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When is a DAO Decentralized?

Axelsen, Henrik, Jensen, Johannes, Ross, Omri·2022·Complex Systems Informatics and Modeling Quarterly
DOI 10.7250/csimq.2022-31.04
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Abstract

While previously a nascent theoretical construct, decentralized autonomous organizations (DAO) have grown rapidly in recent years. DAOs typically emerge around the management of decentralized financial applications (DeFi) and thus benefit from the rapid growth of innovation in this sector. In response, global regulators increasingly voice the intent to regulate these activities. This may impose an excessive compliance burden on DAOs, unless they are deemed sufficiently decentralized to be regulated. Yet, decentralization is an abstract concept with scarce legal precedence. We investigate dimensions of decentralization through thematic analysis, combining extant literature with a series of expert interviews. We propose a definition of “sufficient decentralization” and present a general framework for the assessment of decentralization. We derive five dimensions for the assessment of decentralization in DAOs: Token-weighted voting, Infrastructure, Governance, Escalation and Reputation (TIGER). We present a discretionary sample application of the framework and five propositions on the future regulation and supervision of DAOs. We contribute new practical insights on the topic of compliance and decentralized organizations to the growing discourse on the application of blockchain technology in information systems (IS) and management disciplines.

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  • Early stage projects often lack the resources to fully embrace decentralization, while navigating compliance and infrastructure limitations.

    “The limited adoption of DAO-specific features observed in this study echoes findings arguing that early stage projects often lack the resources to fully embrace decentralization, while navigating compliance and infrastructure limitations (Axelsen et al., 2022).”

    From Exploring the decentralized science ecosystem: insights on organizational structures, technologies, and funding (2025) · cites this paper as Axelsen et al., 2022

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Metadata

Authors
Axelsen, H., Jensen, J., & Ross, O.
ORCID
Venue
Complex Systems Informatics and Modeling Quarterly
Publisher
Riga Technical University
Published
2022-07-29
Issue
31
Pages
51-75
ISSN
2255-9922
DOI
10.7250/csimq.2022-31.04
Cited by
41
References
3
Licence
creativecommons.org/licenses/by/4.0 (unspecified)

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