As the DAO industry and subsequent DAO infrastructure are still in their infancy, there are many problems that face the space today. These challenges vary widely across individual DAOs and for the ecosystems they are built within. The following issues highlighted are a general scope of the current identifiable problem areas:
In the majority of democratic voting systems, votes are kept private to protect personal voter data, but also to prevent social influence from potentially affecting voter decision making. While transparent, immutable blockchains were necessary to prove out the technology, to be widely adopted across industry, cryptographic primitives are needed to protect select information on-chain. Zero-knowledge proofs (Zkps), attribute-based encryption, and trusted execution environments (TEEs) are a necessary feature to ensure DAO voting remains anonymous during the voting process.
Similar to transparent voting, transparent fundraising in DAOs can lead to several problems for the organization. This mainly affects investment DAOs which look to raise capital to purchase assets. A high profile example of this occurred with ConstitutionDAO, an organization with a mission to purchase a copy of the United States Constitution. ConstitutionDAO was outbid by a very narrow, calculated margin, as the funding raised by the DAO was transparent on-chain. The winning bidder could see exactly how much capital ConstitutionDAO had raised for the auction, thus giving them an unfair advantage during the bid. For on-chain investment vehicles to grow, private financial transactions will be required to prevent this type of situation from occurring.
Expensive to Participate
The base blockchain layer a DAO has been built on can greatly increase the cost for both creators and participants. In today's DAO landscape, the majority of DAOs are created on Ethereum which has traditionally high gas costs due to the sheer volume of participants. Therefore, every time an individual wants to create or vote on a proposal for the organization, they would have to pay an extraordinary gas fee. While this may be fine for DAOs that have members with a significant amount of capital, this creates a large financial barrier for newcomers looking to join or participate.
Siloed Management Tooling
DAO management tools are siloed in two different ways: by blockchain and by application. First, the majority of DAO management infrastructure has been built on Ethereum, which makes it difficult to create and manage a DAO when your organization or community assets are held on a different blockchain. Second, there are no existing DAO management platforms that offers every function in one consolidated product. DAO creation, governance, treasury management, and payroll tools all exist in separate applications. This makes it difficult for non web3-native users to create and manage their DAO.
The majority of DAO governance today relies on simple governance structures. The most common include one member = one vote, or an individual’s vote being weighted based on the percentage of tokens they own. While both of these governance structures have their use cases, they are not the only voting structures that will govern future DAOs. In the future, on-chain credentials and nominated voting such as general councils and technical committees will emerge. DAOs need a platform that allows them to utilize these governance structures while also giving them the ability to create their own unique systems.