The Scalability of DAOs

The Scalability of DAOs

Last week we recorded an interesting episode with Martin Köppelmann and Matan Field about dxDAO. The dxDAO will be a DAO on the Ethereum blockchain that will initially manage the decentralized exchange protocol DutchX.

What I found most interesting about the conversation were their claims that DAOs are an organizational form that becomes more efficient as it scales, unlike traditional organizations like companies. While I'm not fully convinced that traditional organizations really lose efficiency with scale, let's accept that claim for the time being.

If DAOs become more efficient as they grow, then a larger DAO would outcompete a smaller DAO. It would get even more resources. And grow even more. It is quite apparent that if this were the case, there would be a big first mover advantage to creating such a DAO. Martin's claim that 'there is a 1% chance that the dxDAO will be the world's biggest organization in 10 years' is understandable in that context.

But what's the logical conclusion of this? One thing they envision is that the dxDAO could become the DAO of decentralized finance protocols. But if the dxDAO would really be superior in managing all DeFi protocols, why should it stop there? And if it doesn't stop there, do we keep going until we have some kind of world government?

It's hard for me to understand the long terms implications of these claims right now. But I do absolutely believe that DAOs will become one of the most fertile grounds for experimentation in the next years.


Brian Crain

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