Decentralised autonomous organisations pave the way for community governance for any business. We are seeing new creative use cases for DAOs such as GameFi Comics, which is the cornerstone of trading card game development and endorsed by key players such as Ethereum. Co-founder Vitalik Buterin explained that shared decision-making is valuable to avoid a collision. But at the other end of the spectrum, DAOs are liquidating or running out of Ether.
ETH is $1,590 to pay lenders, and there is also a drop-in optimism. The number of critics grows with concern about the many attack vectors affecting projects. To end this narrative, the DAO must explore new structures to remain incorruptible.
To that end, multi-sig wallets are a necessary step for users and contributors to see DAOs as a secure alternative to centralized enterprise structures. They are an essential part of driving this egalitarian approach to decision-making.
Not 100% safe, but close
Concerns about securing DAO funds have cast the most excellent shadow over their egalitarian structure. Any resource investment in the DAO is kept in its treasury, and proper governance structure is non-negotiable. The first thing that must be made clear is that all Web3 and DAO projects that want to ensure their protocol’s continued operation and future growth must maintain funding. Better spending and investment decisions should start with treasury management, especially when Defi platforms like bZx are under attack with all members involved. The DAO government team takes responsibility for disregarding the protocol. There is no such thing as a 100% perfectly secure crypto wallet, but multi-signature wallets protect against external hacking threats, as hackers would need access to more than one key to do so.
Not your keys, not your crypto
Large amounts of money could tempt anyone, so DAOs looking to reduce the risk of unauthorized transactions or carpet hauls benefit from having multiple signers approving each transaction. Like any traditional business, crypto businesses are also vulnerable to critical personal risk. The benefits of multi-signature wallets are two-fold: they protect DAOs from malicious actors and hacking. Perhaps the most notorious example of this type of risk is still QuadrigaCX, where the death of Gerald Cotten, its crypto founder, who was the sole holder of the exchange wallet’s crypto keys, left funds worth $198,435,000 left in an unrecoverable state.
Multi-signature wallets add that extra layer of security and transparency to transactions. One of the biggest misconceptions is that every transaction must be signed unanimously. But for critical marketing to be successful, a threshold or number of signers must be reached: say three out of five owners, to guarantee a majority decision and prevent one person from being in complete control. DAO teams can also set spending limits for wallet owners, so small purchases don’t have to be signed by all wallet owners. This speeds up operation.
Don’t give your keys to strangers
For people using a wallet for their own money, there is no need for a second person to sign off on their transactions; But for those who hold the funds of an organization in which others have invested money or when people depend on that money for their livelihoods, such as salaries, it is essential. It would be not only reckless but also immoral to uphold fate. From an organization to a single point of failure. Some people believe that starting a DAO or using a multi-signature wallet is like the two are on opposite ends of a spectrum. But using multi-signature wallets reduces the risk of undermining the group’s goal. Nor does it mean that Web3 projects and DAOs trade decentralization for the ability to process a transaction with greater enforceability.
This is as decentralized as possible. Someone must sign, so it’s best to have transactions signed by a few people. However, you can’t get everyone to sign because nothing gets done.
Setting up the wallet is the easy part – the challenge comes when considering how to better coordinate signers without resorting to a system where the wealthy have bought into power and now hold the keys. Host an annual rotating roundtable where three to five DAO members have a signatory role for a set period. The DAOs might even nominate new people yearly, so it’s not the same contributors every time.
Too many hands in the pot
Of course, the more people involved, the greater the risk of coordination becoming a challenge. They need more people to sign, and everyone can see everything. Some DAOs prefer the convenience and accept the risks that come with it. Others are unwilling to compromise and would be willing to jump through additional hurdles to secure their money. We even see DAOs using a “pod” or sub-DAO architecture to create multiple multi-signature wallets for smaller teams.
You can act more flexibly and speed up the process. Ultimately, it comes down to what makes DAOs a more viable option: streamlined, centralized wallet management or increased security for your funds. We will see. Them Verma is the Co-Founder and CEO of Mesha, an intelligent all-in-one management tool for Web3 and DAO startups. He previously founded the English learning app Enguru. He received his Bachelor of Arts from the University of Pennsylvania and an MBA from Cornell Tech.