TYPEPerspective PUBLISHED16May2025 DOI10.3389/fbloc.2025.1538227 Decentralizing governance: exploring the dynamics and OPENACCESS EDITEDBY challenges of digital commons DimitrisKogias, UniversityofWestAttica,Greece and DAOs REVIEWEDBY FiratCengiz, UniversityofLiverpool,UnitedKingdom AntoniaDamvakeraki, Mark Esposito1,2*, Terence Tse1 and Danny Goh3 UniversityofNicosia,Cyprus *CORRESPONDENCE 1HultInternationalBusinessSchool,Cambridge,MA,UnitedStates,2BerkmanKleinCenterforInternet MarkEsposito, andSocietyatHarvardUniversity,Cambridge,MA,UnitedStates,3ÉcoledespontsParisTech(ENPC), mark@mark-esposito.com Marne-la-Vallée,Île-de-France,France RECEIVED02December2024 ACCEPTED07April2025 PUBLISHED16May2025 This paper explores the intersection of decentralized governance, blockchain CITATION EspositoM,TseTandGohD(2025) technology, and the digital commons through the lens of Elinor Ostrom’s Decentralizinggovernance:exploringthe principles. It examines how Decentralized Autonomous Organizations (DAOs) dynamicsandchallengesofdigitalcommons and tokenization models present both opportunities and risks for managing andDAOs. Front.Blockchain8:1538227. digital resources in transparent, community-driven ways. The authors assess doi:10.3389/fbloc.2025.1538227 how token-based, reputation-based, and hybrid governance COPYRIGHT mechanisms—ranging from quadratic voting to Soulbound Tokens—can ©2025Esposito,TseandGoh.Thisisanopen- enhance democratic participation and accountability within blockchain accessarticledistributedunderthetermsofthe ecosystems, while also recognizing their susceptibility to plutocracy, voter CreativeCommonsAttributionLicense(CCBY). Theuse,distributionorreproductioninother apathy, and collusion. Drawing on case studies such as MakerDAO, forumsispermitted,providedtheoriginal MolochDAO, Commons Stack, and Aragon, the paper critically analyzes real- author(s)andthecopyrightowner(s)are world implementations of decentralized governance and the extent to which creditedandthattheoriginalpublicationinthis journaliscited,inaccordancewithaccepted theyadhereto—ordeviatefrom—Ostrom’sdesignprinciplesforcommon-pool academicpractice.Nouse,distributionor resourcemanagement.Ithighlightsstructurallimitationsingovernancedesign, reproductionispermittedwhichdoesnot especially in the presence of unequal voting power and centralized control complywiththeseterms. disguised as decentralization. The paper also critiques the socio-economic implications of blockchain’s global expansion, noting how digital governance can replicate neo-colonial dynamics in the Global South and amplify state surveillance in authoritarian contexts. Further, it underscores the environmental costs of blockchain infrastructure and introduces DAOs like KlimaDAO and Regen Network as emerging experiments to align decentralized finance with sustainability goals. Ultimately, the authors propose a “dual imperative”: to develop context-sensitive, inclusive governance architectures within DAOs, while pursuing international legal recognition and standards.Theconclusioncallsforcommunitarianmodelsthatfusealgorithmic rule enforcement with human-centered deliberation to protect the emancipatory potential of blockchain governance. Whether blockchain becomes a force for democratization or digital enclosure, the authors argue, will depend on how its governing architectures are designed, contested, and evolved bythecommunitiesthatsteward them. KEYWORDS digitalcommons,governance,blockchain,artificialintelligence,decentralizednetwork FrontiersinBlockchain 01 frontiersin.org Espositoetal. 10.3389/fbloc.2025.1538227 Introduction Ostrom’s principles for commons governance A blockchain network relies on collectively managed technologies to pool and share information (Murtazashvili et al., Blockchainnetworkscanbeusedtoimprovethegovernanceof 2022).Analyzingvariousmodelsofblockchainnetworkspresentan digital commons by addressing limitations to Ostrom’s eight opportunity to govern the digital commons. Based on Elinor principles. (Stern, 2011) These principles include the need for Ostrom’s definition, the digital commons can be understood as clearly defined boundaries, rules fit to local circumstances, online resources that are designed and governed by a community participatory decision-making, self-monitoring, environmental withrulesconcerningaccessandsharing.Thedigitalcommonsrefer monitoring, sanctions, accessible modes of conflict resolution, tosharedonlineresourcesandspacesthatarecollectivelycreated, and rightsto organize. maintained,andgovernedbyacommunity,oftenwithanemphasis Clearlydefinedboundariesallowuserstoknowwhohasaccess onopenaccessandcollaboration.Theseresourcescanincludeopen- to the resource and the capabilities of the resource. Without clear source software, public datasets, freely available educational boundaries,itbecomesdifficulttopreventoverusebyoutsidersorto materials, and platforms for collective knowledge sharing, such as holdusersaccountable.Ostromexplainsthatrulesgoverningtheuse Wikipedia orCreative Commons-licensedcontent. of the resource should align with local conditions, ensuring that Most examples of digital commons governance through expectationsaboutmaintenancearerealisticandappropriatetothe blockchain networks have occurred in the realm of finance specificenvironment.Resourceusersshouldactivelyparticipatein (Vulpen and Jansen, 2023). Implementing tokenization models making and modifying rules. This inclusion fosters a sense of and smart contracts that allow token holders to participate in ownership and increases compliance. Monitoring should be democratic voting processes, Decentralized Autonomous conducted either by the users themselves or by individuals Organizations (DAOs) typically govern shared resources. Other accountable to them. This helps detect rule violations early and forms of decentralized governance have been found in Aragon maintain trust withinthe group. (Aragon Network DAO, 2012) and large Commons-Based Peer When rules are violated, sanctions should be applied in a Production (CBPP) communities like Wikipedia and FLOSS graduated manner, meaning that minor infractions receive light projects (Rozas et al., 2021a). FLOSS (Free/Libre and Open penalties while repeated or severe offenses result in stronger Source Software) projects are software initiatives that follow the consequences. This approach balances fairness with enforcement. principlesoffreedom,transparency,andcollaborativedevelopment Accessibleandlow-costmechanismsforresolvingconflictsshould involvingopenaccesstosourcecodeandnon-proprietarylicensing. also be available in the community. Since disagreements are This paper compares the efficacy of various models and inevitable, a fair and efficient system for handling disputes helps examines the extent to which the decentralized, token-based maintain group cohesion. Communities must have the right to nature of blockchain networks can improve the regulation of the organize their own governance systems without interference from digital commons based on Ostrom’s principles. Historically, the higher authorities, which legitimizes their local management and decentralized nature of blockchainnetworks has been treated as a supports autonomy. For resources that are part of larger systems, means to democratize digital spaces by introducing multilateral governanceshouldbenestedinmultiplelayers.Localgroupshandle formsofgovernanceadheringtothebeliefsofmanyusers(Zwitter local issues, while broader institutions coordinate at regional or and Hazenberg, 2020). However, the expansion of blockchain national levels, creating a cooperative structure across scales. technologies and cryptocurrencies in the developing world could Together, these principles highlight the potential for sustainable, alsorepresentanewformoffinancialcolonialism,whereblockchain community-basedresourcemanagementwhensystemsarecarefully financialization perpetuates historical patterns of economic designed and grounded inlocal knowledge and participation. exploitation and dependency through digital networks. These Existing limitations to governing the digital commons along challenges are not limited to the developing world but are also Ostrom’sprinciplesincludediscrepanciesinresourcemanagement, prevalentinindustrializednations,highlightingtheglobalnatureof difficulty of assigning ownership over global boundaries and digital inequality and the need for inclusive solutions (Robinson scalability, unequal decision-making, monitoring, and weakly etal.,2015).Recentresearchhasshedlight(Dellarocas,2010a)on enforced sanctions due to a lack of universally binding thecompleximpactsofautomatedreputationandrewardsystems authorities (Stern, 2011). Building on Ostrom’s principles, on online communities, revealing both benefits and potential blockchain networks present an opportunity to enhance the drawbacks that warrant critical examination. For instance, while regulation of global digital commons through decentralized these systems can enhance user engagement, they may also governance models. inadvertently reinforce existing biases or create perverse incentives (de la Roche et al., 2022). While blockchain networks Tokenization model in decentralized aim to decentralize power and increase transparency, their design often reflects the assumptions and values of their creators, governance prioritizing efficiency over fairness or favoring users with more technical expertise or financial resources. Yet, blockchain On blockchain networks, tokenization is used to determine technology also offers opportunities for financial and social users’ rights to conditionally perform an action based on their inclusion in developing countries by addressing challenges such ownership of an asset. These assets are tokens that function as aslackofbankinginfrastructure,hightransactioncosts,andlimited transferable data elements on the blockchain. Tokenization allows access toformal financial systems. forformsofdecentralizedgovernancethatareuniquetoblockchain FrontiersinBlockchain 02 frontiersin.org Espositoetal. 10.3389/fbloc.2025.1538227 networks, including DAOs like MolochDAO and MakerDAO. sustainability.Majortokenholders,especiallythosewithshort-term Originally created to fund Ethereum 2.0 development, investment horizons, may push for policies that maximize MolochDAO allows token holders to vote on grant proposals, immediate token value even at the expense of long-term collectively funding projects that contribute to the Ethereum ecosystem health (Uzsoki and Guerdat, 2016). This can lead to ecosystem (Ethereum, 2015). MolochDAO primarily funds the formation of a shareholder primacy model, where decisions projects that contribute to the development and sustainability of favor token price appreciation over decentralization protocol Ethereum’spublicgoodsanddecentralizedinfrastructure.TheDAO security (The Aspen Institute, 2022). is focused on improving areas of the Ethereum ecosystem where funding through traditional venture capital or private investment Delegated voting model is lacking. Similarly, MakerDAO is a lending protocol and a DAO that oversees its operating protocol using the MKR governance token. In response to low voter participation, governance delegation HoldersofMKRparticipateinthedecentralizedgovernanceofthe allowuserstodelegatevotestorepresentatives.Auniqueaspectof MakerProtocol by voting on key parameters such as stability fees theMakerDAOecosystemisthedelegatedvotingmodel.Sincenot (essentially the interest rate on the loan), collateral requirements, all MKR holders can actively participate in every governance andriskmanagementstrategies.TogeneratetheDAIstablecoin,the decision, the MakerDAO allows MKR holders to delegate their stablecointhatMakerDAOmintsasloans,userslockEther(ETH), voting power to other individuals or entities, known as delegates, or other approved collateral, in smart contracts. These contracts, whovoteontheirbehalf.InMakerDAO,proxydelegatescontrolled knownas“vaults,”ensurethatDAIisbackedbyovercollateralized 9.16% of voting power individually, while self-delegates required assetstosecurethestablecoin’svalue(MakerDAO’sDAI,2014).If 504,514 MKR tokens to sway decisions (DAO Index, 2025). This thevalueofETHdropsbelowacriticallevel,theprotocolliquidates governance model aligns with the monitoring and regulations the collateral to repay the outstanding DAI debt (The Maker outlined in Ostrom’s principles. However, the overarching Protocol, 2024). Users are incentivized to manage their collateral tokenization model also introduces the risk of centralization to prevent losses from liquidation penalties; the protocol benefits when a limited number of individuals or entities owns a because overcollateralization ensures the stability and comparatively large percentage of MKR. For example, in trustworthiness of DAI. As such, by making users stake ETH as September 2018, the firm Andreessen Horowitz acquired 6% of collateral, MakerDAO ensures that individual users’ incentives to the total MKR supply for $15 million (Crypto Fund, 2018). In avoid liquidation align with the protocol’s goals of stability and December 2019, Dragonfly Capital Partners and Paradigm ecosystem growth. MKR governance through the tokenization collectively purchased $27.5 million of MKR, approximately 5.5% model further reinforces this alignment by ensuring risk ofthetotalsupply(TheMakerFoundation,2012),toinfluencethe parameters are selected to benefit both the protocol and its users decentralizedgovernanceoftheMakerProtocol.Theinvolvementof (“Understanding the MakerDAO Governance Process, 2024). these venture capital firms introduces a limitation to the The tokenization model turns users into decentralized decentralized, collective decision-making of the MakerDAO policymakers (Sockin and Xiong, 2021). However, models like ecosystem, as governing power becomes concentrated within the token-weighted voting can paradoxically lead to centralization users that possess the most tokens. While delegation tends to and plutocracy. In token-based governance, voting power is increase overall voting activity (Cheng et al., 2024), it reduces typically proportional to token holdings. Early adopters or engagement in strategic decisions and concentrates power participants with more resources who acquired tokens at lower among delegates. prices or through lower prices are more likely to gain To address this, platforms like Compound and Aave have disproportionate influence over governance decisions. This adopted delegated voting models, where token holders can assign dynamic reinforces itself in a negative feedback loop, where those theirvotingpowertotrusteddelegates.Thisapproachattemptsto withmoretokenscanshapegovernancetofavorpoliciesthatbenefit balance broad participation with effective decision-making by them,furtherconsolidatingtheirpower.Whencoupledwiththefact enabling more informed or engaged actors to vote on behalf of thatmanysmallerholdersdonotparticipateduetorationalapathy, lessactivemembers.However,itcanalsoleadtoconcentrationsof decision-making becomes primarily driven by a few large token powerinthehandsofafewhigh-profiledelegates,raisingquestions holders. This consolidation of governing power creates incentives aboutwhethersuchmodelstrulybreakfromtraditionalhierarchies for collusion and vote-buying, as large token holders can inform orsimply reproduce themin newforms. cartelsordelegated governancestructures wheretheyalignvoting Uniswap has taken a different approach by establishing a interests to maintain control. Further, systems like liquid stacking governance council, a group of trusted stakeholders who guide governancecanconcentrategovernanceinthehandsofafewlarge key decisions while still deferring to community votes on major liquid stacking providers. This leads to low baseline engagement, protocol changes. This hybrid model introduces a layer of which persists across most DAOs. In Decentraland, average voter institutional memory and coordination capacity, aiming to participationperproposalwas0.79%,withmedianparticipationat resolve issues like fragmented decision-making or procedural 0.16%(PeñaCalvínetal.,2025).Across30,000DAOsanalyzed,53% delays common in fully open governance structures. Yet, this too were inactive, with no proposals in 6 months, and voter turnout presents trade-offs. While councils can improve efficiency and decreased as DAO sizeincreased (Peña-Calvin etal.,2024). provide accountability mechanisms, they may also consolidate Unliketraditionalmodesofgovernance,blockchaingovernance power and limit broader community input, especially if council is often dominated by economic incentives rather than long-term membership lacks rotation or transparency. The tension between FrontiersinBlockchain 03 frontiersin.org Espositoetal. 10.3389/fbloc.2025.1538227 coordination and inclusivity remains a central issue for DAOs reviews.Off-chaincontributionscanalsobeincorporatedthrough navigating governanceat scale. engagementincommunitydiscussionswhichcanfactorintousers’ reputationscores.Long-term,consistentparticipationisrewarded, reducing the risk of manipulation from short-term engagement Mitigants to centralization on spikes. Reputation-based governance establishes transparent blockchain networks criteria for participation and influence, ensuring that decision- makers are involved in the commons. Despite its advantages, Quadratic voting models reputation-based voting requires thorough implementation to avoid sybil attacks, as fake identities on networks can artificially To mitigate the consolidation of governing power among the inflate reputation, as well as mitigate biases in contribution largest token holders, it is recommended to transform the assessment. Potential solutions include cryptographic identity tokenization model so that funding influence is nonlinearly verification and reputation decay mechanisms to prevent proportional to token holdings (Quadratic Models for exclusionary governance. Understanding, 2017). In traditional token-based voting, influence is directly proportional to the number of tokens possessed by a user. A quadratic, or nonlinear, voting model Soulbound Tokens (SBTs) would weaken the power of large token holders by introducing a cost-curve for voting. For example, Gitcoin Grants use quadratic Soulbound Tokens (SBTs) are non-transferable digital assets votingtodistributefundingbasedoncommunitypriorities(Gitcoin that represent personal achievements, credentials, or reputational Grants, 2020). markers.Theyofferaneffectivewaytopreventgovernancecapture In additional to a quadratic tokenization model, blockchain inblockchain-baseddigitalcommonsbyensuringthatvotingpower networkscanalsoemployapublicgoodsfundingmodelthatallows is tied to participation rather than wealth. Since SBTs cannot be small contributors to have a larger collective impact. Funding is bought or transferred, they align governance influence with matchedusingaquadraticformula,wheresmallerdonationsfrom meaningful engagement rather than financial status. Governance manypeoplereceivemoreweightthanalargedonationfromasingle participation is earned rather than bought, meaning long-term entity. Gitcoin’s quadratic funding model for Ethereum projects contributors and ecosystem stewards wield influence. Since exemplifies this form of decentralized governing power. Gitcoin’s governance is tied to non-transferable tokens, misbehavior can experimentation with reputation-based and quadratic voting lead to penalties, such as losing governance privileges, which through its Grants program represents another innovative aligns with Ostrom’s principle of graduated sanctions. governance pathway. Rather than giving greater weight to those Community members can also verify each other’s contributions withmoretokens,Gitcoin’squadraticfundingmechanismamplifies through on-chain records, ensuring transparency in governance. the voices of smaller contributors, promoting a more democratic ThemainchallengewithSBTsisprivacy.Ifallreputationalmarkers distributionofinfluence.ThismodelreflectsOstrom’semphasison are public, users may be subject to tracking or discrimination. congruencebetweenrulesandcommunityvalues,asitenablesmore Additionally, governance systems must implement fair ways to equitableresourceallocationbasedonthebreadth,notjustthesize, distributeandrevokeSBTswithoutcreatingcentralizedgatekeepers. ofsupport.Atthesametime,reputationsystemsarenotimmuneto manipulation, and defining what constitutes meaningful participation remains a challenge, especially in anonymous or Rotating governance councils pseudonymous digitalspaces. Rotatinggovernancecouncilsinvolveperiodicallychangingthe individualsresponsibleforoverseeingkeygovernancefunctionsina Reputation-based voting decentralized organization. This mechanism prevents entrenched power structures by ensuring that governance responsibilities are Unliketraditionaltoken-basedvoting,reputation-basedvoting distributedovertime.Byimplementingfixed-termgovernanceroles, assigns voting power based on an individual’s contributions and individuals or groups cannot monopolize decision-making engagement rather than financial stake. This mitigates wealth indefinitely. Different perspectives are introduced over time, concentration issues, ensuring that governance decisions reflect ensuring that governance decisions reflect the evolving needs of long-term community interests rather than short-term profit the digital commons. By rotating governance responsibilities, motives. This aligns with Ostrom’s principle of collective-choice different members of the community take turns ensuring fair arrangements,wherestakeholdersactivelyshapetherulesgoverning management of shared resources, aligning with Ostrom’s shared resources. In token-weighted governance, decision-making principle of monitoring. Moreover, since governance roles are power is proportional to the number of governance tokens a temporary, disputes are less likely to escalate into long-term participant holds, which often results in “whale domination,” power struggles. While rotating councils can prevent where a few large stakeholders control governance outcomes. centralization, they require structured transition processes to Reputation-based voting distributes power based on trust or ensure continuity. Additionally, inexperienced participants may expertise rather than token ownership. This model incorporates struggle with governance responsibilities, necessitating on-chain activity metrics, where participants earn governance mentorship programs or staggered transitions where experienced weight based on actions such as code contributions and proposal members guide newentrants. FrontiersinBlockchain 04 frontiersin.org Espositoetal. 10.3389/fbloc.2025.1538227 DAO regulations The Token House allows for token holders to vote on protocol upgrades and technical matters, while the Citizen’s House is Two prominent categories of DAOs include financial DAOs, responsible for allocating funding to public goods. The design suchasMakerDAO,anddigitalcommonsgovernanceDAOs,such intentionally separates financial incentives from social value, as Commons Stack. Financial DAOs are primarily focused on creating clearer accountability and reducing the risk of token monetary and economic activities. MakerDAO, for instance, whales dominating all governance outcomes. Both houses rely on governs the Dai stablecoin, allowing users to generate Dai a more curated and representative membership than what is through collateralized debt positions. The core function of such typically found in fully decentralized DAOs, enabling faster and DAOs is to ensure financial stability, liquidity, and efficiency in more focused decision-making. decentralized financial markets. Governance in financial DAOs Centralized or semi-centralized governance models can also typically revolves around risk management, monetary policy, and promote betterstrategicalignment.Inthe case ofOptimism,the maintainingstableoperationswithinadecentralizedecosystem.In presence of curated councils and working groups enables the contrast, DAOs for digital commons governance, like Commons network to set and pursue long-term objectives more Stack,aimtosupportthedevelopmentandsustainabilityofshared coherently. Rather than relying on unpredictable token holder digital resources, open-source projects, and community-driven sentiment,Optimismcanchanneleffortstowarditscoremission initiatives. These DAOs facilitate collective decision-making for of funding digital public goods. Similarly, projects like Arbitrum resource allocation, funding, and governance of public goods. have begun exploring delegate councils and security councils to They employ mechanisms such as bonding curves and quadratic expedite decision-making and respond to emergencies—features voting to ensure fair participation and long-term sustainability of thatpureDAOstypicallylack.Thesemorestructuredmodelsdo digital commons, emphasizingvalues like collaborationand social not abandon decentralization entirely, but they temper it with impact ratherthan financial profit. mechanisms for clearer accountability, strategic leadership, and DAOs allow blockchain networks to establish a collective, execution power. decentralized decision-making process (Li and, 2022). Initially, However,DAOsareincreasinglygainingattentionasinnovative users or community members of a blockchain network propose governancestructuresforblockchain-basedcommunities,yettheir changestothenetwork’sstructure,operation,andstrategies.Then, legal status remains ambiguous. Traditional legal frameworks theseproposalsarerefinedthroughon-chaindiscussionsbeforethe struggle to accommodate DAOs, which operate without coreteamtakestheproposalstoon-chainvoting.Asopposedtooff- centralized control, fixed jurisdictions, or conventional corporate chainvoting,wherevotinghappensoutsidetheblockchainonthird- structures. In response, emerging DAO regulations, such as partyplatforms,on-chainvotingoccursdirectlyontheblockchain, Wyoming’s DAO LLC law, represent an effort to integrate DAOs where votes are recorded immutably in smart contracts and into recognized legal systems. However, while such regulations decisions are executed automatically based on the outcome (Jafar provide a pathway for legitimacy, they also introduce potential etal.,2022).Aftertokenholderscasttheirweightedvotesbasedon challengesand tensions with decentralization. their possession of tokens, the core team implements the In2021,WyomingbecamethefirstU.S.statetolegallyrecognize community-approved proposals. (Commons Stack, 2024) This DAOsbyamendingitsLimitedLiabilityCompany(LLC)statutesto collective determination of digital regulation aligns with Ostrom’s allowDAOstoregisterasLLCs.Underthisframework,DAOscan definitionofthecommonsbytreatingdigitalspacesasacommon- obtain legal personhood, meaning they can enter contracts, own pool resource that users should regulate through collaborative, assets, and benefit from limited liability protections for their decentralized decision-making. Yet, the tokenization model raises members. To qualify, a DAO must include “DAO” in its name, concerns aboutthescope ofthiscollective choice arrangement,as provide an operating agreement specifying how it operates, use only those who own tokens can cast votes to determine the smart contracts for governance, and elect to be either “member- implementation of a specific structural, operational, or strategic managed” or “algorithmically managed.” This legislation aims to change(Crandall,2023).Despiteblockchainnetworks’inclusionary, offerDAOsthesameprotectionsandresponsibilitiesasLLCswhile collective decision-making approach to decentralized governance, acknowledging theirunique decentralizednature. current trends suggest that blockchains are used in fewer cases as One of the main challenges DAOs face is legal uncertainty, platformsforinclusioninthedigitalcommons;blockchainnetworks particularlyconcerningliability.Wyoming’sDAOLLCframework are also being used for more exclusionary and exploitative ends. provides members with limited liability protection, ensuring that (DAOIndex,2025)Assuch,althoughDAOsallowforarelatively individuals participating in DAO governance are not personally democratic governance model for decentralized digital commons, liable for the DAO’s actions. This protection is crucial for theyyieldvaryingresults.DAOscantakeinitiativeonlywhenusers encouraging broader participation in DAOs without fear of legal propose changes, and DAO’s enforcement of token-based voting repercussions.Withoutlegalpersonhood,DAOsstruggletointeract increasestheimpersonalizationofcommunity-wideimprovements with traditional entities, such as banks, courts, and regulatory and sanctions(Rozaset al.,2014). bodies. The DAO LLC model grants legal standing, allowing The Optimism Collective’s bicameral governance model is an DAOs to sign contracts and engage in litigation when necessary. example of how centralized decision-making can improve ThislegalbridgecanhelpDAOsintegratewithmainstreamfinancial government efficiency. Composed of two distinct “houses”, the and commercial systems while maintaining decentralized Token House and the Citizen’s House (Welcome to the governance. By offering a legally compliant pathway, Wyoming’s Optimism Collective, 2024), the system blends token-based law could encourage more institutional adoption of DAOs. governance with a more curated form of public goods funding. Regulatory clarity may attract traditional businesses and FrontiersinBlockchain 05 frontiersin.org

Espositoetal. 10.3389/fbloc.2025.1538227 investors,fosteringinnovationwhilereducingrisksassociatedwith MiCA is primarily focused on crypto-asset service providers and regulatory arbitrage. stablecoins, it sets a precedent for how decentralized projects, However,therequirementforaformaloperatingagreementand including DAOs, might be governed across EU member states. LLCregistrationcouldimposetraditionalcorporatestructuresonto MiCA emphasizes consumer protection and operational DAOs, potentially undermining their decentralized nature. While transparency, which could pressure DAOs to adopt more formal smartcontractsmayautomategovernance,thenecessityofalegal structuresorpartnerwithcompliantentitiesiftheywishtoserveEU entity and compliance with state laws could lead to centralized users. Though MiCA does not explicitly legislate DAOs, its broad administrative functions that conflict with the original ethos of definitions and risk-based approach suggest that any organization DAOs. Moreover, Wyoming’s law only applies within its engaging in crypto-related financial activity could be subject to jurisdiction, raising questions about how DAOs interact with oversight,even ifit lacksatraditional legal identity. regulations in other states and countries. Because DAOs operate DAOsarelimitedbythefactthatmostarestillintheirinfancy globally on blockchain networks, differing legal treatments across (ElFaqiretal.,2020),andthereisalackoftoolingavailableforDAO jurisdictions could lead to conflicts or regulatory arbitrage, where development (Wang et al., 2022). Although there is currently no DAOsstrategicallyregisterinthemostfavorablelegalenvironments clearviewofhowaDAOdesignedforcommonsgovernancewould whilestill operating globally. operate(VulpenandJansen,2015),therehavebeensameexamples The 2023 Ooki DAO ruling set a legal precedent for DAOs. of projects who claim to rely on commons-oriented perspectives, DistrictJudgeWilliamH.OrrickruledthatOokiDAOhadillegally including the Commons Stack project and the Aragon DAO operatedatradingplatformwithoutproperregistrationasafutures platform (Rozas etal., 2021b). commission merchant (Statement of CFTC, 2024). After a $643,542 fine, Ooki DAO was shut down via default judgement Commons-oriented projects bytheCommodityFutureTradingCommission.(Dellarocas,2010a) Crucially, theruling classified OokiDAO as a“person” underthe Commodity Exchange Act, increasing the regulatory and legal The Commons Stack is an organization that creates tools and liabilities for DAOs (Li and, 2022). Further rulings in U.S. courts frameworkstoassistdecentralizeddigitalcommunitiesinmanaging havecreatedthepossibilityofcontributorstoDAOsfacingpersonal sharedresources(CommonsStack,2014).Focusingonsustainable liabilities, complicating DAOs’ model of decentralized governance governance models that balance community goals with financial andincreasinglegalrisksforDAOcontributors(Dellarocas,2010b). stability, the Commons Stack project founded the Token As DAOs gain traction globally, regulatory approaches vary Engineering Commons (TEC) (Commons, 2021). The TEC is a widely by region, reflecting different attitudes toward innovation, project under Commons Stack and the digital token engineering risk, and financial oversight. Countries like Switzerland and communitythathascreatedaresourcepoolfordevelopingpublic Singapore have positioned themselves as crypto-friendly infrastructureprojects.TECusesabondingcurvemodeltomanage jurisdictions, offering legal clarity and frameworks that resourcesanddemocraticvotingfordecision-making.In2021,TEC accommodate DAOs within broader fintech ecosystems. For launchedasthefirstCommonsDAO,applyingOstrom’sprinciples example, Switzerland’s canton of Zug, often referred to as toDAOgovernancethroughtheeconomicsco-designmethodology. “Crypto Valley”, has developed progressive laws that allow DAOs ()Thismodelallowsvoterstoindependentlydevelopproposalsand to register as legal entities, such as associations or foundations receivefeedbackfrommembersofthedigitalcommonsbeforeitis (Braun-Dubler et al., 2020). This legal recognition provides put to vote. The Commons Stack claims that the CommonsDAO DAOs with the ability to enter into contracts, hold assets, and “embracespolycentricgovernance”bycateringtothediverseneeds interact with traditional financial systems, while still preserving of the commons (Commons Stack, 2013). Commons-oriented aspects of decentralization. By grounding decentralized projects on blockchain networks like the Commons Stack align organizations within established legal categories, Switzerland with Elinor Ostrom’s principles for governing the commons by balances the innovative potential of DAOs with safeguards for promotingdecentralized,community-drivenmanagementofshared legalaccountability. resources. These projects aim to prevent overuse by ensuring fair Singapore has taken a similarly open yet cautious approach, participation and sustaining collective benefits in digital public promoting blockchain innovation while implementing regulatory goods, such as open-source protocols, decentralized identity guardrails. The Monetary Authority of Singapore requires systems, and data-sharing networks. compliance with anti-money laundering and counter-terrorism Aragon is a software that allows users to create decentralized financing laws, ensuring that decentralized projects operate autonomousorganizationsontheEthereumblockchain(Upgrading within a transparent and regulated environment. Singapore has Smart Contracts, 2021). This software can be leveraged to create become a hub for Web3 startups by offering regulatory clubs, companies, nonprofits, and other organizations that sandboxes and clear guidelines, allowing DAOs to experiment collectively regulate finances and decision-making through its and grow within a legally secure framework. However, DAOs decentralized model. According to Aragon, over operating in Singapore still face challenges around defining 1,700 organizations are built on its software, with a market cap liability and enforcing contracts, especially as their governance ofover$30billionUSD.(Ecosystem,2020)Aragonconsistsoffive structures often involveglobal, pseudonymous participants. offerings with two native tokens. Most significantly, the Aragon In contrast, the European Union is moving toward a more Network Token is used in platform-wide governance and can be comprehensiveregulatoryregimewiththeMarketsinCrypto-Assets usedasabondtocreatetheANJtoken,whichtheAragonCourtuses (MiCA)regulation,whichwillcomeintofulleffectin2024.While tosettledisputes.OrganizationsbuiltonAragoncanusetheAragon FrontiersinBlockchain 06 frontiersin.org Espositoetal. 10.3389/fbloc.2025.1538227 Court to arbitrate and reach resolutions. Similar to a centralized Theseinitiativesoftenexacerbateeconomicandsocialinequalities, model, jurors are selected at random from the Aragon Network’s embedding many smallholder farmers in exploitative frameworks collectionofDAOsbasedonAragonsoftware.Bothpartieswillstake dominated by corporations and state surveillance (Blockchain ANTtokens,andafterthejurorsdelivertheirverdict,thetokenswill Chicken Farm, 2015). Blockchain initiatives often increase bedistributedtoeitherpartybasedonthevote.Jurorswhovotewill barriers for smallholder participation, favoring corporations and receiveaportionoftheaggregatedfees,andjurorswhofailtovote large-scale farmers, and subjecting smallholders to increased will lose their staked tokens (Stephen Haley, 2016). The Aragon scrutiny and dependency on corporate platforms. These systems Court sanctions misbehaving parties and members of the jury also facilitate data collection by corporations and the state, through the process of stacking tokens and removing jury reinforcing surveillance mechanisms in rural communities. This members. Thus, decentralized communities can establish a form usage of blockchain technology aligns with an authoritarian ofgovernancethroughblockchaincourts(RozasandHassan,2022). capitalist model, consolidating state control and corporate interests under the guise of modernization. It is necessary to further investigate the enduring effects of blockchain Collective choice and resource pooling implementation on local rural economies and smallholder regulation livelihoods. Blockchain networks address the challenge of identifying Resource allocation in Web3 relevant conditions in an environment as heterogeneous as global digital commons. In a blockchain context, online communities decide which proposals to recognize and how they are valued, Analyzing the impact of blockchain technology and Web3 on establishing a framework to acknowledge contributions through localeconomiesandenvironmentsrevealsthatblockchainprojects online participation in organized methods similar to those of a arenotmerelyvirtualsystemsbutareintrinsicallytiedtophysical participatorydemocracy.Theseinteractionsoccuronopen-source spaces and their social, economic, and environmental dynamics projectsonplatformslikeGitHub,aswellascommunitychatsand (Howson et al.). Drawing on Henri Lefebvre’s idea of “the forums (Seungwon Eugene Jeong, 2020). Formally established production of space,” (FairCoop, 2023) Howson et al. idea of proposals, after obtaining approval through a tokenized voting “Crypto/Space” posits that Web3 projects materially and socially process, are then codified through smart contracts (Rozas and constitute space in manners that deviate from traditional digital Hassan, 2022). Initial implementations of blockchain systems did software.Blockchainprojectsderivevalueandoperationalcapacity not have sufficient flexibility in its smart contracts, but current fromphysicalresourceslikeenergy,land,andinfrastructure,while implementationshaveadoptedtoolstoovercomeformerlimitations simultaneouslyshapingthesespacesbyalteringtheireconomicand andchangesmartcontractsasdeemednecessarythroughcollective regulatorylandscapes.The“Crypto/Space”frameworkcritiquesthe determination. (MakerDAO, 2020) This upgradeability of smart prevailing narrative that blockchain is a neutral, apolitical contractscanbeseeninAragon’sDAOplatform(AragonNetwork technology. Instead, it reveals how these projects are deeply DAOandDecentralizedGovernance,)andOpenZeppelin’stoolsfor embedded in power dynamics, often favoring speculative capital smartcontract updating (Upgrading Smart Contracts,2021). and elite actors at the expense of marginalized communities (Howsonetal., 2024). Due to the energy-intensive nature of Proof-of-Work (PoW) Global perspective on democratization cryptocurrencies like Bitcoin, blockchain projects tend to exploit of blockchains local resources without offering commensurate benefits to host communities in a process known as “crypto-parasitism”. (Hung, Despite the benefits of decentralized polycentrism through 2024)Bitcoinmining,whichreliesonPoWconsensusmechanisms, DAOs, the tokenization model, and collective choice, blockchain consumesvastamountsofelectricity,oftensourcedfromlocalgrids technology can also be weaponized against democratic intent by or subsidized energy programs intended for broader extending neo-colonial dynamics. (Jutel) The deployment of community use. blockchain in developing countries may serve the interests of Case studies from Chelan County, Washington, and Dresden, global financial capital, leading to new forms of economic NewYork(Lallyetal.,2010),illustratehowminingoperationsstrain dependency. local infrastructure, increase utility costs, and produce noise In the Global North, blockchain is celebrated for pollution, disrupting everyday life. Chelan County became a decentralization and empowerment (Hung, 2024). In contrast, in hotspot for cryptocurrency mining due to its access to cheap China, the state utilizes blockchain to reinforce governance and hydroelectric power generated by the Columbia River. The area’s alignwithcorporateinterests,amplifyingstatepowerandcapitalist historicallylowenergycostsattractedseveralminingoperations,but motives. (Peña-Calvín et al., 2024) The adaptation of blockchain the influx of miners created significant challenges. Mining rigs technology in rural China contrasts its original libertarian ideals produce significant heat and require industrial-scale cooling with its current implementation as a state-controlled tool for systems to operate efficiently. The large fans used to cool these economic and social governance. (Regen Network, 2021) In systems generated constant, high-decibel noise, disrupting the China, blockchain is integrated into national development tranquility of the surrounding neighborhoods. Moreover, sudden policies, diverging from its decentralized, privacy-focused roots demand from crypto mining operations overwhelmed Chelan (The Untold Technological Revolution Sweeping Through, 2016). County’s electrical grid. Mining rigs require enormous amounts FrontiersinBlockchain 07 frontiersin.org Espositoetal. 10.3389/fbloc.2025.1538227 of electricity to run high-powered computers 24/7, causing the Virtual land grabs local utility infrastructure to near capacity. To accommodate thesedemands,theChelanCountyPublicUtilityDistrict(PUD) Blockchain projects often acquire land under false pretenses, had to invest in grid upgrades, including installing new promisingdevelopmentorinnovationbutfailingtodeliveronthese transformers and substations. These additional costs imposed commitments (Howson et al., 2020). These projects use the land financialburdensforthepublicutility.Tomanagetheheightened primarily for speculative purposes, such as securing investment, demand and offset infrastructure costs, the PUD introduced a inflating asset values, or facilitating token sales. For example, special rate structure for cryptocurrency miners (Chelan PUD, Liberland, a proposed tax-free crypto nation on disputed land 2021).Thesehigherratesaimedtopreventthecostsfromspilling between Croatia and Serbia, was originally marketed as a over to residential and other commercial customers. However, libertarian haven, but its promises remain unrealized, and the local residents voiced concerns that they might indirectly land remains undeveloped. Similarly, Cryptoland, a planned subsidize mining operations if rate adjustments proved blockchain utopia in Fiji that was heavily marketed but failed to inadequate to cover the actual costs incurred by infrastructure secure the land, left investors with worthless NFTs. These land upgrades.Inresponsetocommunitybacklashandgridconcerns, acquisitions displace local populations and often ignore existing Chelan County implemented temporary moratoriums on new claimsorcommunityneeds.Manyregulatorybodiesanddevelopers cryptominingoperations.Thisallowedlocalofficialstostudythe tend to frame these areas as “blank slates” for experimentation, long-termimpactsoftheseactivitiesandestablishregulationsto disregardingthesocialandenvironmentalcosts.()Assuch,ethical mitigate adverse effects. usages of blockchain networks as a mode of digital governance Similarly,in2020,adecommissionedcoal-firedpowerplantin requires the establishment of foundational risk-minimizing Dresden, New York was repurposed into a natural gas-powered oversight secured byexternal regulatory bodies. crypto mining facility. This facility, operated by Greenidge Generation, highlighted the environmental and infrastructural challenges associated with crypto mining. Greenidge Generation Play-to-earn gaming converted the plant into afacility that could both produce energy and power its cryptocurrency mining rigs. The dual-use model “Play-to-earn”(P2E)gamingisanemergingformofdigitallabor created additional strain on the regional energy grid, as large- that blurs the lines between work and play. P2E games monetize scale mining operations demand a consistent and significant gameplay by integrating blockchain technology, offering players energy supply. The substantial power usage raised concerns financial incentives through cryptocurrency and NFTs. Axie about the facility’s impact on energy availability for local Infinity, a pioneer in P2E gaming, exemplifies this model by communities and small businesses. The high energy consumption using digital scarcity to create value. Sky Mavis, the developer, by Greenidge’s mining operations raised fears of increased energy generates revenue through transaction fees and marketplace prices for local residents. While the company claimed to operate activity. Axie Infinity can demonstrates how blockchain-based efficiently, criticsargued thatitsheavy energyuse created upward gaming produces new forms of labor precarity, endangering pressureonratesforthebroadercommunity.Thefacilitydrewlarge employment levels through exploitative practices (Kuo Siong amountsofwaterfromSenecaLakeforcooling,dischargingheated Tan,2024). water back into the lake. Environmental groups warned that this TheCOVID-19pandemicamplifiedtheappealofP2Egaming, practice threatened local aquatic ecosystems, including fish particularlyintheGlobalSouth,whereitwasmarketedasalifeline populations and waterquality (Mantius, 2022). foreconomicallyvulnerable populations.Axie Infinityappealedto The events in Chelan County and Dresden illustrate the playersincountrieslikethePhilippinesandVenezueladuringthe unintended consequences of large-scale cryptocurrency mining. pandemic, with stories of players earning more than minimum While these operations bring investment and jobs, their wages.Playersearnthroughin-gamecryptocurrencieslikeSmooth significant energy demands, noise pollution, and infrastructural Love Potion (SLP) and Axie Infinity Shard (AXS) to trade for strain often outweigh their benefits. Both communities income, yet their experiences are shaped by the volatility of demonstrate the importance of proactive regulation and cryptocurrency markets and insecure employment arrangements community engagement to address the environmental, economic, amongotherexploitativeworkingconditions.()AxieInfinityallows and socialimpacts ofcrypto mining. userstosecureassetownershipandenablestradeondecentralized More broadly, the carbon footprint of Bitcoin mining rivals marketplaces,makingdigitalrewardsliquidandredeemableforfiat thatofentirenations,withmuchoftheenergycomingfromfossil money. Yet, since players’ earnings are directly tied to the fuels.Miningoperationsproducee-wastefromoutdatedhardware cryptocurrency market, they are subject to unpredictable like ASIC units, which are discardedevery 1–2 years. Thiswaste amounts of volatility. For example, SLP prices dropped 99.65% often ends up in the Global South, exacerbating environmental from their peak, eroding income potential. (Lally et al., 2010) degradation.Often,localcommunitiesarelefttobearthebruntof Moreover, delayed token withdrawals exacerbate losses, as prices theseexternalities,suchasincreasedpollution,risingutilitycosts, often decline before players can convert earnings to fiat. Security and limited job creation. In order to reap the democratizing risks also threaten to compromise players’ earnings, as the Ronin benefits of decentralized blockchain networks in the digital blockchain, which underpins Axie transactions, suffered a commons while minimizing crypto-parasitism, users must have $625 million hack in 2022 that leftmany players unable to access equalinputinthefunctionsofthenetwork,aswellaswithexternal earnings.ThecentralizedoversightofAxieInfinitybythedeveloper regulatory bodies. Sky Mavis means that the developer can change software code to FrontiersinBlockchain 08 frontiersin.org Espositoetal. 10.3389/fbloc.2025.1538227 modifygameplayandrewards,oftenwithoutwarning,atthecostof services (Regen Network, 2021). It leverages a proof-of-stake destabilizing players’ earnings and increasing theirwork intensity. blockchain to issue ecological credits based on real-world data, (Werbach, 2018) Errors in detection algorithms have unfairly such as improved soil health, biodiversity, or water retention. penalized innocentusers, disrupting livelihoods. Farmers and land stewards can receive compensation for P2E gaming can commodify leisure, leaving many players ecological improvements, while buyers can invest in verified dependent on unstable cryptocurrency markets. Speculative environmental outcomes. (Mantius, 2022) Regen’s governance economic models and exploitative labor practices exacerbate this model includes a broad network of scientists and ecologists who labor precarity. Despite claims of decentralization and aim to ensure that ecological metrics are credible and regionally empowerment, blockchain-based games often replicate or amplify relevant. Its decentralized yet data-driven approach demonstrates traditionalformsofinequalityandexploitation.Thereisadditional howblockchaincansupportcomplexenvironmentalcoordination toexaminedigitallaborthroughaprecaritylenswhilerecognizing across dispersedactors. the socioeconomic vulnerabilities embedded in emerging Celo, a mobile-first blockchain platform focused on financial technologies. inclusion, integrates sustainability directly into its protocol-level economics(Ecosystem,2020).Aportionofitstransactionfeesand block rewards is allocated to a reserve of tokenized carbon assets, DAOs incentivizing effectively building carbon offsetting into the foundation of the sustainable behavior network.CeloalsosupportsDAOsandprojectsthatadvanceclimate goals through its Climate Collective,which includes organizations Although blockchainnetworkare energyintensive, DAOscan likeToucanandRegen.(delaRocheetal.,2022)Celo’smodelshows be used as tools to incentivize sustainable behavior and address how sustainability can be made an integral part of digital global challenges such as climate change. KlimaDAO, one of the infrastructure, notjustan optionaladd-on. largest sustainability-focused DAOs, leverages blockchain Throughtheseexamples,itbecomesclearthatDAOshavethe technology to influence the voluntary carbon credit market. By potentialtofosterscalable,incentive-alignedenvironmentalaction, using decentralized finance mechanisms, KlimaDAO and similar provided their governance structures remain transparent and projects aim to align financial incentives with environmental adaptive to ecologicalcomplexity. responsibility. KlimaDAOisablockchain-basedorganizationdesignedtodrive Assessment of potentials up the price of carbon credits, thereby making pollution more expensive and encouraging businesses to offset emissions. It operates on the Polygon blockchain and utilizes a treasury- Governance of digital commons by blockchain can be backed algorithmic token, KLIMA, which is backed by tokenized interpreted into “six affordances:” (Rozas et al., 2014) carbon credits. The core mechanics include carbon-credit backing tokenization (Lin et al.), self-enforcement and formalization andabondingmechanism.KlimaDAOacquirescarboncreditsfrom through collective arrangements (De Filippi and Hassan, 2016), traditional markets and tokenizes them into Base Carbon Tonnes shifts to automatization in digital regulation through DAOs (BCTs),allowingthesecreditstobeusedasfinancialtokens.Under (DuPont and Campbell-Verduyn, 2017), increased transparency the DAO’s bonding mechanism, users can sell carbon credits to in governance (De Filippi, 2018), and the codification of trust KlimaDAOinexchangefordiscountedKLIMAtokens.Thishelps through upgradeable smart contracts (Werbach, 2018). These six theDAOcontinuouslyaccumulatemorecarboncredits,removing affordances can be interpreted through the lens of Ostrom’s them from the market. By increasing the demand for tokenized principles for managing the commons. Tokenization enables carboncreditsandlockingtheminitstreasury,KlimaDAOaimsto clearly defined community membership and proportional createartificialscarcityinthecarbonmarket,makingcarbonoffsets resource contribution, reflecting Ostrom’s principle that more expensive and pressuring industries to adopt more commons governance should establish clear boundaries of sustainable practices. participation. By issuing governance tokens, blockchain TheToucanProtocolisanotherblockchain-basedinfrastructure communities define who has a stake in decision-making, similar thatbringscarboncreditsontotheblockchain,allowingthemtobe to the traditional commons that require clear user rights. Self- traded, retired, and embedded into decentralized finance enforcement and formalization through collective arrangements applications (Carbon Credit Market Infrastructure, 2023). By mirrors Ostrom’s principle of collective-choice arrangements, tokenizing carbon assets, Toucan introduces liquidity and where users directly shape rules. Blockchain-based governance transparency to what has traditionally been a fragmented and formalizes agreements through smart contracts, ensuring that opaque market. (Zwitter and Hazenberg, 2020) It incentivizes community-driven decisions are enforceable without reliance on sustainability by enabling DAOs and decentralized protocols to centralized authorities. Increased transparency in governance offset their emissions or build carbon-conscious features into reinforces Ostrom’s principle that effective monitoring should be their systems. Toucan’s use of open governance allows available to all participants. Because blockchain records all stakeholders to collectively decide how carbon assets are sourced transactions immutably, it ensures that rules, votes, and resource and used, (Zwitter and Hazenberg, 2020) aligning with Ostrom’s distributionsremainvisible,reducingcorruptionandstrengthening principles ofparticipatory rule-making and local knowledge. collective accountability. The codification of trust through Similarly,theRegenNetworkfocusesonregeneratingecological upgradeable smart contracts supports graduated sanctions and systems through blockchain-based verification of environmental conflict-resolution mechanisms, another key part of Ostrom’s FrontiersinBlockchain 09 frontiersin.org

Espositoetal. 10.3389/fbloc.2025.1538227 principles. Blockchain systems enable programmable enforcement power to those coding the rules to govern blockchain networks of rules, where non-compliance triggers predefined penalties or and by extension the digital commons (Rozas and Huckle, 2021). dispute resolution mechanisms, maintaining order without Yet, those with more power in the community may experience reliance on external enforcers. Decentralized resource higherpressurebecauseoffrequentroundsofnegotiations,andthe management facilitated by blockchain aligns with minimal decentralized governance model would allot a higher degree of recognition of rights, ensuring that governance structures are freedom and agency to local networks which emerge over recognized and upheld without excessive external interference. By time(Rozas and Huckle, 2021). giving users direct control over governance mechanisms, As DAOs evolve, several key research directions could blockchain-based commons avoid centralized gatekeeping while enhance understanding and development, including empirical maintaining self-determined rule-making. studies on governance participation, legal structures for A blockchain network’s creation and management of tokens compliant DAOs, and the integration of AI into DAO directly determines access to the blockchain’s infrastructure. governance. Empirical studies investigating factors that Digital commons governed by blockchain can grant tokens to influence DAO participation could better outline incentive peoplewhohavesufficientlycontributedtheinfrastructure,orpaid structures, voting frequencies, and decision-making engagement. a certain price, to access the internet through the community Studies should center around governance fatigue and voter network (Rozas and Hassan, 2016). Moreover, tokenization can apathy in DAOs, as well as power dynamics in DAO determinetheextenttowhichauserpossessesgoverningagency. governance across reputation-based voting, quadratic voting, In large-scale digital commons and FLOSS Projects, permission and SBT-based governance. As DAOs become more andrightstomodifythecommonscanfurtherbedeterminedusing embedded in legal frameworks, empirical studies should explore tokenization.Assuch,theapplicationoftokenizationtothedigital howDAOscanadoptlegalentitiessuchasLLCs,cooperatives,or commonscanincreasethenetwork’scapabilitytoexperimentwith trustswhilepreservingdecentralization.AsAIexertsalargerrole the use of different types of tokens in collaborative platforms inthedigitalgovernancesphere,researchinghowAImodelscan (Rozas et al.,2014).Morespecifically,the implementationof the assistinDAOproposalevaluationandgovernanceautomationcan tokenization model to communally construct mediating help streamline the regulatory process as well as assess the blockchain-based artifacts can shed light on “invisible labor” feasibility of DAOs that are entirely managed by AI-driven (Pérez-Orozco, 2014) and address hidden power dynamics in smart contracts. CBPP communities. Blockchain networks give CBPP communities the potential to collectively construct software and algorithms in which users’ Digitalized communitarianism through CBPP actions are more easily tracked and audited by other users. This aligns with the digital commons’ open and participative nature. However, the commons-based approach depends on a Byemphasizinguseoverexchangevalue,CBPPaimstoestablish reinterpretation of the trust or contract between participating autonomous systems that redistribute resources equitably within users and the mode of governance. By nature, the algorithmic communities.AnalyzingtheexampleofFairCoopascasestudyfor nature of blockchain networks’ DAOs requires frequent updates, theefficacyofCBPP,it isevident thatdecentralizeddigitalspaces wherein users’ trust in the governance model is tested. The cansustainandgovernthemselvesiftheycanefficientlyscalewhile upgradeability of smart contracts is consequently essential to regulatingissuessuchashierarchicalpowerstructuresanduneven enhance users’ trust in the governance model (Rozas and Hassan, participation. 2016). Moreover, the implementation of decentralized courts in Founded in 2014 in Catalonia, Spain as an extension of the blockchain networks can also bolster user buy-in to the Catalan Integral Cooperative (CIC), FairCoop was established by decentralized governancemodel (Rozaset al.,2021a). activist Enric Duran using funds from loans taken from Spanish Sinceblockchainnetworksarelargelyregulatedbyautonomous banksinanactofcivildisobedience(FairCoop,2023).FairCoop’s DAOs, blockchain technologies rely on rules that are mission is to create a global cooperative for equitable trade and unambiguously understood by machines (Rozas and Hassan, redistributionofresources.ThedigitalcollectiveusesFairCoin,an 2016). The implication is that digital commons regulated by alternative cryptocurrency, to sustain local economies and inject blockchain networks must have “formalized governance rules” capitalintocommons.Unlikeothercryptocurrencies,FairCoinused (Rozas et al., 2021b) understood and executed by algorithms in a “proof of cooperation” (PoC) validation system to align with naturallanguage.Asaresult,membersofthedigitalcommonsmust environmental and social goals (Ettlinger, 2024). Internal discuss rule changes, or update smart contracts, and subsequently governance is conducted through automated processes with encode these changes. (Rozas et al., 2021b) This process faces participatory decision-making in chat assemblies. As opposed to complications as CBPP communities grow in size and scope. exploitative forms of blockchain networks, FairCoin’s approach When CBPP communities begin upsizing, they normally try to emphasis sustaining the ecosystem through collective resource decentralize control over infrastructure and increase the level of management. However, market volatility led to the devaluation of formalization in organizational processes (Schweik and English, FairCoin,underminingitsabilitytosustainthenetwork.Moreover, 2013). Although these organizational changes align with diverging interests among participants and external opportunists Ostrom’s principles of collective choice arrangements, they do takingadvantageofthesystemforpersonalgaincontributedtothe not typically occur in scenarios of equitable power dynamics destabilization of the project. Freeloading also posed a barrier to (Rozas et al., 2014). This organizational formalization can shift efficient regulation. Despite democratic aspirations, the projects FrontiersinBlockchain 10 frontiersin.org Espositoetal. 10.3389/fbloc.2025.1538227 Data availability statement exhibited power imbalances, with leadership eventually consolidating into a form of centralized decision-making (Blockchain Chicken Farm, 2015). Therawdatasupportingtheconclusionsofthisarticlewillbe Whileautomationthroughblockchaincanenhanceefficiency,it made available bytheauthors, without unduereservation. risksentrenching powerimbalancesifnotcarefullymanaged.The project highlights the need for a degree of human-centered, Ethics statement deliberative processes to complement algorithmic systems to scale communitarian systems across regions. Since larger networks introduce greater complexity and potential for value drift, No human studies are presented in the manuscript. No addressing these gaps requires proactive measures to integrate potentially identifiableimages ordata arepresented inthis study. marginalized populations and foster inclusive participation (BlockApps Inc, 2024). Author contributions Conclusion ME:Writing–originaldraft,Writing–reviewandediting.TT: Writing – original draft, Writing – review and editing. DG: Blockchain technology and Web3 have introduced Writing –original draft,Writing –review and editing. transformative possibilities for decentralizing governance and establishing equitable digital commons. However, persistent Funding challenges, from market dependencies to inclusivity gaps, require innovation and reflexivity. By addressing these complexities, communitarian governance models can evolve Theauthor(s)declarethatnofinancialsupportwasreceivedfor into scalable and inclusive frameworks that align with theresearch and/or publicationofthis article. Ostrom’s principles while adapting to the multifaceted nature of digital spaces. If blockchain governance is to embody Ostrom’s, blockchain networks must address the complexities Conflict of interest ofdigitalcommonsmanagement.Whileblockchainprovidesa noveltoolkitfordecentralizedgovernance,itssuccessdepends The authors declare that the research was conducted in the on how communities structure governing power and absenceofanycommercialorfinancialrelationshipsthatcouldbe accountability within these systems. Whether blockchain will construed as apotential conflict ofinterest. serve as a tool for democratization or an extension of existing inequities will be determined not just by technical innovation, Generative AI statement but by the collective choices of those who engage with and regulate these digital commons. In cases where states use blockchain to entrench their power, such as through The author(s) declare that no Generative AI was used in the surveillance or the centralization of digital identity systems, creation ofthismanuscript. individuals and communities must resist passivity by building and participating in alternative, transparent, and community- governednetworks.ThisresistancemirrorsOstrom’semphasis Publisher’s note oncollective-choicearrangementsandtherightofcommunities to self-organize without external interference. By designing Allclaimsexpressedinthisarticlearesolelythoseoftheauthors blockchain systems that prioritize inclusivity, accountability, and do not necessarily represent those of their affiliated and participatory governance, individuals can protect digital organizations, or those of the publisher, the editors and the freedom and ensure that blockchain remains a commons, reviewers. 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