The biggest challenge DAOs will face

DAOs (Decentralized Autonomous Organizations) are organizations that operate on a blockchain network and are governed by a set of rules encoded in smart contracts. Members can join the DAO by purchasing tokens that represent their ownership stake and voting rights. 

DAOs have gained popularity due to their potential to create more transparent, democratic, and decentralized forms of governance. However, they are not without challenges.

In projecting what the world of crypto will be like from 2023 onwards, a16z wrote a report and listed the three challenges that DAOs will focus on to be successful.

Hiring

According to a16z, rising crypto prices generate interest in crypto-related jobs, and delegation and councils are becoming more common. This will affect how DAOs will operate as openings in these new-generation institutions will require trusted personalities to fill up roles and perform their duties from anywhere around the world.

Treasury management

As participation in DAO governance is growing, DAOs will run more experiments with new forms of community governance. Governance in DAOs will require a meticulous system that will manage the assets built and owned by the organization.

Sustainable funding

The report states that while Decentralized Autonomous Organizations (DAOs) funded more than $60 million in grants, they hold roughly $10 billion in liquid treasury assets. In other to have a more stable system, DAOs are exploring new checks and balances to prevent governance attacks.

In addition, a16z noted that “DAOs are becoming formal legal entities” with projects being legally identified as LLCs, LCAs, UNAs, and Foreign Foundations.

Finally, the silicon-based venture capital firm added that the “price-innovation” cycle is part of the crypto market which will lead to innovation and the release of more efficient products into the market.

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