[Analysis] Becoming decentralized enough: The case for DAOs - Mohamed Fouda

Despite the name, decentralized finance applications are generally closer to "non-custodial" financial services argues Mohamed Fouda. The ability for a centralized company to modify, pause, or kill a contract is present in many existing DeFi applications and soon those businesses will need to pick a side. For Fouda the option are operate as a centralized business on a public blockchain or delegate control to a decentralized autonomous organization (DAO). A DAO must have three characteristics for decentralization:

1. DAO membership is open and is not limited to a specific group.
2. DAO members /shareholders can propose/vote on changes and their decisions cannot be blocked or modified by a central authority.
3. The DAO members receive direct or indirect financial incentives from participation to guarantee alignment of incentives.

Projects like MakerDAO are moving towards this model, though some aspects are still controlled by a centralized team and token holder concentration is high. Decentralized exchanges like IDEX, 0x, and Uniswap are also integrating various aspects of DAOs. But according to Fouda, until projects meet all three characteristics they are not truly DAOs, and not truly decentralized.