What DAOs Can Do: Exciting Or Worrying? Rethinking 2021

DAOs have been deemed to be the best and most important tool of coordination for companies and organizations. In the first part of this article, we talked about the many benefits we saw during 2021, but like in any innovation, there are worries about what it might all mean in the future.

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Worries of the Year

In 2021, taxes were a concern. Did DAOs have enough responsibility to teach their members the likely taxes that they would be responsible for? If they are not careful, then 2022 could bring some very unwelcome surprises.

Small investors can be exposed to potentially dangerous situations if the taxation of DAOs is not clear in the United States.

It is possible that thousands of dollars could be accrued in taxes liabilities. There’s also a risky grey area regarding legality. Reportedly, many users didn’t know their tokens were taxable when they got them from DAOs during 2021.

What happens if the token’s price plunges dramatically? The fair market value of the token at the time it was received could mean that members still need to pay taxes.

A major concern for 2021 was whether code execution is really a smart idea in the future of work, and complex decisions.

Some people envision smart contracts replacing the management decisions. Although this could reduce human error in decision-making, it would also make the process more democratic and easier to coordinate with other businesses. However, many feel that predetermined inputs can be dangerous and inappropriate.

Are smart contracts more harmful than beneficial for workers? Are they able to create more balance in the workspace, and consider more humane concerns? It’s a challenge the DAO technology will likely face.

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What Do DAOs Miss?

Grace (Rebecca) Rachmany, who published her findings on CoinDesk this year, is one of the most intriguing approaches about the state of DAO technology.

The founder of DAO Leadership noted that not all the decision-making in DAOs is as democratic as it sounds since there are organizations –not centered in investments– where “those affected by a decision” are not “those who make the decision”.

DAOs can be characterized by tokens costing money. This is because stakers are more likely to care about it. But what if investments are no longer the main focus of the project? What if there is a better way to make positive and effective decisions that have an impact on large communities, and can withstand times of crises?

DAOs are a way to challenge the old organization model, which means that they have the potential for greater impact on society. Can the DAO tech do what the United Nations can’t? Rachmany says techs need to see the larger picture.

“DAO technology has provided little more than voting and funds allocation mechanisms,” she writes, and adds that the “DAO technology should be applied to areas we haven’t solved yet, areas where everyone’s interest is at stake and therefore everyone should have a say.”

Rachmany notes that “DAOs offer the potential to organize collective intelligence to address complex questions and manage shared resources.” However, “Because of their myopic focus on “on-chain” governance of blockchains, the DAO technologists have failed to create compelling technology for the problems that society is facing.”

Rachmany sees failure in centering this potential in small circles, an ironic reality as the fuel of these movements is “the sense that almost all of the democratic processes are broken in today’s society”.

She thinks it’s time for well-designed systems that can “cause better sense-making” and sees gaps in the decision-making processes of DAOs so far, the organizations’ accountability, lack of solutions for the inclusion of minorities with “less (or no) capital to invest “, and so on.

Can new technology make society obsolete or work with existing technologies? Global challenges are complex?

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