In complex organizations such as companies and associations the decision-making power is usually delegated to a small administrative body whose members are the decision-makers.
Traditional governance models are centralized systems in which all members of the organization are led by a single body that decides the organization’s fate and manages every aspect of it.
Consider what would happen if this power was given to those who are actively involved in the life of the organization, not just those who work or volunteer for the organization, but also those who buy the products and have an interest in the group’s operations in general. Consider a decentralized governance system in which power is distributed to all people who wish to participate.
This type of governance model is made possible by the blockchain via the DAO. A Decentralized Autonomous Organization is a word that refers to a self-governing organization. In this model, decisions are made using deterministic voting systems, whose rules are certain and precise since they are implemented using smart contracts written on the blockchain.
Smart contracts are computer programs that are memorized and run on blockchains to carry out certain actions when certain conditions are met.
The smart contracts of a DAO allow for a variety of interactions, including the ability to make proposals and vote on them via blockchain transactions made by DAO participants.
To become a member of a DAO, you must own a certain amount of the organization’s cryptocurrency. Without this requirement, it is not possible to cast a vote or advance proposals because the weight of each vote is proportional to the amount of cryptocurrency held by the voter.
It is not, however, a democratic system, but rather one in which anyone with an interest or desire to express their opinion about an organization can do so by purchasing a certain amount of cryptocurrency linked to the DAO and voting, proposing, and thus having an impact on the organization in which they believe.
The benefits of a decentralized governance model
The transition from centralized to decentralized governance brings the organization’s will into focus, allowing it to take into account not just the will of its employees, but also the will of its customers who use its products and services.
In fact, DAOs are frequently used to manage the development of blockchain products.
The fact that users can propose and vote on the development of new features allows us to optimize resources by giving life to features that truly add value to products and services. The DAO has evolved into not only a governance tool, but also the most powerful market validation tool.
How to integrate the DAO model into legally recognized organizations
Until recent times, the DAO was seen as a governance model that could not be applied to legally recognized organizations. Even today, the majority of DAOs manage blockchains and DeFi services, allowing developers to work autonomously while avoiding the need for voter identification or registration in public databases because voting occurs through blockchain transactions carried out by decentralized wallets.
Things are starting to change. Wyoming’s government recognized DAOs as legal entities on July 21, 2021. American CryptoFed DAO was the first DAO to be recognized.
Furthermore, the DAO governance model can be adopted by companies and other organizations even if this model is not formally recognized by local law.
The Xriba Association is an example of this.
Indeed, the Association, as a legally recognized organization, is composed of traditional governance organs such as the Executive Committee and the General Meeting, but a portion of the decision-making process is delegated to the Xriba DAO.
The Xriba DAO, which is currently in development, will be responsible for stabilizing the roadmap of the Xriba Association’s blockchain projects, as well as the outcome of voting for the association’s status, which will be approved by the association’s governing bodies.
As a result, those who are interested in the services provided by the Xriba ecosystem will be able to make proposals and vote on the features while holding a certain amount of XRA tokens.
The Xriba Association is one of the first legally recognized organizations to formalize this type of system, which is a compromise between the need to comply with traditional organization laws and the desire to decentralize its own governance.