Ingeun Kim | ingeun92@naver.com | CURG
This article was originally written in Korean, and you can find it here !!
That government of the people, by the people, for the people shall not perish from the Earth.
Gettysburg Address, U.S. President Abraham Lincoln, November 19, 1863.
Rule by the majority of citizens
Definition of democracy from the 2015 revised <Politics and Law> textbook
The characteristic of democracy glimpsed from the Gettysburg Address and textbook is that organizations, societies or nations operate based on the will of the majority of their members.
Humans are social animals that cannot live alone, and societies formed by these humans have diverse thoughts and opinions. Although each opinion in society has meaning, society cannot satisfy all opinions while operating. Therefore, society must derive a common opinion through consensus and decisions based on the diverse internal opinions. Society then operates based on these derived opinions — this is a society where democracy functions at its core.
In particular, members of society themselves have sovereignty that cannot be violated by anyone else in the same society. This is why we do not call dictatorships where the sovereignty of the majority is violated by a minority “democratic nations.”
So in the current era of rapid technological advancement, how has the development of blockchain technology in particular impacted democracy, and in what direction is it leading democracy? Let’s find out.
What is a DAO?
A Decentralized Autonomous Organization (DAO), Fully Automated Business entity (FAB), or Distributed Autonomous Corporation/Company (DAC) is a decentralized network with weak artificial intelligence.
It maximizes productivity by breaking down tasks into computable interactions. It also incentivizes those performing the tasks. Such organizations can be viewed as companies operating under business rules without human intervention. These rules are implemented as verifiable open-source software deployed on the computers of the shareholders. Individuals can become shareholders by purchasing stock in the company or earning stock by providing services to it. The stock represents a share in the DAO’s residual profits.
A DAO is one of the most prominent forms of organization in the Web3 scene, and as the acronym suggests, it is decentralized and operates autonomously. The key characteristic of a DAO is that it establishes operational rules for the organization that cannot be intervened by humans, allowing it to operate automatically. These rules are decided by the DAO members through consensus, and once decided, they are automatically applied until changed. Therefore, the rules must be carefully determined.
While there may be various procedures for establishing an organization’s operational rules, the most effective way to reflect the overall opinion of the organization is through a democratic decision-making process. For this reason, democracy plays a crucial role within DAOs.
Democracy in DAOs
Democracy within a DAO manifests as members having sovereignty over the organization and the ability to influence the determination of operational rules. Any DAO member can propose opinions related to the organization’s operations, and if those opinions are adopted through procedures such as voting, they are incorporated into the operational rules or modify or abolish existing rules.
Thanks to recent blockchain development, the democratic procedures within DAOs have become automated through various voting methods, with the results technically guaranteed. (If you are curious about one such voting method, PQV, you can read more [here](https://d3lab-dao.gitbook.io/pqv/).)
Problems with Democracy in DAOs
Although democracy within DAOs has become technologically automated and solidified, it does not follow the same path as the development of democracy in the real world, so problems and side effects are emerging.
Majority Decision vs. Individual Private Property
1. The proposal to seize a whale wallet was passed in the Cosmos JUNO project
2. The proposal to seize a whale wallet was passed in the Solana Solend project
3. The proposal to force liquidate a USDN whale wallet was passed in the Waves project
(You can see the actual proposal details through each link.)
The common feature of these three incidents is that the majority decision in a DAO violated individual private property by seizing or force-liquidating specific wallets. While the proposers claim they had to take such forceful actions as their ecosystems were directly threatened, there are also significant opposing views concerned about setting a bad precedent.
Most opposing views likely argue that a majority imposing on individual property is unjustified. To minimize such side effects, democratic nations in the real world have constitutions.
Article 23 of the Constitution of the Republic of Korea
① The right of property of all citizens shall be guaranteed. The contents and limits shall be determined by law.
② The exercise of property rights shall conform to the public welfare.
③ Expropriation, use or restriction of private property from public necessity and protection shall be governed by law, provided that just compensation is paid.
The reason such incidents occurred in Web3’s DAOs is because the fundamental concept of a “constitution” that guarantees basic rights through operational rules has not yet been established. DAO operators in the Web3 world should now recognize the need for a constitution and establish operational rules on fundamental rights in order to minimize problems and side effects.
Direct Democracy vs. Representative Democracy
Direct Democracy
A form of democracy where all enfranchised citizens directly participate in political activities.
Representative Democracy
A form of democracy where the national power is exercised through representatives elected by the people. Also known as a representative democratic system.
Namu Wiki (Direct Democracy, Representative Democracy)
There are two main types of democracy: direct democracy and representative democracy. As the descriptions state, direct democracy involves the participation of all members, while representative democracy involves participation by only a few representatives.
Pros and Cons of Each Democracy Type
In theory, direct democracy where everyone participates may seem fairer and allow everyone’s influence to be evenly exercised. However, as the number of members in an organization or group grows, having all of them participate in decision-making becomes practically impossible due to spatial and temporal constraints. Additionally, if members lack awareness of participating in decision-making, an “apathetocracy” can arise where there are decision-making vacuums.
This is why most democratic nations adopt a representative democracy system where citizens elect legislators to parliament to exercise decision-making power on their behalf. However, this representative democracy has the downside that if the representatives do not properly represent the opinions of their sovereign constituents, a gap can arise between the representatives and those represented.
Paradigm Shift in Democracy Types Due to Blockchain Development
I believe direct democracy is the best form of democracy if there is a space where all members who are interested in decision-making can gather and a designated time when they can all convene together. (There may certainly be differing views on this.)
While blockchain technology cannot solve the issue of members’ awareness levels for decision-making, it has become capable of addressing the spatial and temporal constraints as the technology advances. (Of course, providing rewards for exercising voting rights could also help resolve apathetocracy to some extent.)
Given the prerequisite of an internet-connected environment, one can participate directly in and influence decision-making processes happening on the blockchain from anywhere and anytime. This allows members’ opinions to be directly confirmed, eliminating gaps in representation. It also enables decision-making procedures to be completed while using minimal spatial and temporal resources. In short, direct democracy, which had given way to representative democracy due to practical constraints, has regained an opportunity to resurface by leveraging blockchain technology.
Conclusion
Blockchain technology has the characteristic of enabling a process built on thorough verification where everyone enjoys the same process and results, fostering trust. Leveraging this, voting systems enabling decision-making were created, and from the decided results, DAOs capable of autonomous operation based on operational rules were formed.
In particular, DAOs have the great advantage of allowing all members to exercise their voting rights through electronic voting unrestrained by space and time, enabling the most fair decision-making process.
Of course, while DAOs possess these highly attractive merits, as explained in this article, they also have many problems and side effects. Since DAOs built on blockchain technology are still in their infancy, I believe there is much to consider and refine.
If DAOs can develop methodologies to minimize problems and side effects, such as establishing constitutional operational rules, they can transform into even more efficient and democratic decentralized autonomous organizations.
I will conclude this article pondering how the paradigm of democracy may shift thanks to the advancement of blockchain technology.
