With the crypto boom in 2021, many blockchain enthusiasts and cryptocurrency traders believe that Decentralized Autonomous Organizations (DAOs) could be the future of typical organizations and cultural communities. Tracheopteryx, a reputable DAO air traffic controller and main contributor to Yearn.Finance commented on the future of decentralized finance (DeFi), non-fungible tokens (NFT) and DAOs,
âThe way I thought about it, if you look at DeFi, it’s a gamble on the future of finance. NFTs are a bet onâ¦ the future of property, âhe continued,â But, DAOs are a bet on the future of the human organization itself, which is even more important. “
What are decentralized autonomous organizations (DAO)?
DAOs are native Internet organizations with no centralized authority. Rather, they have a built-in treasury that is only accessible with community approval, meaning that a community governs them without line management. Therefore, DAOs are managed from the bottom up and decisions are made based on a precise set of rules implemented on a smart contract in a blockchain, usually Ethereum.
Therefore, DAO users are the most important element. If the community – the group of token holders spread across the globe – wants to change any aspect of DAO, they must organize the vote, contribute more money, or complete other tasks. However, this does not make every organization with governance capabilities a âDAOâ, as another necessary quality is to be autonomous or to have the capacity to control its own affairs.
The term DAO might have a negative connotation for those who witnessed the first DAO hack in 2016. DAO was one of DeFi’s largest crowdfunding projects, raising around $ 150 million in 3 weeks. Its developers quickly encountered a bug in DAO smart contracts, allowing an attacker to siphon off DAO assets.
Some believe that the Bitcoin Network (BTC) is a prime example of DAO. Although Bitcoin’s network evolves thanks to the power of its community, most of its community members have never met. Miners and BTC nodes should report support instead of having a structured management mechanism, also known as semi-autonomous structure. For these reasons, BTC would not be considered a DAO.
What can DAOs do?
DAOs do what the dot-com bubble did to businesses in the 1990s, when many businesses flourished with new internet technology. Mirroring, DAOs are propelling DeFi and the crypto world in terms of massive growth and innovation.
DAOs can be created for almost any purpose with the support of community members. Some of the use cases for DAOs are:
- Governance protocols for yield optimizers and lending platforms such as Uniswap and Aave.
- As an investment and grants that work with common capital or fund new innovative projects such as MetaCartel, Gitcoin and Moloch. Unlike hierarchical organizations, they rally with token holders on the investments to be made such as new projects or developments.
- As a collector, he can pool funds to purchase anything from a digital work of art to actual antiques like the US Constitution.
- Social DAOs, also known as community clubs, allow users to become members by purchasing a certain number of tokens.
Additionally, DAOs can work with different types of memberships. Token-based memberships are typically entirely unauthorized, allowing governance tokens – tokens that are used solely for platform utility and voting – to be redeemed without the need to seek permission on a decentralized exchange (DEX). On the other hand, share-based memberships are limited to certain rules carved into the smart contract, meaning members cannot leave DAO with their proportional share of the cash.
Examples of DAOs on the Ethereum network
- PleasrDAO: A collective DAO that invests in high value NFTs. He bought a $ 5.5 million NFT from Edward Snowden and the only copy of the Wu-Tang Clan’s album, “Once Upon A Time In Shaolin” for $ 4 million.
- ConstitutionDAO: It was created to purchase a rare copy of the Constitution of the United States by raising over $ 47 million. Unfortunately, the DAO lost the auction at Sotheby’s.
- Uniswap: A DeFi protocol used to trade altcoins. Their innovative combination of Automated Market Maker (AMM) and liquidity pool concept is praised by many. Uniswap is the largest DAO and the second largest DEX on Ethereum.
- MetaCartel Ventures: A for-profit investment DAO to fund creative projects that create new applications on Ethereum.
- Gitcoin DAO: A DAO grant designed to fund and foster promising open source projects within the DeFi ecosystem. They have already funded over $ 49.8 million for well over 300,000 developers.
How to do a DAO
While the whole concept of creating a DAO seems difficult for a non-tech crypto native, platforms like Aragon, Colony, District0x, and DAOhaus, among others, will allow a user to create a DAO with almost no hassle. These platforms often encourage individuals to opt for a DAO because, like Colony declared, “Politics is at stake”, which means that the senior executives of a normal company could take over the work of their subordinates.
Further, the founders of Colony noted that “instead of being watched and evaluated by someone higher up in the hierarchy, the merit of any individual within a colony [DAO] is calculated through systematic peer review of completed work and digitally represented on the blockchain. “
These platforms allow you to easily set up company ownership, issue tokens, fundraise, and create rules like voting rights, membership type or even the percentage of vote needed. for a movement or project to be approved.
In addition, DAOstack works on larger projects. They develop “WordPress for DAO”. Imagine being able to use and reuse a few governance plugins depending on what type of DAO you’re trying to create – almost anyone could create a DAO with little hassle.
Is joining a DAO worth it?
DAOs can be a simple method to change hierarchical governance. Instead of a board of directors, a community can vote on the decisions of the DAO. Although Wyoming has given DAOs the same legal authority as Limited Liability Companies (LLCs), they are still not nationally recognized, making it more difficult for them to be adopted on a large scale.
Mark Cuban, billionaire investor, share his idea of ââDAOs on Twitter: âThe future of business could be very different as DAO takes over legacy businesses. He went on to say, âEntrepreneurs who enable DAOs can make money. If the community is good at governance, everyone benefits. “
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