Can DAO become the next big thing? Part 01


The concept of the Decentralized Autonomous Organization (DAO) is gaining popularity, and this year we might see a rise in the adoption of the concept, according to blockchain evangelists. A Decentralized Autonomous Organization (DAO) is an organizational structure where a set of people, including the board members, stakeholders and other managerial entities, interact as per the set protocols enforced in the decentralized system. Unlike a traditional organization, there is no hierarchical structure, and a decentralized organization may or may not need a legal system.

The rules of a Decentralized Autonomous Organization are encoded in smart contracts which is transparent and can be controlled by the shareholders. Though there are certain advantages of turning an organization into a DAO, there are certain challenges in the system. The main purpose of the DAO is recording the financial and legal implications of the organization. This also includes decision making involving the shareholders of the organization to reach a consensus. Here are the different protocols set to aid the decision-making process through voting.

The One-Person-One-Vote (1p1v) protocol

This is the most common and preferred type of protocol for reaching a consensus, especially in matters related to governance. This is a common method of voting during the presidential elections in an economy and even in an organization. Each person who is eligible to cast a vote can vote only once for any one party. The party that receives the highest number of votes wins the elections.

The One-Person-One-Vote method can be adopted for a DAO on a blockchain network, but there are certain complications with the implementation of the method. On a blockchain network, a wallet address acts as a users identity. Blockchain being a permissionless technology allows an individual to have multiple wallets. If a single individual has multiple wallet addresses, they can cast several votes thus manipulating the end result.

For the technology to serve as an efficient platform for the One-Person-One-Vote voting system, the real world identity of the person has to be linked to the wallet addresses. Having no layer to link the real identity of the individual will lead to Sybil attacks where a voter can create multiple wallet addresses and cast several votes.

The One-Stake-One-Vote (1s1v) protocol

As the name suggests, the One-Stake-One-Vote Protocol requires an individual to stake tokens to cast a vote on the blockchain network. The number of tokens that the voter stakes determine the weight of his vote, and the party that receives the maximum stakes, wins.

The challenge with this method of voting is that rich voters can stake more tokens and have the power to manipulate the outcome. This also leads to a different type of attack where the rich voters can overstake the minority share and collect their tokens.

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