The rise of blockchain technology has ushered in a new era of organizational innovation, where Decentralized Autonomous Organizations (DAOs) emerge as entities governed by code rather than centralized authorities. DAOs leverage smart contracts to facilitate transparent, peer-to-peer decision-making, enabling global communities to coordinate resources, allocate funds, and pursue collective goals without intermediaries. However, early DAOs faced significant hurdles in scalability, particularly in managing attention and participation in large groups, often leading to decision paralysis or centralization in disguise.
Since my active involvement in the cryptocurrency world in 2017, DAO is one of the major topics which is interesting for me. I'm an active participant of the Cardano ecosystem. I have participated in Project Catalyst since Fund1. Also I’m DREP (Delegated Representative) - I constanly vote on Cardano governance decisions. Even in the hard times which we have right now (war, danger, lack of electricity and heat) - I maintain my long-term interest in the evolution of DAOs in the blockchain industry.
DAOSTACK, launched in 2018 by an Israeli development team led by Matan Field, positioned itself as a pioneering "operating system for collective intelligence" on the Ethereum blockchain. Born from the lessons of The DAO's infamous 2016 hack, which highlighted the risks of untested governance models, DAOSTACK aimed to provide a robust framework for building resilient DAOs. Through an Initial Coin Offering (ICO) that raised approximately $30 million, the platform introduced the GEN token and a modular suite of tools designed to democratize DAO creation and operation. By emphasizing interoperability and open-source development, DAOSTACK sought to foster ecosystems where decisions align with the broader collective will, drawing inspiration from holographic principles where local actions reflect global consensus.
At its core, DAOSTACK's purpose was to enable scalable decentralized governance, allowing organizations to self-organize around shared objectives while mitigating common pitfalls like voter apathy and proposal overload. Key features included the Arc framework—a library of reusable smart contracts for custom DAO configurations—and the innovative Holographic Consensus (HC) mechanism, which integrates reputation-based voting with prediction markets to filter and prioritize proposals efficiently. Deployed initially on Ethereum and later adapted to sidechains like xDAI (now Gnosis Chain) for cost efficiency, DAOSTACK supported diverse applications, from community funds to collaborative ventures, hosting around 92 DAOs and engaging over 9,000 users at its peak in 2019–2020.
Despite its ambitious vision, DAOSTACK's trajectory revealed the challenges of sustaining decentralized systems, with activity declining by 2021 due to incentive misalignments and competition from newer platforms. This research paper delves into DAOSTACK's technical architecture, ecosystem dynamics, governance mechanics—particularly HC—and strategic goals, while comparing it to contemporaries like Cardano's Project Catalyst. By examining its functions, differences, pros, and cons, we uncover valuable lessons for the ongoing evolution of DAOs in the blockchain landscape.
Abstract
DAOSTACK, an Ethereum-based platform for decentralized autonomous organizations (DAOs), represents an early attempt to facilitate scalable, collaborative governance through blockchain technology. Launched in 2018, it aimed to enable collectives to self-organize around shared goals by providing modular smart contracts, reputation-based voting, and a novel mechanism called Holographic Consensus. This paper examines DAOSTACK's technical characteristics, including its deployment on Ethereum; its ecosystem, which hosted around 92 DAOs and over 9,000 users but largely consisted of small, short-lived entities; its goals of fostering resilient decentralized coordination; and its voting mechanics, which integrate prediction markets to prioritize proposals. Central to the analysis is how DAOSTACK functions as a DAO framework, emphasizing modular architecture for proposal creation, staking, and decision-making. Additional focus is placed on comparing DAOSTACK with Cardano's Project Catalyst. Key differences include blockchain infrastructure (Ethereum vs. Cardano), governance models (reputation and prediction staking vs. token-weighted with quadratic elements), and adoption outcomes (DAOSTACK's decline vs. Catalyst's ongoing activity). Pros of DAOSTACK include innovative scalability and flexibility, while cons encompass ineffective incentives, low user engagement, and eventual abandonment. This comparison highlights lessons for future DAO designs, underscoring the challenges of balancing decentralization with practical utility in blockchain ecosystems.
Introduction
The emergence of decentralized autonomous organizations (DAOs) marks a paradigm shift in organizational structure, leveraging blockchain technology to enable peer-to-peer coordination without centralized authority. DAOs operate through smart contracts that encode rules for governance, resource allocation, and decision-making, allowing global participants to collaborate transparently and autonomously. This model addresses limitations in traditional hierarchies, such as inefficiency and corruption, by distributing power among stakeholders. However, scaling DAOs to handle large communities while maintaining resilience and efficiency remains a core challenge.
DAOSTACK, developed by an Israeli team and launched in 2018, positioned itself as an "operating system for collective intelligence." It sought to provide a comprehensive stack for building and managing DAOs on Ethereum, emphasizing interoperability, modularity, and innovative governance mechanisms to support large-scale collaboration. The platform raised approximately $30 million through an initial coin offering (ICO) of its GEN token, attracting attention for its potential to revolutionize decentralized governance. At its core, DAOSTACK aimed to create resilient systems where decisions align with collective interests, drawing from concepts like holographic consensus to filter proposals efficiently.
This research paper analyzes DAOSTACK in depth, covering its technical foundations, ecosystem metrics, strategic objectives, and operational mechanics. Particular emphasis is placed on its voting system, which integrates reputation and prediction markets to mitigate attention overload in large groups. The main inquiry focuses on how DAOSTACK functions as a DAO—through proposal submission, boosting, and reputation-based voting.
By comparing these systems, the paper identifies pros such as DAOSTACK's modular flexibility and Catalyst's sustained activity, alongside cons like DAOSTACK's economic incentive failures and Catalyst's plutocratic tendencies. Drawing from empirical data on DAOSTACK's lifecycle—from peak activity in 2019-2020 to decline by 2021—and Catalyst's ongoing funds exceeding $100 million, this analysis offers insights into DAO evolution. Ultimately, it argues that while DAOSTACK pioneered advanced governance tools, its shortcomings underscore the need for better incentive alignment and user engagement in future designs.
Technical Characteristics
DAOSTACK is built on the Ethereum blockchain, utilizing its smart contract capabilities to create a modular framework for DAOs. Ethereum's Turing-complete scripting language enables DAOSTACK's core component, Arc, a collection of reusable smart contracts that define building blocks for DAO operations. Arc allows developers to compose custom DAOs by combining elements like voting schemes, reputation systems, and proposal mechanisms, promoting interoperability with other Ethereum-based tools.
The platform's architecture consists of four layers: Ethereum as the base blockchain for security and immutability; Arc for governance primitives; Arc.js, a JavaScript library for interfacing with contracts; and user-facing applications like Alchemy for intuitive DAO management. This layered approach ensures flexibility, allowing DAOs to integrate with external protocols while maintaining on-chain transparency. For instance, each DAO has a treasury managed via smart contracts, with operations recorded publicly to prevent tampering.
Technically, DAOSTACK leverages Ethereum's proof-of-work (at launch) and later proof-of-stake consensus for transaction validation, ensuring decentralized execution. The GEN token, an ERC-20 asset, facilitates staking in prediction markets within the Holographic Consensus mechanism, adding an economic layer to governance. Reputation, a non-transferable metric earned through contributions, serves as voting power, distinguishing DAOSTACK from purely token-based systems.
However, Ethereum's high gas fees posed challenges, leading to deployments on sidechains like xDAI (now Gnosis Chain) for cost efficiency. Of the 92 DAOs created, 67 were on xDAI, reflecting adaptations to scalability issues. DAOSTACK's contracts are upgradable via proxy patterns, allowing evolution without forking, though this introduces potential centralization risks if upgrades are controlled by a small team.
Overall, DAOSTACK's technical design prioritizes composability and resilience, enabling DAOs to own assets, manage budgets, and execute decisions autonomously. It integrates with tools like Safe{Wallet} for multisig security and supports custom plugins, making it suitable for diverse applications from venture funds to community governance. Despite these strengths, the platform's reliance on Ethereum exposed it to network congestion, contributing to its eventual decline as newer layer-2 solutions emerged.
Holographic Consensus in DAOSTACK
Detailed Mechanics of Holographic Consensus
Holographic Consensus (HC) represents DAOSTACK's innovative approach to resolving the inherent tension between scalability and resilience in decentralized governance. At its core, HC is a protocol that enables decisions in large-scale DAOs to be made quickly and locally—requiring only a small fraction of the DAO's total influence or voting power—while ensuring these decisions align with the global opinion of the entire DAO. This alignment is achieved through a crypto-economic game that transforms potential mismatches between local and global opinions into economic opportunities for participants. The name "holographic" draws from the analogy of a hologram, where each small fragment contains the information of the whole image; similarly, local decisions reflect the broader collective will.
The mechanics of HC begin with the proposal lifecycle. Proposals in a DAOSTACK DAO start in a pre-boosted state, queued for consideration. In this phase, they require an absolute majority (typically over 50% of the total reputation in the DAO) to pass, ensuring resilience against manipulation but limiting scalability due to the high attention required from all members. To scale, HC introduces a "boosting" mechanism: proposals can be elevated to a boosted state if they meet certain staking thresholds. Boosting shifts the voting requirement to a relative majority, where approval depends only on the majority of active voters within a defined timeframe (e.g., a week), regardless of total participation. This reduces the quorum barrier, allowing decisions with lower overall turnout while maintaining efficiency.
Central to HC is the integration of prediction markets via staking with the GEN token, DAOSTACK's native cryptocurrency. Anyone—DAO members or external participants—can stake GEN tokens on a proposal's outcome: "upstaking" to predict it will pass (boosting it toward relative majority) or "downstaking" to predict failure and prevent boosting. Staking creates a bet ratio (success-to-failure stakes). If this ratio exceeds a predefined threshold (e.g., exponentially increasing based on the number of already boosted proposals), the proposal is boosted. Successful predictors are rewarded with bounties derived from staking fees, DAO contributions, or forfeited stakes from losers, while incorrect stakers lose their GEN. This market-driven filtering prioritizes high-value proposals by monetizing collective attention: promoters must pay (via stakes or fees) to elevate items, ensuring only those with sufficient "internal value" (perceived benefit to the DAO) consume limited attention resources.
Key parameters in the Genesis v0.2 protocol, DAOSTACK's implementation of HC, include exponential thresholds for boosting to prevent spam and attention overload. For instance, the boosting threshold might scale as e^{k \cdot b}, where ( b ) is the current number of boosted proposals and ( k ) is a constant, making it progressively costlier to boost additional items. Voting rules incorporate reputation—a non-transferable, merit-based score earned through contributions—as the primary voting weight, promoting meritocracy. Proposals in boosted mode pass with a relative majority (e.g., >50% of votes cast), but if opposition arises post-boosting and shifts the outcome, predictors who upstaked incorrectly are slashed, creating arbitrage opportunities that reinforce alignment.
Incentives are structured game-theoretically: mismatches between local (boosted, relative majority) and global (absolute majority) outcomes generate profits for accurate predictors, encouraging monitoring and correction. For example, if a boosted proposal is ultimately rejected by voters, downstakers profit, incentivizing them to flag misalignments early. This dual-token economy (DAO-specific tokens for internal governance and GEN for external prediction) separates concerns, allowing open participation in filtering without diluting DAO control.
Empirical validation from DAOSTACK's deployment highlights HC's practical workings. Across 92 DAOs and over 9,000 users, HC was analyzed in 23 active DAOs, where it facilitated governance with average voter turnout of just 8% per proposal. Boosting achieved 97% precision in identifying relevant proposals and 76% sensitivity in capturing approved ones, though 48% of non-boosted proposals still passed, indicating occasional filtering lapses. In high-volume DAOs like dxDAO (918 proposals) and Genesis Alpha (peaks of 40 open proposals), HC enabled scalability by reducing the need for mass participation, with 86% average approval rates and most decisions unopposed.
Pros and Cons of Holographic Consensus
HC offers several advantages in DAO governance. Its primary pro is enhanced scalability: by allowing relative majority for boosted proposals, it permits large DAOs to process more decisions without requiring universal attention, as seen in DAOSTACK's ability to handle peaks of over 30 proposals in multiple DAOs. Resilience is bolstered through economic incentives that align local actions with global consensus, preventing minority hijacking—proposals not aligned with the DAO's will are downstaked and filtered out. The prediction market fosters efficiency, acting as a neutral filter that rewards accurate forecasting and punishes errors, potentially attracting external expertise. Innovation in futarchy (governance via markets) makes HC a pioneer, influencing modern systems like optimistic governance in other platforms.
However, cons emerged from DAOSTACK's real-world implementation. A key issue was the lack of independent staking: only 34% of stakes came from outsiders, with 83% from DAO members and a third from proposers themselves, turning HC into a self-referential tool that favored insiders and potentially exacerbated plutocracy. Complexity and costs—such as GEN token burns and Ethereum gas fees—deterred broad adoption, contributing to declining accuracy post-2020. Power imbalances persisted, with high Gini coefficients in small DAOs indicating oligarchic tendencies. Ultimately, insufficient incentives failed to sustain an active predictor network, leading to HC's underutilization as DAOSTACK declined.
Comparison with Cardano Catalyst in the Context of HC
In comparing DAOSTACK's HC with Cardano's Project Catalyst, HC's prediction-market filtering stands out as a differentiator for scalability in general-purpose DAOs, whereas Catalyst relies on token-weighted voting (one ADA = one vote, with quadratic experiments) for funding-specific decisions. HC's boosting reduces attention demands, enabling low-turnout governance (8% in DAOSTACK vs. higher in Catalyst's community reviews), but Catalyst's sustained activity (over $100M distributed) highlights better incentive alignment through direct rewards. Pros of HC over Catalyst include merit-based reputation mitigating wealth bias, but cons like staking dependency led to DAOSTACK's fall, while Catalyst's simpler model avoids such complexity, though risking plutocracy without full quadratic implementation.
Ecosystem
DAOSTACK's ecosystem, while innovative, remained modest in scale and longevity compared to contemporaries like Aragon. From its launch in April 2018 to its peak in 2020, the platform hosted 92 DAO deployments—25 on Ethereum's mainnet and 67 on xDAI for lower costs. These DAOs varied in purpose, including venture funds, community initiatives, and experimental governance groups. Notable examples include Genesis Alpha, a flagship DAO for platform governance, and dOrg, a developer collective that persisted beyond DAOSTACK's active support.
User metrics show over 9,000 registered addresses, but active participation was limited to about 900 users, with two-thirds joining during the initial growth phase from 2019 to 2020. Major DAOs like Kyber Network (5,000 users) and BuffiDAO (2,700 users) drove much of this, indicating concentration rather than broad adoption. dApps built on DAOSTACK were few, primarily Alchemy—a user interface for proposal management and voting—and integrations with tools like Snapshot for off-chain signaling.
Ecosystem activity plateaued at 22 active DAOs by April 2020, with a small persistent community of 20-40 weekly users post-2021. Partnerships included collaborations with projects like Gnosis for sidechain support and integrations with wallets for seamless participation. However, most DAOs were small and short-lived, with limited dApp diversity beyond governance tools.
Recent X discussions highlight DAOSTACK's influence on modern DAO tooling, with mentions of its Holographic Consensus inspiring current frameworks. Despite this, the ecosystem's decline after developer support ended in 2021 underscores challenges in sustaining engagement without ongoing incentives.
Goals and Plans
DAOSTACK's primary goal was to enable scalable decentralized governance, allowing large collectives to self-organize around shared values efficiently. It envisioned DAOs as resilient entities capable of managing resources, making decisions, and fostering collective intelligence without central control. By addressing attention scarcity in large groups, DAOSTACK aimed to catalyze a new era of collaboration, potentially impacting sectors like finance, supply chains, and social initiatives.
Plans outlined in its 2017 whitepaper included building a modular stack for DAO creation, with Arc as the foundation for customizable governance. Future developments focused on enhancing Holographic Consensus for better scalability, integrating with other blockchains, and expanding user tools like Alchemy. The GEN token was designed to incentivize participation through staking rewards.
Post-ICO, DAOSTACK pursued pilots with projects like dxDAO and partnerships for real-world applications. Long-term visions included thousands of dApps on Arc, but economic incentives proved ineffective, leading to stagnation. By 2023, the project was largely abandoned, though its open-source code influenced subsequent DAO platforms.
Voting Mechanics
DAOSTACK's voting system, centered on Holographic Consensus (HC), addresses scalability by combining reputation-based voting with prediction markets. Proposals start in a queue, where users stake GEN tokens to predict outcomes—boosting if stakes exceed a threshold, or quiet-ending if not.
Boosted proposals require relative majority approval using reputation, a non-transferable score earned via contributions. Reputation determines voting weight, promoting meritocracy over wealth. Parameters like proposingRepReward incentivize successful submissions, while votersReputationLossRatio penalizes misalignment.
HC uses GEN staking for/against proposals; correct predictors earn rewards, incorrect lose stakes. This filters high-quality proposals, reducing attention demands. Empirical data from 22 DAOs and 6,000 users validated HC's ability to prioritize aligned decisions.
Mechanics include time-bound boosting periods and slashing for malicious actions, ensuring resilience. While innovative, issues like cost and complexity limited adoption.
How the DAO Functions
DAOSTACK DAOs function as on-chain entities managing treasuries and decisions through modular contracts. Users deploy a DAO via Arc, configuring reputation, voting schemes, and tokens.
Proposals are submitted with reputation rewards for passers. HC filters them: staking GEN boosts visibility for reputation votes. Approved proposals execute automatically, reallocating funds or updating parameters.
Reputation accrues from contributions, enabling voting without financial barriers. The GEN economy incentivizes accurate predictions, aligning local actions with global consensus. Alchemy provides UI for interactions, while interoperability allows external integrations.
In practice, DAOs like Genesis handled community governance, but low engagement led to treasury drains. Functionality emphasized resilience over speed, though real-world use revealed incentive misalignments.
Comparison with Cardano Catalyst
DAOSTACK and Cardano's Project Catalyst represent distinct approaches to DAO governance, differing in technology, mechanics, purpose, and outcomes. DAOSTACK functions as a general-purpose framework for building DAOs on Ethereum, enabling modular creation of organizations for various uses like funds or communities. Proposals undergo HC filtering before reputation-based votes, emphasizing merit and prediction accuracy. Catalyst, conversely, is a specialized funding DAO within Cardano, distributing treasury ADA for ecosystem projects via community proposals and votes.
Key differences start with blockchain: DAOSTACK on Ethereum (with xDAI) vs. Catalyst on Cardano's proof-of-stake chain. Voting mechanics diverge sharply—DAOSTACK's HC uses GEN staking and reputation for scalable, meritocratic decisions, while Catalyst employs ADA-weighted voting (one ADA = one vote), with quadratic experiments in Fund 14 to curb whale dominance. Catalyst proposals pass via yes/no tallies ranked by net votes, requiring minimum ADA holdings for participation.
Functionally, DAOSTACK supports broad DAO operations like treasury management and custom governance, whereas Catalyst focuses on innovation funding, with stages like proposal submission, community review, and voting via apps. DAOSTACK's ecosystem was smaller (92 DAOs, 9,000 users) and declined, while Catalyst manages billions in ADA across funds, with high participation in votes.
Pros of DAOSTACK include innovative HC for attention efficiency, modular flexibility for custom DAOs, and reputation over wealth to reduce plutocracy. It excels in theoretical resilience for large groups. Cons encompass ineffective incentives leading to low activity, complexity deterring users, and abandonment post-2021 due to funding issues.
Catalyst's pros: Active community, transparent funding (over $100M distributed), and incentives like voter rewards. Quadratic voting mitigates some inequalities. Cons: Plutocratic bias favoring large holders, slow processes (e.g., 18-month delays), and legal ambiguities in accountability.
Overall, DAOSTACK prioritizes general scalability but failed in sustainability, while Catalyst succeeds in focused funding but risks centralization.
Conclusion
DAOSTACK pioneered ambitious DAO tooling, but its decline highlights governance challenges. While technically sound and innovative, poor incentives and adoption limited impact. Catalyst's success in funding underscores targeted applications' viability, though both reveal decentralization's trade-offs.
In conclusion, DAOSTACK DAO exemplifies the pioneering spirit of early blockchain governance experiments, offering valuable insights into the potential and pitfalls of decentralized coordination through its modular Ethereum-based architecture, Holographic Consensus mechanism, and reputation-driven voting. While its technical innovations, such as scalable proposal filtering and meritocratic decision-making, addressed critical challenges like attention scarcity and plutocracy, the platform's decline—marked by low user engagement, ineffective incentives, and abandonment by 2021—underscores the difficulties in sustaining broad adoption without robust economic models and real-world utility.
And Cardano's Project Catalyst emerges as a thriving alternative, demonstrating how a focused, funding-oriented DAO can foster ecosystem growth by distributing over $100 million in ADA for innovative projects, incorporating community-driven improvements like quadratic voting to enhance fairness, and maintaining high participation through transparent processes and rewards.
For researchers, developers, and enthusiasts seeking active involvement in blockchain governance, Project Catalyst represents an excellent opportunity to explore and join: it not only empowers users to propose, vote on, and fund real-world initiatives but also contributes to Cardano's evolving treasury system, promoting decentralized innovation with tangible impacts on sustainability, scalability, and global collaboration—making it a compelling model worth investigating and participating in for those committed to advancing the DAO landscape.
As an active Project Catalyst Participant since Fund1 and as Cardano DREP (Delegated Representative) - I’m here to help you if that’s needed. I will continue studying the DAO topic as well as the Cardano ecosystem with my articles, videos and communication.
I would be happy to hear your opinion and feedback - feel free to contact me by email or any other messenger.
More about Project Catalyst: https://projectcatalyst.io/
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