We don’t want to swap the plutocratic leadership of traditional finance for similarly centralized overlords of crypto. Adding another layer - reputation - to this system could create more room for qualified participants and a more equitable approach to governance. Web3 won’t excel by practicing design according to committees of the richest, but right now DAOs lack flexible tools to document reputation and qualifications in a self-sovereign, decentralized way. Even Vitalik Buterin has recently acknowledged the inflexible shortcomings of coin voting governance, which can be unduly influenced by inequality and incentive misalignment, and even outright attacks through vote-buying. Allocating decision-making power based upon assets owned, as opposed to expertise, will cause DAOs to remain plutocratic unless qualifying data about members becomes more contextual.

DAOs that allocate voting rights based on proportional tokenholdings are by definition plutocratic, even moreso when those tokens are purchased (e.g. One might call this situation the DAO Plutocracy Problem.Ī plutocracy is an elite ruling class whose power is derived from their wealth. Being richer can give you more ability to steer the ship, even in instances where weighting influence toward the most subject-matter-qualified individuals might inform better decision-making. This means that the more governance-allocating tokens you hold, the more dramatic the influence you can have on the direction of the DAO. Because tokens are required for membership and individuals with more token holdings frequently beget more membership influence, DAOs often concentrate decision-making abilities among their largest token-holders.

If you want to join a DAO, purchasing certain tokens on the open market is often the only qualification. A DAO or decentralized autonomous organization is an enterprise-like operation directed by voting through tokenized governance.

Plutocracy clothing