Some crypto projects have established, within them, a stage of the roadmap which consists of the DAO.
DAO is the acronym that indicates a Decentralized Autonomous Organization; this objective is achieved through the use of smart contracts and community resilience.
Governance Tokens
Normally utility tokens can also be attributed a governance feature, i.e. the possibility of voting on some decisions to be made within the community, with the aim of improving the project.
We can call this type of voting on-chain Governance, and this increases the decentralization of a project.
limits and possible concerns of on-chain voting
Governance is the prelude to the maximum decentralization of a project built on the blockchain, but it can be affected by some critical issues.
First of all, possible community apathy: the voting results could be distorted and with untruthful votes.
A certain inertia of the community could also be compounded by a form of plutocracy: in this case the votes would be distorted due to the greater incisiveness of the votes depending on the tokens owned.
Another concern could derive from collusion between community members to control the votes and therefore distort what could be the natural result of the vote.
These limitations of on-chain governance can be resolved in off-chain mode, but in this case we would end up in a centralized system.
The possible solution would be a hybrid system that exploits only the positive sides of each system, and manages to mitigate the weaknesses of both.
Obviously the challenge in hybrid systems becomes balancing the transparency and inclusiveness parameters of on-chain governance and the deliberative aspects of off-chain governance.
Sensitivity is devolved to the developers of the various projects in order to refine governance in such a way as to make their "creatures" long-lived.
The decentralized decision-making process is the piece that completely completes the decentralization that began with the use of the blockchain; however, this requires clear and transparent communication.
Through governance, a project-user relationship is created, which unleashes a synergy aimed at making the project successful.
In practice, the user feels an integral part of the project and thanks to this incentive, any project is destined for success, as only those who are truly motivated and who see a future in the project itself will participate.