The Rise of Decentralised Autonomous Organisations: Implications for Operations and Supply Chain Management

The Rise of Decentralised Autonomous Organisations: Implications for Operations and Supply Chain ManagementDecentralised Autonomous Organisations (DAOs) are a rapidly developing type of organisation that operates through a blockchain network and operates without centralised leadership, instead being owned by its members. In 2021, the number of participants in DAOs had increased significantly, rising from 13,000 to 1.6 million worldwide, and there are now over 4,228 DAOs currently in operation. This trend has prompted further research to investigate the potential opportunities for DAOs in addressing long-standing challenges within operations and supply chain management.

Academic debates have emerged, questioning the similarities and differences between DAOs and other member-owned organisational structures, such as cooperatives. While parallels can be identified between these structures, the unique aspect of DAOs lies in their ability to motivate members towards the promotion and advancement of the organisation. This member motivation is achieved through incentives in the form of DAO tokens, which are awarded to members who exert additional efforts beyond those associated with primary economic activities. In this way, all members are eligible for rewards, regardless of their status within the organisation, as long as their contributions facilitate the development of the DAO.

Subsequently, we aim to examine the efforts made by members of DAOs towards developing their organisations using a game-theoretic model. This model considers the incentives of DAO members to exert efforts and achieve the best possible outcome, which is the first-best outcome. Notably, a significant difference between DAOs and member-owned organisations lies in using tokens as incentives, including practices like token distribution to the community as rewards, which are unique in member-owned organisations. In particular, the study examines real-world practices of DAOs, such as token distribution to the community as rewards, which are not typically practised by member-owned organisations such as cooperatives. Additionally, it compares the equilibrium efforts of cooperatives and DAOs and presents some exceptional cases for the value function. At the same time, we are considering the practices of DAOs currently operating. 

Additionally, it is crucial to investigate how DAOs can benefit supply chains by exploring the optimal incentive mechanism for the supply chain to mitigate the bullwhip effect using a game-theoretic model. The bullwhip effect is a common adverse outcome of fragmented supply chains, and the potential of DAOs to address this issue is an area of research yet to be fully explored.

Mevni Piyarisi is a PhD candidate in Operations and Supply Chain Management at the University of Auckland Business School.