Market cycles are an existential crisis for blockchain enthusiasts, with a tidal wave of downturns threatening every peaceful period of growth and development. This crypto winter is no exception. Not to say that warning signs were missing, but no one seemed to want to spoil the bull-market fun to address clear problems in the crypto ecosystem.
What does set this bear market apart is the sheer amount of exposed nerves that have been uncovered in this latest cycle, and from perceivably indestructible players at that. But developments on the blockchain periphery, such as DAOs and other decentralized enterprises, still have room to stay afloat by making key pivots and considerations. So if market cycles are always a factor in crypto, DAOs can still stick the landing during a turbulent period.
Placing the blame
In the 2018 bear market, there seemed to be a very clear culprit sparking the plummets in Bitcoin prices and generating market turmoil: ICOs. This time the causes are more nuanced.
Of course, there are key players and phenomenons compounding the impacts of this latest downturn that could be held accountable. For instance, the collapse of algorithmic USD-pegged stablecoins Terra and Luna created a destructive domino effect across projects of all shapes and sizes. Three Arrows Capital is perhaps the most famous casualty of this crash, collapsing under the weight of loan defaults and effectively zapping away billions in crypto valuations.
Crypto firms making risky bets and overpromising yield results also underpin the current turmoil in digital assets. Major lending platforms such as Celsius met their match trying to operate using centralized principles with unpredictable decentralized assets, leading to brutal insolvency once liquidity gaps became too big to close. And need we mention NFT scams?
These examples of bear market contributors are not meant to dogpile, but to highlight the inefficiency in looking for a tidy problem. The ICO bubble responsible for the 2018 slump became a convenience for companies that survived the fallout, allowing them to simply sweep ICOs under the rug and continue developing without addressing underlying issues. In a sense, not having one definitive catalyst for the bear market is actually a good thing.
DAOs: Staying decentralized, staying afloat
For DAOs and other decentralized organizations, the crypto crash does not necessarily have to be a doomsday event. But staying buoyant requires a considerable change in focus and prioritization.
If there’s any time to try and shake off the “subreddit with a bank account” stigma, it would be now. DAO operations and treasury management are not a get-rich-quick scheme. Acting in a responsible manner while being centered on concrete growth and development can help do so. The key themes for DAO development are to aim for transparency, sustainability, and actual organization.
The purpose of DAO development is to build a positive community around a project, and doing so requires responsible, decentralized management of its treasury. Often, a DAO management team treats a treasury as a hedge fund, getting caught up in the mix of trying to generate heaps of liquidity. But leveraging too much can be an expressway to the same type of dissolution as Celsius.
Likewise, maintaining a mix of tried-and-true tokens in a treasury can maintain its stability in a market turnover. This protects the integrity of DAO operations far more effectively than chasing after every trendy token that may generate more yields. In essence, it pays to plan long-term.
DAOs and management
As a decentralized organization, maintaining constant communication and tracking vital aspects of DAO management is paramount in building a sustainable project. If centralized organizations and institutions place a great emphasis on accountability, this is even more vital in a DAO environment where identities are often masked by usernames and stretch across countries. Not only does this ramp up the trustworthiness of a DAO, but keeping best practices in financial oversight can close vulnerabilities like rug pulls, scams, and other bizarre fraud activities that can plague other blockchain projects.
Surviving a bear market is not an easy feat when it seems like the best and brightest projects are struggling to tread water. But DAOs and decentralized organizations have the perk of flexibility and inherent community values. To stay even-keeled and build further beyond a bear market, prioritizing long-term and sustainable governance strategies in a DAO is critical.
About the Author
Edwin Mata is the CEO and Co-Founder at Brickken, a platform that allows companies to autonomously tokenize their equity and assets, bringing their management on-chain. Mata is a digital lawyer, lecturer, and mentor with a passion for law, entrepreneurship, and blockchain technology. Aside from Brickken, Mata serves as an advisor and consultant for cryptocurrency and legaltech projects, sharing his expertise and experience in both fields to support innovative initiatives.
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