Efficiency

💡 Is efficiency possible?

Understanding Efficiency

Can DAOs remain effective and efficient in the work that they do without returning to fully hierarchical structures?

DAOs are not built for efficiency at scale. The properties that make DAOs unique, namely permissionlessness and resilience, are often in direct conflict with efficiency. The trade-offs between these requirements cannot be ignored, but they can be designed for. We can consider what elements of the DAO need to be most efficient, and design those to use more traditional top down structures. And for those that we want to be more robust and permissionless, and don't need to be as efficient can use flatter, more decentralized structures like token voting.

This is similar to how in publicly owned companies, or even in democracies, large directional changes often require the voting of shareholders and citizens. DAOs can similarly maximize for broad input from token holders for large decisions and delegate decision making as the importance and size of the decisions shrink. Delegation empowers smaller groups that are able to make faster decisions, improving the overall efficiency of the organization. The contract based system proposed in the last section on accountability is an example of this type of delegation.

Slow vs Fast Governance for Making Different Types of Decisions

The YAM reorg focuses on the separation of concerns between different parts of the DAO with different efficiency needs. This is an architectural decentralization, or federation, of the different components of the DAO. It allows for various governance speeds in the different components. To start, we can assume that we have 2 main types of decision making that needs to happen: fast and slow.

If the broad goals and deliverables of a project are well developed and understood then the day to day decisions of a typical project shouldn’t need to go through the full, slow DAO governance process. Token holders have delegated these decisions to those working directly on the project and expect that team to generally make decisions that are in the interests of the original scope of work being funded. The overall direction and funding decisions of that project made by “slow” governance processes guide the decisions of the team. The larger decisions and questions about the direction and funding of a project should be “slow” processes where all stakeholders can weigh in and guide the DAO and its projects. This solidifies the role of token holders as the curators of the general direction of the DAO, but not day to day operators.

This system allows the DAO participants to focus more effort on the work that they should be doing, which is big picture work, while enabling project teams and other grant recipients to craft working styles and organizational structures that work for them and their project.