A Technical Perspective on Decentralization
Craig Calcaterra, Wulf A. Kaal · 2021
This chapter presents a technical perspective on decentralized structures. The pur- pose of the chapter is to provide guideposts and an overview of the technical possibil- ities and limitations for the creation of decentralized autonomous organizations (DAOs). A core precept for the creation of DAOs is the recognition that any set process or set of rules that can ever be designed will ultimately fail to secure a network for all time. This insight is particularly relevant for a decentralized network that should be open for anyone on the globe and provide anonymity. How can a DAO be governed with a set of rules that always need to be amended in the future as the environment changes, to keep the network running healthily? It is necessary to design the systems with an evolutionary mindset and a dynamic governance process. The chapter shows how a dynamic environment for the governance of DAOs can be created and how DAOs may thrive with such a design. The book can be accessed here: https://www.amazon.com/Decentralization-Technologies-Organizational-Societal-Struc- ture/dp/3110673924/ and here: https://www.degruyter.com/view/title/569051 Chapter 6. Technical perspective Before we explain how to build the major institutions that are lacking in the de- centralized economy, we need the technical perspective to explain why these partic- ular solutions are even necessary. Setting up the rewards and punishments in a DAO to ensure productive collaboration is not easy without a central authority to umpire disagreements and maintain harmony. Impossibility results illustrate the right per- spective for developers to understand the logical limits of democratic collaboration. Game theory is necessary to properly justify incentive design. Electronic copy available at: https://ssrn.com/abstract=3782203
Cite: Craig Calcaterra, Wulf A. Kaal, A Technical Perspective on Decentralization (2021). SSRN: https://ssrn.com/abstract=3782203. https://doi.org/10.2139/ssrn.3782203
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