Limitations of Blockchain and DAOs for Complex Economic Processes

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* Article: Beyond the Ledger: Why Blockchain and DAOs Fall Short for Complex Economic Organizations, and How OVNs Point the Way Forward Synthesized with AI from documents developed by Tiberius Brastaviceanu, with the help of Sacha Pignot. Sensorica, 2025.

URL = https://sensoricablog.blogspot.com/2025/07/beyond-ledger-why-blockchain-and-daos.html


Description

"We are witnessing a profound transformation in the architecture of global economic activity. The traditional capitalist system, rooted in firm hierarchies, proprietary assets, and market-based transactions, is giving way to a networked economy. This emergent configuration is typified by commons-based peer production (CBPP), open source collaboration, distributed knowledge networks, and peer-to-peer (p2p) collaboration. Examples abound: permissionless blockchains, distributed scientific research initiatives, decentralized media platforms, and open educational resources.

In parallel, the digital infrastructures enabling these formations are evolving. Initially celebrated as a breakthrough in decentralized coordination, blockchain technologies and Decentralized Autonomous Organizations (DAOs) are revealing inherent limitations when tasked with modeling complex economic processes and sustaining full-fledged economic organizations. In contrast, newer agent-centric approaches—such as the Open Value Network (OVN) model built on Resource-Event-Agent (REA) accounting, the Valueflows vocabulary, hREA logic, and Holochain as a distributed substrate—are showing greater promise.

This blog post draws from the experience of real-world p2p production networks such as Sensorica, and analyzes the foundational limitations of blockchain/DAO-based systems while advocating for a hybrid architecture of economic coordination."

(https://sensoricablog.blogspot.com/2025/07/beyond-ledger-why-blockchain-and-daos.html)


Discussion

The Limitations of Blockchain and DAOs for Complex Economic Processes

Tiberius Brastaviceanu: 

< smart contracts are excellent for certain trustless operations (e.g., escrows, auctions) but fail to capture the dynamics of real-world production, collaboration, and adaptive planning >


Smart Contracts: Deterministic, Rigid, and Passive

Smart contracts are finite state machines. While they enable conditional logic and self-enforcing agreements, they suffer from key constraints:


Lack of agency

Smart contracts cannot initiate actions; they passively await external transactions.


No adaptivity

They cannot learn or evolve in response to new contexts.


Low expressiveness

They model narrow rule-based interactions but cannot handle rich workflows, commitments, or evolving plans.


High operational cost

Every interaction incurs gas fees, limiting granularity and frequency of updates.


DAOs Are Only a Good Model for Governance Without Production

Tiberius Brastaviceanu: 

< DAOs were designed to manage funds and collective decisions. While conceptually intriguing, most DAOs reduce governance to token-weighted voting and budget allocation >


"DAOs lack:

  • A production grammar: DAOs manage treasuries, but not the economic processes that generate and transform valuables.

Contextual roles and coordination: All agents are flattened to token holders; there is no representation of task-specific expertise or social embeddedness.

  • Traceability of contributions: There is no natively supported way to account for who contributed what, how, and with what impact.

In essence, DAOs are governance shells with limited economic depth. They serve as digital cooperatives but do not embody operational infrastructures for economic activity.'

(https://sensoricablog.blogspot.com/2025/07/beyond-ledger-why-blockchain-and-daos.html)


The Blockchain Architecture's Global State Creates Consensus Bottleneck Inappropriate for the Coordination of Physical Production

Tiberius Brastaviceanu:

Blockchain relies on a globally shared ledger, secured by consensus. This introduces:

  • Scalability issues: All agents must agree on the same state, which limits throughput.
  • Privacy limits: All state changes are visible to all participants.
  • Poor fit for diverse local contexts: Global rules enforced via consensus do not adapt well to context-sensitive collaboration.

This model is inherently brittle for complex organizations with multi-scale, asynchronous, and context-specific workflows. Moreover, blockchain-based architectures are grounded in a low-level computational model (deterministic, transactional, state-machine driven) that is ill-suited for expressing complex, adaptive, multi-agent economic systems. In formal terms, blockchains are positioned near the low end of a spectrum of computational expressivity. At best, they enable finite state automation with strict constraints on complexity, timing, and semantic nuance."

(https://sensoricablog.blogspot.com/2025/07/beyond-ledger-why-blockchain-and-daos.html)

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