The full form of DAO is enough to confuse a normal person and make him scroll over to the next piece of content. This blog post will clear your DAO concepts and help you understand how this could be a future.
Traditionally, the companies have a hierarchical role, starting from CEO, CTO, CFO to HR Managers, Software Engineers, etc. The governing body in such types of organizations are the higher management roles taking decisions for the company. A normal person would never be able to look at the financials of the company or even the internal decisions the company makes.
But what if we change the structure? Sounds interesting?
This is where DAO comes into place. The three heavy words ‘Decentralized Autonomous Organizations’ help to restructure the hierarchy and governance for an organization.
What is a DAO?
Decentralized Autonomous Organizations are community-run with a shared goal through transparent decision-making processes. The organization is run on a blockchain to enable transparency and give people a ‘say’ in the governance and management decisions.
DAO is not only limited to an organization, but a group of like-minded people can also even pool in together to let’s say purchase a piece of land. The governance will be given to each member but the weightage will be given to the person holding more tokens.
How does a DAO work?
The best thing about DAO is we can collaborate with anyone sitting in any corner of the world. Even if we do not know that person, we can still create an organization and work together provided internet accessibility.
In recent years, the DAOs have gained quite a lot of popularity where even old-age organizations are planning to convert to a decentralized organization.
What does ‘autonomous’ mean?
Autonomous is defined as a process that is done automatically. DAOs are based on smart contracts that execute upon fulfilling a certain set of conditions. Therefore, the process is entirely human-free.
For example, if a DAO receives money, the way that money is stored and distributed would be written into the DAO’s smart contract and handled automatically. They are also autonomous in that they are self-governing and give independent agency to all members of the DAO.
Examples of DAOs
‘The DAO’ was launched in April 2016 as a decentralized venture capital fund that let members contribute Ethereum tokens and receive DAO tokens in return that could be used for voting on the projects.
Surprisingly, it raised $150 million in ETH that was invested by 11,000 people. In less than 2 months of time frame, hackers hit The DAO and took away $60 million worth of Ethereum.
This led to a negative impression of DAO on many people but DAOs are an extremely powerful form of organizing and it didn’t take long to see a resurgence in DAO activity in the crypto space.
As of today, there are plenty of DAOs existing with different roles. Investing, marketplaces, culture are all domains where DAOs have successfully started rolling out.
Friends With Benefits, or $FWB, is a well-known Discord community of cultural-crypto enthusiasts where members could purchase $FWB tokens to gain access to the server. Community building is one of the more powerful tools that a DAO can enable.
What are the benefits of participating in a DAO?
Compared to the traditional organizations, DAOs are not just autonomous, but also provide greater governance and voting power to people holding tokens. Transparency is an add-on to prevent potential abuse by those in power.
- Efficiency: The traditional organizations work in a hierarchical method where the creamy layer is accountable for work sitting in an office space. DAOs are truly borderless, with a working internet connection, you can work together sipping tea with a penguin (pun intended).
- Autonomy: The work intended in the organization is completely run by smart contracts. No human-intervention! People vote on the projects and if received sufficient votes, the investment or the work is already executed.
- Transparency: The transactions taking place in DAO are accessible to everyone. Members in a DAO can see the code that governs the network, and all the transactions that happen on the blockchain network.
- Anonymity: The people investing in a DAO can do it anonymously that offers a more flexible investment portfolio.
What are the legalities around the DAO?
DAOs haven’t been put under the frame of legalities as of now. Traditional organizations fall under a legal process that eats up much of the resources as well as the time. This enables DAO to be a lot more flexible but also as they are not regulated, the addressal of the problem is far-sighted.
The DAOs are gaining quite a success, DAOs recently had a big win in Wyoming where they can now be recognized as LLCs. Eventually, other states could follow suit, paving the way for DAOs to become widely used by all kinds of businesses and organizations
DAO and Future
The DAOs are a better replacement for the existing centralized models that don’t provide transparency, governance, or voting rights. Unlike centralized business models, all the decisions made by a DAO are decided by the community based on what will best serve the group’s needs and desires.
DAOs are setting the stage for new models of community ownership and governance to emerge, which will enable the internet of the future to be more democratic, community-oriented, and participatory.
DAOs will probably be taking over major business models and more self-actualizing groups implementing DAOs to help govern new and exciting solutions for how we create value and think about ownership.
Frequently Asked Questions (FAQs)
Q1. What are some of the examples of existing DAOs?
A. CurveDAO, PleasrDAO, MolochDAO, FlamingoDAO, etc. are some of the popular examples of DAOs existing on the internet.
Q2. What happened after the hackers stole away $60 million of ETH from The DAO?
A. After the hack, the funds were put on a 28-day hold based on the terms of the smart contract. The Ethereum core team, led by Vitalik Buterin, released a hard fork of the Ethereum blockchain. It was essentially a new version in which everything was the same, except in the forked version, the heist never happened.
Q3. How many members can be a part of the DAO?
A. DAOs are designed to form an organization run by the community. They do not have any upper limit to the people accessing DAO. It could be even a single person or as many as millions taking the part.
Q4. Is everyone granted equal rights to vote in a DAO?
A. The voting power depends on the number of tokens held for a specific organization. A person with more tokens can exercise more governing power.
Sign Up today on The Blockchain School, to unlock more content on Blockchain.