Isomorphism in DAO Governance

  • Normative isomorphism is driven by professionalization, reflected in specialized vocabularies, job descriptions, educational requirements, and other shared norms and standards that guide individuals in a particular field to think and behave in similar ways.
  • Mimetic isomorphism is driven by imitation. Organizations are often faced with uncertainty, both in terms of their external environment and a lack of clarity about internal goals and strategy. A common way of dealing with uncertainty is to mimic other organizations, especially those that are perceived as successful or otherwise exemplary.
  • Coercive isomorphism is driven by external forces. Organizations may be pressured by an external authority to conform to certain expectations. Typical examples include legal or regulatory mandates, reporting or supervisory obligations, and pressure from entities that provide organizations with funding or other essential resources.
  • Blockchain industry has ideological roots in the cypherpunk and open source software movements. This affects how different ideas and practices are received within the industry and contributes to the reproduction of specific design preferences, social norms, and intellectual dispositions. Decentralized applications adopting the principles and ethos associated with their underlying networks is a second order effect of the same phenomena. [4]
  • Thought leadership and recommendations from reputable individuals or organizations are a key source of normative guidance on DAO governance. Although by no means universally adopted, examples include the preference for software-based automation over human involvement, and the use of delegation mechanisms to counter voter apathy. Similarly, concepts such as ’social scaling’, ’governance minimization’, ’credible neutrality’, and ’progressive decentralization’ have been normatively relied on in designing governance mechanisms for a variety of different DAOs.
  • In addition to technical specialization in network operation, software development, and cybersecurity, other areas of DAO governance are also increasingly professionalized (e.g. treasury management, financial analysis, or coordinating the governance proposal and voting procedures). Professionalization of DAO governance encourages homogenization. In the future, this trend may be amplified by the growing importance of professional networks, trade associations, and industry-specific educational and training programs.
  • Many DAOs have adopted governance mechanisms pioneered by the earliest public blockchain networks. Most importantly, these include the use of network-specific tokens to incentivize work and assign access or voting rights, and a standardized process for suggesting changes to the system (usually following the example of Bitcoin Improvement Proposals, itself inspired by BitTorrent Enhancement Proposals).
  • Founding documents describing the core features of a given DAO often include an (explicit or implicit) ideological position on the relative merits of formal vs. informal and ’on-chain’ vs. ’off-chain’ governance. [5] Based on that initial position, many DAOs have modeled themselves — consciously or not — either after Bitcoin and Ethereum (limited on-chain governance combined with semi-formalized off-chain governance) or the early pioneers in token-based voting and treasury management (e.g. Decred and Tezos with more expansive on-chain governance).
  • Faced with high technological uncertainty and not much experience to go by, DAOs often integrate battle-tested code, operational procedures, and governance tools that other DAOs are using. Compared to traditional organizations, this is much easier for DAOs because many blockchain projects are committed to open sourcing their software which is also highly composable if created for the same platform, as is the case with decentralized financial (DeFi) and governance applications on Ethereum. Examples include the broad adoption of the Gnosis multisig wallet, Compound’s governance contract, and the Snapshot tool for off-chain voting. In other ecosystems that enable interoperability between different networks and DAOs, some mimetic isomorphism will inevitably result from the adoption of common development frameworks such as the Cosmos SDK and Substrate. [6]
  • Many blockchain networks and DAOs aim to achieve decentralization and censorship-resistance, which presents a unique challenge from a regulatory point of view. Operating in a legal gray area — as is often the case with innovative technology — encourages regulatory arbitrage whereby the core entities participating in DAOs end up domiciled in jurisdictions that take a more permissive view of their activities. One way to interpret this is that existing regulations drive DAOs to adopt similar legal and organizational forms. As blockchain-related regulatory clarity and enforcement grows, this type of isomorphism is likely to increase.
  • Engaging in commercial activities and coordinating financial flows from the organization to its contributors or from its users to the organization means that economic entities participating in DAOs may be subject to various tax and reporting obligations. The administrative procedures for meeting these obligations are likely to standardize across a variety of DAOs, similar to how tax and reporting requirements drive isomorphic change in more traditional organizations. It is also possible that the ICT-native and inherently global nature of DAOs will eventually trigger a move towards a more globally unified taxation and recordkeeping regime in general. [7]
  • In addition to governments and regulatory bodies, blockchain networks and DAOs may develop dependencies towards other external entities. This may include sources of funding, hardware manufacturers, or other organizations (including other DAOs) that provide resources necessary for a DAO to remain operational. In some cases, such dependencies may grow large enough to allow these external entities to pressure DAOs to adopt certain practices. The degree to which decentralized network operators or other participants in DAOs are currently subject to such pressures is unclear and may remain unreported for long periods of time, especially in the case of organizations that have few alternatives but to quietly succumb to external force.

Footnotes

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Mario Laul

Mario Laul

twitter.com/mlphresearch

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