A Study on Utilizing Elements of Decentralized Autonomous Organizations (DAOs) to Enhance the Effectiveness of International Development Cooperation (IDC) Projects

Abstract

This report examines methods for selectively utilizing specific technologies and principles of Decentralized Autonomous Organizations (DAOs) to enhance the efficiency and effectiveness of International Development Cooperation (IDC) projects. Based on the assessment that the full-scale adoption of a DAO is currently unrealistic and entails significant risks in the IDC environment, this study focuses on the partial application of core elements such as the transparency of blockchain, the automation of smart contracts, and immutable record-keeping. This approach aligns with the recent trend where DAOs are gaining attention for their potential to strengthen social impact and improve the inefficiencies and transparency of existing systems in the development cooperation sector (Aaltonen et al., 2024; Staszczak et al., 2024). The report introduces the potential of DAO elements to contribute to improving transparency and efficiency in key management areas across the project cycle. Among these, it deeply explores methods for securing data reliability and enhancing traceability in the field of Monitoring, Evaluation, and Reporting (MER). It analyzes how the immutable record-keeping characteristic of blockchain can compensate for the vulnerabilities of existing centralized systems and enhance the integrity of specific types of MER data (inputs, activities, verifiable outputs). The potential for pre-validating data and enabling controlled data dissemination using smart contracts is also presented. While MER can serve as a core verification foundation for Outcome-Based Pricing (OBP) models, the application of DAO elements in this area still faces significant challenges, including the oracle problem, data quality limitations, and difficulties in measuring outcomes and impacts. Although blockchain can contribute to recording M&E data in a tamper-proof manner and enhancing transparency and traceability (Everconnect, 2024), ensuring the reliability of oracles that bring real-world performance data onto the blockchain remains a key challenge (GoLab, BSG, University of Oxford, 2023). Furthermore, this report explores the use of tokenomics for the specific purpose of project resource mobilization. While this holds the potential to increase the transparency of fundraising and financial management, the report discusses in depth that in the existing IDC project environment, it faces much higher and more complex challenges. These include legal and regulatory uncertainties, market volatility and speculative risks, the difficulty of designing complex tokenomics, the risk of governance conflicts, and the potential to deepen the digital divide. In particular, if an outcome-linked token model is conceived by combining Outcome-Based Pricing (OBP) with tokenomics, it is highly likely to have the nature of profit distribution, making the issue of its classification as a security severe. Moreover, as seen in the case of the Central African Republic's meme coin (CAR Meme), even tokens issued under the pretext of development goals can exhibit extreme market volatility and be exposed to speculative risks despite disclaimers of intrinsic value, supporting a cautious approach to using tokenomics. While tokenomics for development finance can be linked to achieving SDGs or financing regenerative projects (Staszczak et al., 2024), poorly designed tokenomics can lead to project failure (Kivilo et al., 2025), requiring careful design to prevent speculation and ensure long-term utility. Therefore, the use of tokenomics for resource mobilization currently warrants an extremely cautious and limited approach, suitable for research and small-scale experimental stages. The successful introduction of DAO elements depends less on the technology itself and more on a deep analysis of each project's specific context and a problem-solving-oriented approach. A strategy is needed that starts with relatively low-risk areas, such as enhancing data reliability in the MER field, to learn incrementally. For high-risk areas like tokenomics, a strategy of responsible exploration with the utmost priority on legal and ethical considerations is necessary. This report presents strategic considerations and recommendations for development cooperation agencies like KOICA to utilize the potential of these DAO elements responsibly and effectively.