Eight million dollars. It’s a number that shouts tripling success in the startup world. Now Tally Protocol is moving a step further with their governance. To enable DAOs to more efficiently scale their technology, they’re improving their on-chain governance infrastructure. Have we gotten so excited about new capital that we’re uncritical about it? As responsible stakeholders in this new ecosystem, shouldn’t we be demanding more focused questions? Come along with us as we dig into these unintended consequences of quick, unsustainable growth and possible centralization.

Centralized Governance Infrastructure A Risk?

Tally’s CEO imagines DAOs eventually challenging nation-states. Ambitious, to say the least. Whatever the reason, DAOs will need more efficient on-chain governance in order to scale and succeed. That’s precisely the kind of information Tally™ seeks to deliver. With clients like Arbitrum, Uniswap DAO and ZKsync, Tally is obviously no slouch themselves. What do we do when so much power to govern concentrates in the hands of one entity?

Consider this: we're constantly warned about the dangers of centralized power in traditional finance and government. We champion decentralization as the antidote. Are we in the DAO space fighting with our own shadows, sleepwalking into the same type of trap? Instead, it feels like we’re just changing the gauntlet from one group of gatekeepers to another.

These aren't just hypothetical scenarios. History is full of stories where well-meaning governments, nonprofits, or organizations of all types end up becoming vectors of failure or corruption. The larger Tally grows, the more formidable the target on its back is now. The more costly the repercussions, the greater motivation for nefarious actors to attempt to breach the system.

  • What if Tally experiences a catastrophic technical failure?
  • What if it becomes subject to regulatory capture, forcing it to censor or manipulate governance processes?
  • What if a malicious actor gains control of Tally, effectively holding the DAO ecosystem hostage?

With Tally’s help, Let’s Vote wants to change that and reduce voter apathy. Noble causes. Simplifying and streamlining governance isn’t necessarily the same thing as true decentralization and democratization. In the process, it is very easy for efficiency to trump inclusivity and considered reflection.

Efficiency Versus True Decentralization?

Think of it like this: a perfectly efficient government might be one run by a benevolent AI, making decisions based on pure data. Would that be a democratic government? Would it actually be a reflection of the will of the people?

A DAO dependent on Tally’s efficient functionalities runs the danger of sidelining smaller voices. This approach can chill minority viewpoints and in the long run, defeat the very decentralization this program pretends to support.

Are we really trying to scale governance technology because we want to empower communities? Or is it really aimed at pursuing a more sustainable, and arguably more governable, environment? On this anniversary, let’s urge DOT to support open-source, interoperable solutions. These will enable composable DAOs to take charge of their governance flows as opposed to being at the mercy of one proprietary platform.

As DAOs continue to flourish, regulatory scrutiny is only natural. While Tally’s technology would be useful to DAOs trying to navigate these challenges, the company’s new tech introduces some ominous questions.

Regulatory Scrutiny: A Double-Edged Sword

How might Tally’s infrastructure be used to proactively enforce compliance, while still maintaining the autonomy and independence of DAOs as a core feature? Absolutely. The promise for wrongful use is equally as valid.

Further, picture a situation in which Tally finds itself scrambling as regulators push for KYC/AML checks for every person who interacts with the DAO. These steps can feel overwhelming, but they’re absolutely essential to becoming Title VI compliant. They can be very discouraging to participate, in particular for those who value their privacy and anonymity.

We need to create a regulatory paradigm for DAOs that upholds the rights of people involved. Simultaneously, it should foster tech innovation and prevent new centralized choke points from emerging. Just as important, Tally is a critical part of the industry writ large. It needs to push for smart regulation and genuinely fight against attempts to use its technology in dangerous ways.

No doubt Tally’s funding is a leading indication of the maturing of the DAO ecosystem. We can’t give progress a pass on celebration alone without considering all the ways it might go wrong. We need to require transparency, accountability, and a greater commitment to decentralization from everyone involved, including Tally.

It is undeniable that Tally's funding represents a milestone for the DAO ecosystem. However, we cannot afford to blindly celebrate progress without critically examining its potential downsides. We must demand transparency, accountability, and a commitment to decentralization from all stakeholders, including Tally.

The future of DAOs depends on it.