Centralization has always played a crucial role in human civilizational development. Acting as a hub of influence, decision making and power, central apparatuses of institutional, authoritarian, social and other government have shaped and molded not only the rules that govern various processes, but their execution as well.
When it comes to the application of centralization and the benefits it presents, it is important to revert to human nature as the guiding factor in the selection of centralization as the model of government. It is in human nature to follow a herd-mentality principle that abides by the decisions made either by a centralized, albeit even elected, authority, or a self-imposed figure with authoritarian rule inspiring either respect and confidence, or fear. Such a model ensures the development, application and control of rules for society to abide by. In addition, the model provides a convenient single source of action, decision-making, and responsibility in both cases of success or failure of courses of action taken.
The centralized model of governance can be found in every aspect of human society, from families with patriarchal rule, to governments with elected officials, to corporations with boards of directors. The benefits of a centralized model of governance include a consolidated element of trust in the correctness of decision taking and its accumulation in a single entity of control, thus negating the dissolution of responsibility among numerous members of society. In addition, centralization frees up enormous amounts of time for members of society, once again delegating all decision-making tasks to a select group of individuals.
The centralized model has proven its effectiveness over time, evolving from the authoritarian rule of kings and feudal lords to democratic systems that essentially elect their own centralized authorities.
Though effective and established by time, the centralized model has numerous drawbacks and is prone to abuse. The most obvious disadvantage of centralization is abuse of power by the elected individuals. Corruption stems from the trust and power vested in them, leaving immense room for abuse of delegated responsibilities and their illegal monetization through bribery and other means. Another major disadvantage of centralization is the lack of control over the effectiveness and efficiency of the processes taking place inside the decision-making mechanisms, leading to another major disadvantage – the lack of transparency. Combined, these disadvantages erode trust in the centralized model of governance and the search for viable alternatives.
An alternative was eventually developed with the advent of blockchain technologies and the spread of decentralized infrastructures. The given technological advancements have led to the development of Decentralized Autonomous Organizations – DAOs – fully automated, decentralized, transparent, and community-operated systems catering to the needs of both the individuals involved and the services they were designed to maintain.
All DAO systems operate on the basis of distributed governance, which is shared among the participating members with no centralized authority or hub of decision-making delegation. The use of voting processes, which are made available to holders of Governance Tokens, allows for fully decentralized decision-making on all major actions to be taken regarding the DAO, its technical updates, developments, features, commission, and other aspects.
The advantages of such a decentralized approach are numerous and include complete transparency of all processes taking place inside the DAO thanks to the use of the blockchain basis with its fully immutable records and auditable ledgers. Other advantages include the trustless basis of operation, which does not require the members of the DAO to know or trust each other. DAOs are also highly scalable and offer numerous monetization opportunities for their participants on a corruption-free and transparent basis.
The applications for DAOs are numerous and can be found not only on the decentralized market, but also in real-life applications requiring trustless bases of interaction among participants and fully transparent process monitoring.