Digital Democracy in Decentralised Autonomous Organisations

For the past decade, decentralised autonomous organisations (DAOs) have been explored and experimented with, risen and fallen many times [1]. The ability of “self-infrastructuring” [2] and user innovation on an institutional level [3] resulted in rapid prototyping around novel governance systems. The rich variety of DAOs across blockchain (sub-)ecosystems including decentralised finance (DeFi), layer 2 solutions (L2s), non-fungible token (NFT) communities, “social DAOs” and many more resulted in a vast natural experiment in coordination, based on the “confidence machine” [4] of blockchain technology.

De Filippi and Hassan [5] define a DAO as a “blockchain-based system that enables people to coordinate and govern themselves mediated by a set of self-executing rules deployed on a public blockchain, and whose governance is decentralised (i.e. independent from central control)” [p. 2]. Most definitions in academic literature characterise a DAO through rules being enshrined in smart contracts, whose code is deployed on a public blockchain. However, controversies remain around each of the dimension “decentralised”, “autonomous” and “organisation” [ibid., p. 6]. In practice, however, the term DAOtends to be used rather inflationary and is an “incredibly broad term whose meaning has evolved a lot over the years” [6]. Reports from Asia where DAOs are not always considered a technology per se but framed as an “enabling philosophy”¹ suggest that DAOs are subject to cultural variations.

The term “DAO”, it seems, can serve as a mantra for change of—“often still emergent and yet to be refined”— governance. Being aware of such perspectives on DAOs is arguably important to fully grasp the reality of DAOs (real of self-proclaimed) when they are “complex, socio-technical, algorithmic system[s]” [7, p. 75]. Diverse use cases and individual perspectives to what constitutes trust and confidence in their respective communities [8] stress the importance of complementing technical system analyses with research methods of the social sciences, such as ethnography.

While the technologies behind DAOs in principle allow to them “radically advance democratic ownership and governance”, Schneider argues that much more attention has been given to securing property rights, while the technological potential of implementing and maintaining digital democracy is “missing from the crypto-optimist culture” [9]. Even if attention is given to democratic values, Nabben and Zargham argue that “software developer ontologies are shaping governance infrastructures, with ideals of digital democracy manifesting as paradigms of plutocratic token voting, rather than inclusion” [7]. As a result, the distribution of voting rights can be highly unequal—“with more inequality in some DAOs compared to the general distribution of wealth in the world” [10].

Previous research has described extensively how blockchain-based governance in DAOs adopts decision-making mechanisms, such as token-weighted voting [11‐14] which tends to result in plutocracy, reputation-weighted voting [11, 13, 15] which can resemble a meritocracy, quadratic voting [11, 12, 16‐18] and conviction voting [11, 12]. Even though they are clearly alternatives to classical majority voting, they should not be declared as non-democratic. In modern liberal democracies, and increasingly in a digital democracy setting, they can provide for useful solutions in more complex settings. Complex preference aggregation problems appear, for example, when we have a setting of not only individuals but also organisations, or a mix thereof. However, a number of empirical studies have shown a significant concentration of voting power amongst major DAOs in DeFi and elsewhere [10, 19, 20]. On the other hand, some authors described democratic governance as the original ethos of crypto yet, while contributing valuable perspective to the discourse, they are mostly works of conceptual [12] or essayistic [9] nature. Little attention has been devoted to analysing implementations of democratic mechanisms in DAOs specifically.

Through a systematic review of the literature on DAOs, we seek to find out: Does the short history of DAOs provide novel insights for the notion of democracy? Or are DAOs merely a wishful projection, a “narrative of democracy done right?” [7]

The objective of this paper is therefore to explore implementations of digital democracy DAOs, focusing on mechanisms and challenges:

In line with the UN E-Government Survey, we define digital democracy as a process that involves citizens in the design, decision-making and implementation of policies with the help of information and communication technologies, with the aim of making this process participatory, inclusive and deliberative [21].

This paper is structured as follows. After this brief introduction to digital democracy in DAOs, we describe the methodology of a systematic literature review in Sect. 2. Section 3 summarises our findings, which we continue to discuss in Sect. 4. We conclude by summarising our findings in Sect. 5, pointing to limitations and presenting avenues for future research at the intersection of “DAO science”² and democracy research.

This systematic literature review on digital democracy in DAOs employs the PRISMA 2020 Statement developed by Page et al. [22]. The PRISMA 2020 methodology is designed to enhance the transparency, completeness and reproducibility of systematic reviews. It facilitates a rigorous and structured approach to identifying, selecting, appraising and synthesising relevant studies. By adhering to this methodology, we ensure that the selection process for literature is systematic, unbiased and comprehensive, thereby enabling the identification of the most relevant and high-quality studies for this review (see Fig. 1).

The objective of this paper is to explore the implementations of digital democracy in DAOs, with a specific focus on the mechanisms employed and the challenges encountered. The research questions mentioned above aim to provide a comprehensive overview of the key aspects of digital democracy as reflected in the existing literature, promoting an understanding of both the theoretical frameworks and practical implementations within the context of DAOs. The research questions were formulated to capture a broad understanding of the current academic discourse, laying the groundwork for further explorations around digital democracy within DAOs.

Before screening, the database searches yielded a total of 2137 articles before removing duplicates, distributed as follows: Elsevier (1944), Scopus (82), Web of Science (59), EBSCOhost (18) and Google Scholar (34).

As part of the screening process, duplicate records were identified and removed using Mendeley and Zotero, both reference management tools. This step helped eliminate redundant entries that appeared across multiple databases. After the removal of duplicates, the intermediate count of articles was reduced to 599.

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Next, titles and abstracts of the remaining articles were screened to assess their relevance to the research objectives. To ensure the selection of high-quality, relevant studies, this screening was conducted based on the following, pre-defined inclusion and exclusion criteria. Studies were included if they were relevant to DAOs and Digital Democracy, high-quality peer-reviewed articles or credible grey literature (e.g. technical reports, preprints), provided multidisciplinary perspectives (governance, technology, social sciences), and were written in English. Studies were excluded if they were non-DAO-specific, outdated, redundant, opinion-based (e.g. news articles, editorials), lacked methodological rigour or were written in languages other than English. This screening process ensured that only the most relevant and academically sound articles were selected for full-text review, aligning with the objectives of this systematic literature review on digital democracy in DAOs.

While DAOs often resemble plutocracy, meritocracy or timocracy [11, 23], we find that a variety of governance mechanisms in DAOs enable, contribute to or result in digital democracy. In Table 1, we give an overview on mechanisms and challenges in response to the research questions. Before discussing them in Section 4 based on a broader range of papers, we first describe these mechanisms (in italic) and associated challenges (in bold) below:

On-chain: On-chain (or on-chain) stands in contrast to off-chain [31‐33] and is used as a qualifier, implying inherited transparency, immutability, censorship-resistance and other characteristic mechanisms from a public, permissionless blockchain, such as Bitcoin or Ethereum. In a democracy context, on-chain voting systems provide a public record of votes on a blockchain [12]. However, in pseudonymous settings, votes can be subject to economic manipulation, such as vote buying. Currently, the vast majority of voting activity does not take place in anonymous settings³ as provided through “shielded voting” on Snapshot or on privacy-focused L2s (such as Scroll, zkSync or StarkNet) using zero-knowledge proofs. Other challenges include Sybil attacks (see Proof of Personhood) and significant transaction fees on some blockchains [32], leading to voter fatigue.

Smart contracts: Smart contracts are programmable code, deployed on a (quasi-)Turing-complete blockchain,⁴ ensuring decisions are implemented without human intervention. They are autonomous entities with a publicly verifiable if-this-then-that-logic of self-execution [12, 34‐36] and can be designed to process proposal submissions, voting processes and resource allocations. While some DAOs partially govern themselves off-chain, on-chain execution through governance smart contracts, such as OpenZeppelin’s Governor, is considered the gold standard for DAO governance. However, when “code is law” [49], their feature of the “rule of code” [50] results in rigidity and may become problematic in certain democratic contexts, unless embedded in metagovernance (or the absence thereof) ratified by the demos [35, 37]. A smart contract’s executive abilities are constrained by its pre-defined code—and more generally by the capabilities of its blockchain as well as the (reverse) oracle problem⁵—including potential bugs which can lead to exploits and hacks [37]. Code audits of smart contracts are necessary but cannot ever be sufficient to avoid exploits [1], partially due to smart contracts being incomplete [51].

Branches of governance: Most DAOs are not embedded in the three classical functions of executive, legislative and judicative. This can be explained partially through the opposing design goal of a rule of code, and due to immature governance frameworks and overall complexity [24], leading to some centralisation of power. However, there are similarities. Proposal-based DAO governance frameworks with deliberation mechanisms can resemble a legislative function. As described above, smart contracts and on-chain execution of elections can eliminate principal-agent problems between the legislative and the executive. However, DAOs are not free of principal-agent problems (see Delegation). As for judicative functions, only a few DAOs make use of dispute resolution mechanisms or decentralised arbitration services [15, 29], such as Kleros or Aragon Court. Moreover, checks and balances through political or legal constitutionalism are rare (e.g. Optimism’s Citizens’ House keeping its Token House in check) and generally seen through the lens of economic constitutionalism, specifically cryptoeconomic and game-theoretical incentive design. In democratic contexts, these characteristics may result in economic manipulation and may be considered coordination failures.

Proof of Personhood [52]: While most nation state democracies have long-standing routines to organise one-person, one-vote elections, blockchains don’t. On the Internet, nobody knows you’re a dog. Likewise, on the blockchain, nobody knows you’re a bot. In a blockchain context, agents are usually only identifiable to the level of an account address. As it is generally unclear whether that agent is human or not, blockchains are prone to Sybil attacks. These occur when, for instance, a single actor controls a large number of accounts, indistinguishable from other accounts of honest actors [53]. The related concept of vote buying, or “bribing”, is common in some DAOs and can occur at scale on “marketplaces for votes” [12]. Dotan et al. show that this goes as far as governance participants holding “governance tokens for the duration of a single proposal which they created and voted for with a majority of the voting power” [54]. Flash loans can amplify this issue further [11]. While such attacks can undermine the legitimacy of a system [7], Sybil attacks are technically not an issue in plutocratic, token-based voting where governance tokens are transferable by design and vote buying is a feature, not a bug. This may be a reason why so many DAOs fall back to this mechanism, as it “just works”. However, Ohlhaver et al. argue that vote buying can always move from on-chain to off-chain [52], which can affect DAOs with democratic governance mechanisms, too. Sybil-resistant governance mechanisms are an essential prerequisite for one-person, one-vote governance on the blockchain. They are closely intertwined with blockchain-based universal basic income (UBI) projects. So-called Proof of Personhood mechanisms [55], a kind of decentralised identity system (DID), attempt to solve this issue in a blockchain context [17, 26, 29], known as Proof of Humanity, BrightID, Idena, Circles or more recently, World. World, formerly known as Worldcoin, is using biometric data and zero-knowledge proofs [38, 39]. They aim at uniquely identifying a human and may allocate them “Soulbound” tokens [37, 56], but struggle to distinguish honest humans from bot-like humans and are subject to economic manipulation, too [52]. Ethical concerns also arise from the risk of centralisation inherent in some proof-of-personhood systems, which can conflict with the core DAO principle of decentralisation. Furthermore, maintaining robust fraud prevention measures without compromising user privacy adds another layer of difficulty. Ensuring the authenticity of identities while safeguarding personal data is a delicate balance [39]. As such implementations remain controversial and each individual solution may scale towards a “global oligopoly”, Olhaver et al. call for a “plurality of identity games” [52].

Delegation and liquid democracy: While delegating votes in DAOs is a common practice, that is mostly in the context of token-weighted voting. Best practices of delegation in democratic DAOs are scarce but technically feasible. Liquid democracy, implemented through nested smart contracts, could result in more dynamic and equitable governance mechanisms [15] and might blur the boundaries between engaged voters and professional politicians [40]. Delegation was widely regarded as a way to tackle voter fatigue, which many early DAOs struggled with. Actively taking part in DAO governance comes with high opportunity costs [30] and participation rates are even lower when transaction fees are higher [54], especially with many early DAOs running on Ethereum mainnet. As DAOs such as ENS and Gitcoin required users to delegate their governance tokens before being able to claim “airdropped”, i.e. allocated tokens, delegation became increasingly common practice across DAOs. However, this also fueled a centralisation of power amongst just a few delegates [23, 35, 42‐44, 54]. These patterns can be structurally more similar to shareholder meetings than to democracies [10] and subject to voter coalitions [57]. Moreover, professional and institutional participants tend to dilute the influence by ordinary “retail” users [19]. Fernandez et al. show that, even if the initial distribution of a project’s governance tokens is “fair”, voting power will become concentrated over time as long as the corresponding governance token is tradable [20], confirming Barbereau’s et al. [23] findings. In a similar vein, Goldberg et al. [58] argue that “a blockchain-based governance system and ownership layer constitute a necessary but not a sufficient condition for neutral metaverse infrastructure”.

Pluralism: As DAOs usually operate globally, across cultures, jurisdictions and political affiliations, some explicitly stress the importance of pluralistic governance or polycentricity. Yet, they often struggle with coordination failures and particularly centralisation of power (see above), when their governance mechanisms do not appropriately represent the plurality of their members. DAOs appear to be “following the ’iron law of oligarchy’ – larger DAOs also correlate with greater inequality” [43]. Moreover, as noted by Han and Lee [11], it is common practice in at least some DAOs that individuals with a high degree of voting power, such as founding team members of major investors, refrain from voting. This can imply that the concentration of power is even greater than any analyses of cast votes suggest. Furthermore, the use of special admin keys stretches self-proclaimed definitions of decentralisation [59]. Such “decentralisation theatre” or “fake decentralisation” not only contributes negatively to the long-term viability of such DAOs compared to democratically governed DAOs [60], but also poses the risk of the DAO being considered centralised by regulators and being regulated as such [61]. Some DAOs apply principles of polycentricity, with elements of subsidiarity (see below), as multiple autonomous units operate at different scales while remaining interconnected. However, polycentric governance faces challenges such as coordination difficulties and conflicting objectives amongst different units. Addressing these issues requires effective communication and coordination mechanisms to maintain alignment [45].

Subsidiarity: In some DAOs, we observe geographical/time zone-based clusters, informal topic-specific working groups [28] and other kinds of bottom-up governance. Related on-chain governance mechanisms include pods (Metropolis), hats (Hats Protocol), multisigs (Safe), sub-spaces (Snapshot with SafeSnap/oSnap) or even the emerging field of AI agents in DAOs [28]. Such implementations allow for nested, tree-like dependencies, which can be part of an overarching democratic governance process. All of the former contribute to preventing coordination failures. However, best practices have yet to emerge. Subsidiarity in DAOs is related to polycentricity, as well as Ostrom’s eighth principle of governing the commons of nested enterprises [62], and is still underexplored in literature.

Dynamic quorum: Many DAOs apply stricter quorum requirements for higher-impact proposals, while allowing lower (or no) quorums for lower-impact proposals [11]. Similarly, Alon et al. suggest that strategically important proposals requiring more deliberation should be subject to a higher quorum, while a lower quorum with more operational proposals accounts for voter fatigue and allows the DAO to operate more efficiently [13].

Temporality: Similar to dynamic quorums, some DAOs allow for longer voting periods with high-impact proposals. Even though Alon et al. do not observe adjustable voting durations in their sample of DAOs, they proceed to recommend voting durations to be dynamic—longer for strategic and shorter for operational proposals [13]. Related mechanisms include time-locks, grace periods and cooldowns. These mechanisms are used, for example, to avoid governance tokens being transferred during an ongoing vote and counted twice; to allow time for review before a passed proposal is executed; or to allow time to rage-quit before a passed proposal is executed. Non-traditional voting mechanisms such as conviction voting [12] or Curve Finance’s vote-escrow system [11] grant the more voting power, the longer a member locks their governance tokens. This is similar to tenure-based voting mechanisms. A variety of time-related coordination failures can occur. Examples include the necessity to fix a critical exploit or hack immediately, but immutable rules only allow to do so through a week-long governance process [32]. Some DAOs implemented emergency procedures for that reason or fall back on other mechanisms which retain control and, in turn, become centralisation vectors [59]. Another challenge, though often a legitimate voting procedure, is the phenomenon of flipping a vote shortly before the voting period ends. Some DAO platforms, such as Aragon and DAOstack [63], designed for that through automatically extending the voting period if a vote is cast at the last minute and if it changes the result of the vote, but most DAO toolings do not.

Incentives: Besides staking rewards that are allocated unrelated from voting activity, few DAOs directly or indirectly remunerate voters to incentivise participation. For instance, Safe has a loyalty programme for its governance token holders, Tally and Arbitrum reward delegates monthly with up to 5.000 ARB (approx. 2.000 CHF as of Feb ’25), and—an example of indirect incentive mechanisms—past airdrops by Optimism (RetroPGF) and BanklessDAO have retroactively rewarded governance participants. Jurors in Klero’s decentralised arbitration mechanisms are financially rewarded, too, or financially penalised if they appear to act maliciously [29]. However, studies evaluating financial rewards for voting are inconclusive whether they should be considered economic manipulation, or a legitimate means to tackle voter fatigue. While Rikken et al. suggest that the absence of incentives is beneficial for long-term viability [60], others describe financial incentives for delegates as a “good direction for future work” [54]. An underexplored theme is the dichotomy between governance tokens and security tokens. While the former cannot pay out dividends and have been tolerated in many jurisdictions, the latter are heavily regulated globally and only very few cryptocurrencies are officially marketed as a security. This led to a Cambrian explosion of governance tokens and creative ways of more or less indirectly financially rewarding its holders, e.g. through the value of the governance token itself appreciating in price. Securities, obfuscated as governance tokens, are one example of how DAO governance design is influenced by conflicting interests which do not primarily optimise for good governance. As previously mentioned, other examples include “decentralisation theatre” due to centralisation of voting power and preferring unincorporated DAOs over legal wrappers as a purported regulatory shield [37, 46, 47, 61].

Constitutions: Some DAOs make use of constitutions [64, 65], but unlike nation states, some DAOs refer to them as community covenant, charter, manifesto, code of conduct, voting principles, process document or lore [66]. While overall deliberation is less pronounced in most DAOs than in most democracies, DAO constitutions can limit coordination failures through better alignment when members previously agreed more or less explicitly on values and a vision [7, 65, 66]. Enforceability of constitutions remains a challenge, as DAO constitutions are often written in prose and subject to interpretation, which is in contrast to the “rule of code” of smart contracts. Unless they are enshrined in on-chain governance and receive objectively true information through a trustless oracle, the formal role of DAO constitutions is merely a signalling one, yet their informal role of community alignment remains an essential one [7, 48].

Exiting: A low-cost option of exit is another defining characteristic of polycentricity in DAOs [4]. While exiting is a rather uncommon option in traditional democracies of nation states and often rather inconvenient, it is common in DAOs. “Ragequitting” was coined by MolochDAO which makes use of plutocratic, token-weighted voting. It describes the process of withdrawing from MolochDAO (or any deployment based on its open-source code) by giving up a member’s seat and receiving a proportional payout of the funds the member had originally contributed. While the concept of ragequitting does not apply to democratically governed DAOs, the concept of forking does. A (hard) fork describes a DAO (or a blockchain) splitting into two or more parts and adopting non-backwards compatible design choices. In some ways, forking is a feature to avoid capture and advance evolution. In other ways, it is the ultima ratio of a coordination failure when cooperation has come to an end. Famously, an attack in 2016 on one of the first DAOs, “The DAO”, resulted in Ethereum (ETH) pursuing a hard fork from Ethereum Classic (ETC). In the case of Proof of Humanity DAO, the lack of a preamble in a constitution (and the lack of a debate thereof at an early stage of the project) led to not having an aligned vision. Ultimately, this resulted in a fork of the project, as the mere ability to fork fueled polarisation and an increasingly escalating discourse [17].

This study investigated the mechanisms and challenges associated with digital democracy in DAOs. In line with [11, 23], we find there is a wide range of governance mechanisms used in DAOs, such as token-weighted voting with governance tokens that are transferable and usually traded on decentralised exchanges (DEXs). Plutocratic governance mechanisms continue to dominate the DAO space, as several studies showed before [10, 20, 43]. While Barbereau et al. [23] describe DeFi’s governance as timocratic and call for a “philosophical intervention” to “dispel spurious, platitudinous notions of ’democracy”’ [p. 12], Nadler and Schär show that most studies severely overestimate the actual concentration of voting power [67]. Nabben et al. [7] explain the lack of widely used democratic governance models by both meritocracy and plutocracy holding “pre-eminent value and respect in the [blockchain] space” [p. 84]. Allen and Nabben [12] remind of blockchain’s pseudonymous, token-based participation system and the lack of permissioned structures—common in democratic governance systems of nation states—and conclude that blockchain is not naturally conform to democratic processes.

However, we identified several governance mechanisms that are in fact democratic or complement governance designs of democracy (see Table 1). In line with Ballandies et al. [24] who describe the two phases of deliberation and voting, we observe that the vast majority of mechanisms relate to the phase of voting, while few best practices and more challenges are associated with the preceding phase of deliberation. We identify challenges, namely Sybil attacks, economic manipulation, rule of code, economic manipulation, exploits and hacks, centralisation of power and coordination failures. That is in line with Merk, who suggests that governance minimisation and token voting were a result of the motto “don’t trust, verify”, common in Bitcoin and other blockchain communities, which “may have inadvertently led to some of the issues currently experienced by DAOs, such as a lack of participation and voter apathy” [8].

Yet, the practical feasibility and success in fostering truly democratic governance in DAOs remain highly uncertain. Shapiro et al. see “immense” [26] challenges for democratic DAOs, particularly given the challenges around Sybil-resistant mechanism design on blockchains where subjects are identifiable through pseodonymous account addresses and public keys [11‐13, 17, 29] not as in nation state democracies with identity cards and voter registries. Attempts to uniquely verify humans on blockchains through “Proof of Personhood” remain a challenge and subject to controversies [52]. For instance, World has surpassed 11 million registered users across 160 countries, while users and policymakers globally look sceptically at World’s iris-scanning technology. Key elements of democratic decision-making remain a challenge in a blockchain context, such as Sybil resistance, private voting or appropriate space for deliberation.

Moreover, blockchain-based smart contracts and DAOs are institutional technologies [68] which raise conceptual and normative questions around the creation of money and a democratisation thereof. Vatanparast [25] calls for “monetary pluralism of digital currencies [...] that are not driven by profit and extractive motives but rather driven by democratic aims to serve diverse publics’ interests” [p. 195], echoed by [69]. While practitioners contemplate how to have “more good memecoins than bad ones” [70], the launch of the current US president’s own memecoin TRUMP left observers perplexed by the absurdity, as Trump’s own cryptocurrency could “serve as a vehicle for bribery” [71] and erode democracy itself.

Traditionally, research on institutional design, democracy research and other governance-related topics has mostly been constrained to either theoretical modelling or quasi-experiments. DAOs come with a historically unique potential, as they offer a vast solution space (a blockchain as a “world computer”), operate globally across jurisdictions and remain relatively unaffected by geopolitical constraints (censorship-resistant “code is law”), are inherently inclusive (permissionless user innovation) and are digital-first. These properties enable anyone with Internet access to experiment with governance mechanisms, coordinate with others on a level playing field and reconstruct democratic systems from the ground up.

This is in line with Allen and Nabben [12] who go even further, stating that “the role of blockchain may not be to transform existing democratic governance institutions (at least in the short term), but in enabling novel forms of collective action that exist alongside traditional governance systems” [p. 12]. Exemplary design spaces include polycentric governance for global communities in a multipolar world of geopolitical instability, as well as liquid democracy for complex, domain-specific preference aggregation for more direct democracy even in democracies larger than, for instance, Switzerland. A common theme in DAO communities is the notion of metagovernance, when two DAOs exchange governance tokens with one another. As complex systems of polycentricity and subsidiarity emerge over time, metagovernance means “trying to comprehend a condition of bewildering integration” [p. 175], with DAOs as a form of “governable spaces” [72].

Through a systematic literature review we show that DAOs enable digital democracy by utilising a wide range of decision-making processes and governance mechanisms. While DAOs can and initially were thought to be designed following democratic ideals [9], popular DAOs and their underlying smart contract architecture are currently heavily influenced by plutocratic or meritocratic ideals [12]. We discuss that bribery, vote buying and other forms of economic manipulation remain a challenge in DAOs like in all forms of democracy. However, on-chain governance of DAOs creates an immutable record, enabling after-the-fact accountability mechanisms of voter fraud detection and thus disincentivising corruption beforehand.

Moreover, we suggest that the design space of DAOs is vast and offers tremendous potential for digital democracy. When DAOs are based on public, permissionless blockchains with strong characteristics of decentralisation, they inherit features of transparency, immutability and censorship-resistance. Beyond the technical dimension, subcultures have emerged where the term “DAO” stands for societal progress and techno-utopian futures. These use the digital realm of DAOs to experiment with bottom-up governance and to build new institutions, irrespective of geopolitical tensions or monetary policy. This goes as far as DarkFi, a “democratic economic experiment” and “operating system for society” [73], using zero-knowledge proofs to confront totalitarianism to defend a cypherpunk vision of privacy as a digital human right. However, similar “dark DAOs” can also be used for vote buying [1] and privacy-preserving architectures can both strengthen and destabilise democracy, e.g. through terrorism financing. This dual-use dilemma stresses the importance of further research exploring these emerging phenomena in democratic contexts as well as ethical debates amongst practitioners and the general public.

Our contribution to theory is twofold, contributing to research on blockchain and DAOs as well as to democracy research. Firstly, we discuss the prevalent issues in research on DAOs, including voter apathy, economic manipulation and concentration of power. We describe novel perspectives on DAOs as a means for digital democracy, explaining the significance of decision-making mechanisms used in DAOs in a democratic context. Secondly, we contribute to research on democracy by discussing DAOs as a means of user innovation [74] for democracy, enabling grassroots communities to explore new democratic governance mechanisms and allowing researchers to go beyond theoretical and simulation-based approaches and conduct empirical studies on governance mechanisms in practice.

This study faces several limitations that may affect its validity. The reliance on academic literature and grey literature introduces selection bias, potentially overlooking industry insights or unpublished studies. Survivorship bias is also a concern, as the academic literature may focus on active DAOs and may exclude failed projects that could provide valuable lessons. Additionally, the interpretation of governance mechanisms and challenges is subjective, despite efforts to maintain objectivity. The rapidly evolving nature of DAOs presents a temporal limitation, as governance structures and regulations continue to shift. Generalisability is another challenge, as DAO governance differs significantly from traditional democratic institutions. Furthermore, the predominance of conceptual studies and small-scale empirical research limits broader validation. While these challenges exist, they highlight the need for further empirical studies and interdisciplinary research to deepen the understanding of digital democracy in DAOs.

More research is needed to understand mechanisms that enhance the democratic nature of DAOs, as well as their use in democratic contexts. This requires further empirical analysis and interdisciplinary insights from political science, cryptoeconomics, organisational theory and beyond [75]. In both theory and practice, Sybil-resistant governance mechanisms in DAOs are a key area of research and development. With increasing data availability of DAO governance in practice, more empirical research should critically reflect whether DAOs are “technical solutionism” [41] and how they create value for users, citizens and other stakeholders. Future research should also map out how ideologies manifest themselves in blockchains and DAOs. While some argue that certain DAOs are designed for “self-interested neoliberal subjects” [76] and libertarian ideologies seem to be prominent in cryptocurrency communities, such as Bitcoin, more general-purpose blockchains with smart contracts which enable applications beyond just cryptocurrencies may look very different and more diverse due to principles of plurality and subsidiarity [69, 77].

The socio-technical nature of DAOs [7] asks for interdiscplinary approaches. After all, DAOs are toolkits for institutional innovation [3], they are playgrounds for governance games [7], they are democratising democracy innovation [74].