Incentive Alignment
In the case of DAOs, the value is generated in terms of ‘tokens’ which are generally used to represent the voting power of each member as well as rewards and other compensation. This is a way to incentivize token holders to work in the best interests of the DAO and not against it. These incentives are critical for DAO governance because without them, DAO members will not be motivated “to put their time, money, and energy into networks, vote on proposals to improve them, or care at all about their continued growth and success."
These can be in the nature of growth incentives (i.e., continuous distribution of DAO tokens to users who consistently undertake work for the protocol), yield farming (i.e., rewarding liquidity providers with tokens that represent an ownership of the protocol itself) and airdrops (i.e., special token distribution to early adopters of a DAO). Admittedly, this does not resolve all the challenges related to incentive misalignment, but the idea is to ensure that the interests of the participating members are aligned with those of the DAO itself.
Last modified 9mo ago