Built to last, not to scale: The long run of decentralised autonomous organisations

Abstract

The FTX scandal and crypto boom-and-bust cycles have called into question the sustainability of decentralised systems like DAOs. This article argues that inherent constraints will limit DAOs’ mainstream adoption. We contend that the primacy of code in DAOs—represented by the code is law maxim—is overstated given semantic gaps in contracts. Crisis management is another serious bottleneck due to challenges of coordinating decisions without central authorities. Informal hierarchies may also emerge—in line with organisational theoretic concept of power clawing back, which would undermine decentralization objectives. Our analysis considers anonymous reputation verification, flexibility, and transparency to have more staying power and identifies scalability as the primary obstacle—stemming from high transaction costs and throughput constraints.