Why blockchain technology is a solution for future governance

by Arthur · April 25, 2023

Over the past few years, it has become clear that democratic governance as we know it is failing across the globe.

In the midst of a global pandemic, a worsening climate crisis, a war on the doorstep of the G7 and rampant inflation, the world’s leaders are struggling to keep up with today’s challenges.

To move forward, existing governance systems need a complete overhaul to usher in a new, fair and decentralized future.

When it comes to global democracy, the writing has been on the wall for some time.

Today, half of the democratic governments around the world are in decline, the International Institute for Democracy and Electoral Assistance has said.

In its 2022 report, the institute said democratic progress has stalled across countries in the global index over the past five years, with a rise in authoritarian regimes, restrictions on freedom of expression and growing distrust of election results.

More and more countries have recently experienced highly divisive elections, including Brazil, France, Italy, the United Kingdom and the United States.

For example, the UK went through no less than three Prime Ministers in 2022, while populism has been on the rise globally in recent years.

In short, it is clear that people are desperate for a change to the inheritance system, which has always allowed power to remain concentrated in the hands of the few, to the detriment of the many.

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DAO to the rescue

With old governance models failing, perhaps it’s time for a change, and again, blockchain technology provides a solution with the Decentralized Autonomous Organization, or DAO.

A DAO has no central leadership and is governed from the bottom up by a community, with the rules recorded on the blockchain in a transparent and immutable way.

Unlike older governance systems, DAOs allow an entire group to make important decisions in full consensus.

DAOs form the basis of the entire decentralized finance (DeFi) ecosystem.

Through their innovative governance models, DAOs encourage members to vote on specific issues, offering them rewards in the form of tokens or a share of a protocol’s revenue.

Built with open source code, DAOs are completely transparent and eliminate the risk of rigging, bribery or fraud.

Although DAOS (and DeFi as a whole) only make up a fraction of the global financial ecosystem, they are growing and developing rapidly.

Today, there are 2,368 DAOs in existence, with more than $100 million in assets and total DAO tax funds of $25.6 billion.

Their growth has accelerated over the past month, as total government assets jumped 79 percent between March and April, according to data analytics site Deep DAO.

A natural evolution

The DAO model is the obvious evolution of the archaic and outdated shareholder and dividend policy that forms the backbone of business today.

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Far from promoting fairness and equality, current models prioritize the interests of shareholders over the interests of their employees, customers and society at large.

This results in decisions that seek to increase short-term profits and reinforce existing power structures and wealth inequality, to the detriment of people and the planet.

Meanwhile, many public bodies today are a drain on public resources amidst widespread bureaucracy, inefficiency and waste of time.

In many developed countries, including the United States, the number of government institutions has expanded significantly in recent decades, but they contribute little to the world at large.

We can make much better use of limited financial and natural resources by replacing 60 percent of all incompetent middle management employees – in the public and private sectors – with smart contracts.

Those policies that are still relevant to the modern world can then be transferred to the blockchain and managed by code in a transparent and efficient way.

Unlike government elections, which have suffered from declining turnout for decades, DAO models ensure that every participant is involved in decision-making and that their opinion will truly contribute to the organization’s future.