When is a DAO Decentralized?
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When is a DAO Decentralized? / Axelsen, Henrik; Jensen, Johannes Rude; Ross, Omri.
In: Complex Systems Informatics and Modeling Quarterly, Vol. 2022, No. 31, 2022, p. 51-75.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - When is a DAO Decentralized?
AU - Axelsen, Henrik
AU - Jensen, Johannes Rude
AU - Ross, Omri
N1 - Publisher Copyright: © 2022 Henrik Axelsen, Johannes Rude Jensen, and Omri Ross.
PY - 2022
Y1 - 2022
N2 - While previously a nascent theoretical construct, decentralized autonomous organizations (DAO) have grown rapidly in recent years. DAOs typically emerge around the management of decentralized financial applications (DeFi) and thus benefit from the rapid growth of innovation in this sector. In response, global regulators increasingly voice the intent to regulate these activities. This may impose an excessive compliance burden on DAOs, unless they are deemed sufficiently decentralized to be regulated. Yet, decentralization is an abstract concept with scarce legal precedence. We investigate dimensions of decentralization through thematic analysis, combining extant literature with a series of expert interviews. We propose a definition of “sufficient decentralization” and present a general framework for the assessment of decentralization. We derive five dimensions for the assessment of decentralization in DAOs: Token-weighted voting, Infrastructure, Governance, Escalation and Reputation (TIGER). We present a discretionary sample application of the framework and five propositions on the future regulation and supervision of DAOs. We contribute new practical insights on the topic of compliance and decentralized organizations to the growing discourse on the application of blockchain technology in information systems (IS) and management disciplines.
AB - While previously a nascent theoretical construct, decentralized autonomous organizations (DAO) have grown rapidly in recent years. DAOs typically emerge around the management of decentralized financial applications (DeFi) and thus benefit from the rapid growth of innovation in this sector. In response, global regulators increasingly voice the intent to regulate these activities. This may impose an excessive compliance burden on DAOs, unless they are deemed sufficiently decentralized to be regulated. Yet, decentralization is an abstract concept with scarce legal precedence. We investigate dimensions of decentralization through thematic analysis, combining extant literature with a series of expert interviews. We propose a definition of “sufficient decentralization” and present a general framework for the assessment of decentralization. We derive five dimensions for the assessment of decentralization in DAOs: Token-weighted voting, Infrastructure, Governance, Escalation and Reputation (TIGER). We present a discretionary sample application of the framework and five propositions on the future regulation and supervision of DAOs. We contribute new practical insights on the topic of compliance and decentralized organizations to the growing discourse on the application of blockchain technology in information systems (IS) and management disciplines.
KW - Blockchain
KW - Compliance
KW - DAO
KW - DLT
KW - Regulation
KW - Sufficient Decentralization
U2 - 10.7250/csimq.2022-31.04
DO - 10.7250/csimq.2022-31.04
M3 - Journal article
AN - SCOPUS:85150196817
VL - 2022
SP - 51
EP - 75
JO - Complex Systems Informatics and Modeling Quarterly
JF - Complex Systems Informatics and Modeling Quarterly
SN - 2255-9922
IS - 31
ER -
ID: 384341667