Pursuit of decentralization in blockchain-based systems: An empowerment perspective

Decentralized autonomous organizations (DAOs) represent an innovation in the design of organizations by creating blockchain-based human-machine systems that are governed based on the collective decisions of their participants. Although this new form of organizing promises to sustain participation and foster decentralized governance, many existing DAOs have failed to achieve the intended degrees of decentralization. This study aims to understand how DAOs can fulfill their potential for decentralization by empowering individuals to participate in governance. Using an abductive approach guided by the empowerment theory, this research identifies three key practices underpinning empowerment in DAOs: promoting autonomy, ensuring transparency, and fostering communication. A configurational approach is used to identify complementarities among these practices that lead to three distinct governance archetypes associated with varying degrees of decentralization. Based on fuzzy-set qualitative comparative analysis (fsQCA) of 30 DAO cases, we introduce “deliberative democracy” as a DAO governance archetype that allows for increasingly decentralized governance. Our findings demonstrate that, although a high degree of autonomy is needed to sustain decentralization, there needs to be sufficient communication among autonomous actors to facilitate the collective management of DAOs. These findings advance the understanding of decentralization in information systems research and highlight the governance mechanisms that foster decentralization in blockchain-based systems.