Governance
Another way in which the DAO model differs from the traditional stablecoin model is the governance structure. While DeFi decentralizes finance, the DAO model decentralizes the corporation.
In the DAO model, smart contracts replace many of the standardizable elements of the day-to-day management, while key decisions that affect the protocol’s strategic vision are taken collectively by the DAO’s token holders. By aligning the protocol with the incentives of the community, principal-agent dilemmas can be avoided.
Managing the stability of the currency is a question of monetary policy. Just as in the world of central banking, this requires periodic judgments that cannot be automated. This means that there are clear limits to the types of decisions that can be reliably left to DAO vote. DAO’s that decentralize all decision-making have historically been poor at rapidly and coherently dealing with emergent threats to the stability of their token.
Another area that requires specialist knowledge that cannot be fully decentralized is in the selection of solar projects whose kWh generation backs the Zuva token, as well as structuring the detailed mechanics of bonding, staking, and rewards. Decision-making here is delegated to subject-matter experts within the management team who act within the framework of the strategic vision supported by DAO token holders.
Copy link