Are DAOs the Answer to Governing the Metaverse?

Mia Whalley

"Kyle Kondas MFA Show at the Metaverse Gallery in Second Life" by Dean Terry is licensed under CC BY-NC-ND 2.0.

Developments in blockchain, cryptocurrency, artificial intelligence, augmented reality, and 5G networks have seen the Metaverse evolve from a futuristic notion into a soon-to-be reality. With the aim of transforming urban cities into virtual ones, the Metaverse is said to succeed Web2.0. However, the emergence of new actors, roles and relationships in the Metaverse, as well as its inherent properties have raised concern regarding how it should be governed.

Our Current Internet Climate

The Internet as we know it today, also known as Web2.0, is progressively characterised by themes of platformatization, datafication, algorithmization, monopolisation and hyper-connectivity (Bibri-&-Allam, 2022). This has raised concerns regarding privacy, surveillance, accountability, and representation. Frameworks of governance that address and regulate these issues, and the social impact of the evolving Internet, often lag as technology adapts and become part of our daily lives (Zwitter-&-Hazenberg, 2020). Difficulties governing Web2.0 are compounded emerging public and private actors, including large tech companies who accumulate power through means of mass surveillance and big-data (Bibri-&-Allam, 2022).

What is the Metaverse?

The Metaverse is a global digital environment that aims to transform “smart cities to virtual cities” (Bibri-&-Allam, 2022) and is enabled by developments in blockchain, cryptocurrency, augmented reality, artificial intelligence, and 5G. While the Metaverse is still in development and its potential uses are yet to be fully explored, it will transform social life and order as society undergoes a large-scale digital transformation (Bibri-&-Allam, 2022).

"Kyle Kondas MFA Show at the Metaverse Gallery in Second Life" by Dean Terry is licensed under CC BY-NC-ND 2.0.
“Kyle Kondas MFA Show at the Metaverse Gallery in Second Life” by Dean Terry is licensed under CC BY-NC-ND 2.0. 

Concerns Surrounding the Metaverse

The new actors, roles and power relationships expected to emerge in the metaverse, and the model of surveillance capitalism upon which it depends, will have significant implications on the privacy and rights of users (Zwitter-&-Hazenberg, 2020). Tusk (2022, as cited in Howell, 2022, p. 1) raises the concern that “the problems we have regulating technology companies now will be reproduced and amplified in the Metaverse.” New roles such as big-data generators, server providers and blockchain miners have emerged who mediate relationships between actors (Zwitter-&-Hazenberg, 2020). In addition, power is acquired through wealth of data as it can be analysed and sold for economic gain (Zwitter-&-Hazenberg, 2020). This predominantly benefits private companies in monopoly markets, encouraging behaviours consistent with surveillance capitalism which has “frightening effects on democracy and civil liberties” (Bibri-&-Allam, 2022, p. 721). Hackers are another group that aim to capitalise off users’ personal data, a cause of concern as the FBI reports that cybercrime has increased by 300% since COVID-19.

Governing the Metaverse

Due to the Metaverse’s incompatibility with traditional governance methods, managing cybersecurity continues to become more complicated as hackers’ techniques are increasingly sophisticated, and the Internet grows in complexity. It is essential that the metaverse has global privacy protection laws that are enforced by a global governing body to prevent data monopolies and protect users’ rights and information. However, the inclusion of state powers in governing the Metaverse directly challenges its decentralised nature and has the potential to escalate into a governance style with authoritarian characteristics.

"data privacy" by stockcatalog is licensed under CC BY 2.0.
“data privacy” by stockcatalog is licensed under CC BY 2.0. 

What is Blockchain and How is it Governed?

Blockchain facilitates trustless, decentralized transactions between actors and is vital part of Web3.0 and hence, the Metaverse (Shermin, 2017). Blockchain technology has transformed digital currency by somewhat resolving security, transparency, accountability, and logistical issues associated with online transactions and enabling cryptocurrencies such as Bitcoin and Ethereum (Zwitter-&-Hazenberg, 2020). Blockchain can also be used in other fields such as health, water and supply chain management, smart contracts and voting (Zwitter-& Hazenberg, 2020).

 Blockchain-based platforms utilise two main forms of governance to differing extents. On-chain governance refers to rules coded within underlying blockchain protocols which are enforced by large operators or individuals such as miners (De-Filippi et al., 2020). Off-chain governance refers to governance-related activity occurring outside blockchain platforms (De Filippi et al., 2020). However, while platforms such as Bitcoin and Ethereum have had success using these governance models, concerns regarding scalability, the inherent plutocracy of on-chain governance and technocracy of off-chain governance have arisen (De Filippi et al., 2020).

What Are Decentralised Autonomous Organisations (DAOs)?

An interesting concept that has emerged from blockchain technology is that of Decentralised Autonomous Organisations (DAOs). DAOs are blockchain-based systems that allow networks of stakeholders to self-organise and govern themselves in a decentralised, democratic, transparent, and secure nature using smart contracts (Hassan & De Filippi, 2021). Rules regarding DAO governance are embedded in the code of smart contracts and are viewable to all users (Shermin, 2017). This encourages collaboration between stakeholders which could “further economic and political decentralisation” (Hassan & De Filippi, 2021, p. 6) as governance becomes increasingly democratic.

Issues Arising from Blockchain and DAOs

While (Shermin, 2017) suggest that DAOs should be incorporated into decision-making processes in the Metaverse, issues such as procedural tedium, structural rigidity and voter manipulation are of grave concern.

Procedural Tedium

For DAOs to function, stakeholders must submit and vote on proposals. This can be extremely time consuming and cumbersome, generating procedural tedium resulting in a lack of voter participation (Chohan, 2017). Procedural tedium has the potential to undermine DAOs democratic nature as smaller, diverse voices may be overpowered in voting periods or lost entirely.

Structural Rigidity

Digital systems are often perceived as more dynamic than traditional systems in the sense that code can be quickly and easily modified. However, while a DAOs code can be reviewed and altered, it is difficult once the system is operating, resulting in an ironically rigid structure (Chohan, 2017). Before code changes or bug fixes can be made, new code needs to be written and submitted as a proposal – which must then endure the duration of the voting period and pass a specified vote threshold – before being passed. This process can take weeks to complete, leaving DAOs susceptible to cyberattacks such as TheDAO hack. In 2016, a bug in the code of TheDAO smart contract was leveraged by an attacker, resulting in the loss of USD$50m. The attack left the community (who had 35 days before the funds were withdrawn) divided over leaving the blockchain untouched or forcing a hard-fork and “going back in time” (Shermin, 2017, p. 506). Ultimately, a hard-fork was enforced, contradicting the immutabile, decentralised nature of blockchain and DAOs more broadly (Shermin, 2017). TheDAO attack highlights how structural flaws in DAOs leave them rigid and susceptible to attack, suggesting that intervention by the state is required in extreme cases.

"Binary code" by Christiaan Colen is licensed under CC BY-SA 2.0.
“Binary code” by Christiaan Colen is licensed under CC BY-SA 2.0.

Voter Manipulation

The risk of voter manipulation by large voting groups and influential individual users has the potential to dismantle the democratic nature of DAOs as smaller voices are excluded and overshadowed (Chohan, 2017). Many DAOs use token governance styles, where tokens grant users with voting rights, translating into power. Token governance can be leveraged by groups of voters and individuals who accumulate tokens to manipulate votes in an undesirable and oligarchical manner (Chohan, 2017). For example, the Build Finance DAO recently fell victim to voter manipulation as an attacker accumulated enough tokens to grant themselves control over the DAO, before draining its funds. To prevent voter manipulation and incidents such as these, safeguards must be employed at a governance level.

Blockchain and DAO Governance

While government intervention threatens to undermine decentralised, trustless foundations of blockchain technology, so does its current state of governance. To maintain users’ confidence in blockchain technology, and the Metaverse, global governing bodies must implement on-chain and off-chain measures addressing online situations. To manage the power and influence of large tech monopolists, blockchain and DAO governance must enlist diverse, third-party actors. This upholds blockchains decentralised, democratic nature while minimising risks of voter manipulation. Zwitter & Hazenberg (2020) suggest that the actors fulfilling such governance roles should be selected based on relationships, and expertise. This system would support informed decision-making, reduce cyberattack risks and limit the spread of misinformation. In addition, De Filippi et al. (2020) propose incentivised, punitive, and preventative approaches in blockchain governance to promote positive behaviour and “prevent actors from operating in an untrustworthy manner” (De Filippi et al., 2020). While these measures would reduce concerns surrounding blockchain, their implementation must be flexible and scalable to support the complexities of an evolving technology.

In conclusion, since interference by traditional government models goes against the key principles of the Metaverse, new models must be imagined that prioritise users’ privacy and security. Furthermore, while they are flawed, DAOs’ technology, with further research, could play a vital role in Metaverse governance.




Bibri, S. E., & Allam, Z. (2022). The metaverse as a virtual form of data-driven Smart Urbanism: On post-pandemic governance through the prism of the logic of surveillance capitalism. Smart Cities, 5(2), 715–727.

 Chohan, U. W. (2017). The Decentralized Autonomous Organization and Governance Issues. SSRN Electronic Journal.

De Filippi, P., Mannan, M., & Reijers, W. (2020). Blockchain as a confidence machine: The Problem of Trust & Challenges of Governance. Technology in Society, 62, 1–14.

Hassan, S., & De Filippi, P. (2021). Decentralized Autonomous Organization. Internet Policy Review, 10(2), 1–10.

Howell, B. (2022, April 20). Governing the Metaverse: Can We Learn from Telecommunications? [Blog post]. American Enterprise Institute.

Kelly, L. J. (2022, February 15). Build finance Dao Falls to governance takeover. Decrypt. Retrieved October 19, 2022, from

Shermin, V. (2017). Disrupting governance with blockchains and smart contracts. Strategic Change, 26(5), 499–509.

Sing, B. (n.d.). Why the metaverse could be hacker heaven. Get Cyber Resilient. Retrieved October 19, 2022, from

Soares, X. (2022, August 29). On-chain vs. off-chain transactions: What’s the difference? CoinDesk Latest Headlines RSS. Retrieved October 19, 2022, from

Zwitter, A., & Hazenberg, J. (2020). Decentralized network governance: Blockchain technology and the future of Regulation. Frontiers in Blockchain, 3(12), 1–12.