to find out how person development and tokenization affected the outcomes. Based on the workforce’s analysis paper, their main discovering is that tokenization serves the aim of transferring possession from preliminary fairness holders to customers of the platform, however the tradeoff is that there isn’t a single entity that may subsidize community participation. Is.

This clearly leaves the door open for traders to deal with purpose-driven DAOs like conventional shares.

“The potential for prime returns has harm cryptocurrencies as a way of cost as a result of individuals don’t wish to spend them,” lead researcher Michael Soukin stated in a press launch, including: “They’ll simply convert us into one thing like Amazon and Apple.” may be taken again. That is the entire level we had been making an attempt to get away from.”