Overcoming centralized governance: How DAOs democratize decision making

The crypto ecosystem has emerged to democratize finance, empower individuals, and promote freedom. However, governments and global financial institutions often treat public blockchains and digital assets skeptically.

Governments claim to support the development of innovative technologies like blockchain, but they adopt a tough stance on crypto businesses, such as cryptocurrency exchanges. In the U.S., the Securities and Exchange Commission (SEC) is putting pressure on many crypto companies, while in Australia, the federal government is planning to tighten crypto regulation by requiring all crypto exchanges to hold a financial services license.

While governments recognize the unique features of blockchain technology, they’re not using it to promote freedom. Currently, major central banks are deploying permissioned blockchain networks to power central bank digital currencies (CBDCs) — a new form of money that can undermine the foundation of financial markets by reducing credit availability and giving governments total control over the money flow.

How do DAOs ensure decentralization across blockchain communities?

Decentralized autonomous organizations (DAOs) challenge governments by proposing a truly democratic mechanism to improve decision-making. We’re far from experiencing DAOs at the government level, but they surge in popularity across decentralized finance (DeFi) and Web3 projects.

DAOs have the potential to democratize financial markets by giving control back to users and providing a voting mechanism that allows everyone to have a say in the governance process. They protect users from data breaches, surveillance, and unsupported financial sanctions, promoting freedom and being immune to censorship.

DAOs are expanding at a rapid pace. The total value locked (TVL) in DAOs has increased significantly from $12 million in 2019 to approximately $24 billion in 2023, indicating a growth rate of over 200,000% over four years. Almost 10 million people worldwide hold governance tokens, and about 3 million actively participate in the governance process across hundreds of decentralized apps (DApps).

Blockchain companies adopt full decentralization

Some blockchain companies are building on the promise of decentralization by moving their governance to DAOs. One example is AirDAO, a community-governed layer-1 chain and an expanding ecosystem of Web3 and DeFi apps.

While many major public blockchains are primarily regulated by centralized entities, such as the Ethereum Foundation, the Solana Foundation, or the Cardano Foundation, AirDAO aspires to emerge as the first community-governed layer-1 blockchain.

The foundation of the AirDAO ecosystem is its secure and lightning-fast layer-1 blockchain. Powered by the native token AMB, the network boasts a robust consensus mechanism and advanced security protocols, ensuring the integrity of transactions and the overall ecosystem. Moreover, the network’s scalability allows for seamless transaction processing, enabling users to enjoy a smooth and efficient user experience.

Source: AirDAO

DAOs offer a democratic approach that encourages transparency, accountability, and collective ownership. It’s why AirDAO started as a centralized structure and has been transitioning to a DAO, aiming to achieve full autonomy. Initially led by a CEO, AirDAO’s shift to decentralization started in 2023 with the introduction of the AirDAO Council — formed as a result of community voting held once per year.

Currently, the Council manages all assets and decision-making processes. Its consensus rule requires a 75% vote for approvals, promoting collective decision-making.

Besides the AirDAO Council, the project established Governance Working Groups, enabling all community members to participate in governance and address challenges like centralization and disproportionate token concentration. These groups are meant to implement an impact-based voting system across the entire ecosystem. This differs from other DAO models that depend on a few individuals holding most assets.

The transition plan includes nonfungible soulbound tokens (SBTs) for voting, linked to wallets or individuals, and relying on biometric data.

Anyone can participate in AirDAO’s decentralized governance by running an AirDAO node. This involvement grants participants access to various rewards and benefits.

Thanks to its innovative governance model, AirDAO aims to reward its community fairly and foster long-term growth by aligning the interests of node operators, tokenholders, and developers.