Are Tokens Sufficient to Resolve Collective Action Problems in Decentralized Autonomous Organizations? A Model-Based Examination

Abstract

Opportunism caused by conflicts of interest significantly impedes collaboration within decentralized autonomous organizations (DAOs). To address this issue, we develop a model to illustrate whether the unique aspect of tokens—the interest alignment effect—can mitigate collective action problems in DAOs. This model integrates the “rational cheater” framework with the interest alignment effects introduced by token rewards. It also examines the interaction between token rewards and members’ social motivation, particularly focusing on the dynamics of crowding-out effects. Our findings highlight that the constraints on opportunism in DAOs primarily include the interest alignment costs associated with token holdings and the psychological costs tied to members’ social motivation. These costs complement each other in reducing opportunism in DAOs. Additionally, the effect of increasing token rewards on opportunism depends on the balance between the current token value and how opportunistic actions potentially affect the organization’s value.