Following on the heels of the US presidential election, the Royal Melbourne Institute of Technology (RMIT) Blockchain Innovation Hub has published a paper titled Democratic governance and blockchain governance: Is reconciliation possible? exploring the potential for using blockchain to improve current democratic governance systems. This is timely given the wealth of assertions of potential fraud prior to the 2024 US election, and ongoing suggestions by the losing side that there are discrepancies in the vote tallies.
The authors focus on the application of Decentralised Autonomous Organisations (DAOs) in democratic governance. In a previous paper, the RMIT team identified DAOs as adaptive governance engines which offer a dynamic low cost collective decision-making infrastructure. The paper argues that core attributes of DAOs nevertheless clash with the foundational principles of democratic governance but if a way to successfully integrate blockchain technology and DAOs into the democratic electoral process can be found, DAOs could serve alongside existing traditional governance systems and offer alternative frameworks for collective action.
What are DAOs?
DAOs are blockchain-based systems that enable people to govern themselves mediated by a set of self-executing rules deployed on a public blockchain
The authors argue that by introducing blockchain tools like token-weighted voting, smart contracts and permissionless participation, political transaction costs can be reduced. Moreover, DAOs offer a framework where actions and votes are coded publicly on-chain, potentially increasing trust and reducing claims of fraud.
DAOs vs democracy
One of the main distinctions between DAO governance and democratic governance is the nature of participation and identity verification. In traditional democratic systems, governance rights are linked to citizen-based identities and strict regulations around participation to ensure accountability, equality and transparency.
Most DAOs today rely on pseudonymous and token-based identities where governance rights flow from token ownership rather than verified personal identity (but also exhibit practically very low voting rates). This approach grants anyone with tokens the ability to engage without requiring central authorisation or identity verification. The authors argue that while this model promotes openness and flexibility, it can also promotes plutocracy, where the wealthiest token holders wield the most influence, challenging the principles of “one person, one vote” found in democratic systems.
Challenges to integrating DAOs in democratic systems
To successfully integrate DAOs into democratic governance structures, the authors suggest either placing restrictive limits on core DAO features or fundamentally transforming the democratic process.
However, imposing centralised controls, identity verification or permission layers on DAOs risks stripping them of their flexibility and decentralised characteristics, rendering them similar to traditional databases, albeit much more secured versions.
As an alternative, the authors proposes that DAOs might serve as an alternative governance model rather than replacing democratic structures, allowing them to evolve organically. The concept of the "network state" championed by the well-known investor, Balaji Srinivasan is held up as an example of this experimentation. The network state offers a vision of governance based on participation rather than citizenship and more dynamic governance structures.
Conclusion
This paper provides a thought-provoking analysis of the possibility for DAOs to revolutionise collective decision making processes alongside existing democratic governance structures. This evolution could allow DAOs to continue experimenting with decentralised governance, potentially paving the way for new forms of digital, community-oriented governance that align with emerging societal values and technological capabilities.
Written by J Huang and S Pettigrove with Michael Bacina
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