Can you envision a way to collaborate with individuals all over the world without knowing who they are, defining your own rules, and making your judgments all while using Blockchain solutions? DAOs, on the other side, are helping to bring this to fruition.
The acronym DAO stands for Digital Autonomous Organization, and it's more than simply a cryptocurrency buzzword. DAO is a decentralized organization with no central leadership. It is a virtual organization that uses Blockchain Technology to govern its decision-making process and treasury management. Every DAO is preceded by relevant open-source code from a technical aspect, making the firm's management structure more transparent and accessible.
What is the Purpose of a DAO?
The majority of mainstream businesses are still centralized, which implies that a top-down governing body is always in place. Proposals to assist organizational changes that affect all of its units/employees are opaque, the consensus is ignored, and money isn't properly defined or allocated, with only a few in command of the relevant processes.
DAO, as a web-based and blockchain-based corporation, has many advantages over traditional businesses. While we could create a full whitepaper to describe the benefits, here are two points that will help you better understand the notion.
What Makes DAOs Unique?
A blockchain effectively records the financial transactions and regulations of a DAO. Smart contracts remove the need for a third party in a financial transaction, allowing it to move faster. The strength of a DAO is determined by a smart contract.
The smart contract, which also serves as a representation for the organization's regulations, holds the organization's storage. Because they are equipped with Blockchain development solutions, DAOs are transparent and public, no one can change the rules without others noticing. Although we are acclimated to organizations with legal recognition, because a DAO can be formed as a general partnership, it can function very effectively without it.
Types of DAOs
It's critical to recognise that DAO is a broad phrase that refers to a wide range of organizations and businesses. Despite the fact that the two collectives are vastly different, they are both DAOs.
Here are a few well-known DAO examples:
- The PleasrDAO invests in other assets and collects various NFTs.
- The HerStory DAO is a non-profit organisation that gathers and sponsors projects by Black women and non-binary artists.
- The Komorebi Collective DAO provides funding to female and non-binary crypto entrepreneurs.
- The Benefits of Friendship DAO is a private social club that requires a fee to join.
- The MetaCartel Venture DAO is a for-profit company that invests in decentralised applications in their early stages.
DAOs are considerably democratic than traditional corporations. Any modifications to a DAO must be voted on by all members, rather than being enacted by a single party (according to the enterprise system).
How do DAOs work?
To understand DAOs, you must first comprehend the technology that underpins them. Blockchain solutions and smart contracts, which are collections of code that operate on the blockchain, are used by the majority of DAOs.
A blockchain is a decentralized digital ledger. While blockchains are most known for publicly documenting transactions involving cryptocurrencies like bitcoin and other digital assets like NFTs, they can also be used for a variety of other purposes. The blockchain can serve as a backbone for DAOs, maintaining the structure and regulations within each on-chain.
There is usually a hierarchy in traditional organizations. The structure is determined by a formal board of directors, executives, or higher management, who can make changes.
Growth of DAOs
DAOs are the most equitable and comprehensive business model ever designed. They strengthen the flaws of both traditional centralized enterprises and blockchain projects, the former being vulnerable to central points of failure, middlemen, and conflicting stakeholder interests. A true DAO has only one interest to safeguard: that of the company. It does not require any workers or executive management, allowing it to provide a service without regard for salaries, middlemen, or even profits. Businesses may have the slightest profit margins, only requiring to cover their operational expenses and nothing else.
In addition to blockchain solutions, the advent of more widely available artificial intelligence will also benefit DAOs. While some companies on the verge of becoming DAOs currently require users to vote on protocol modifications, an AI-based DAO will one day be preprogrammed to weigh the views of millions of unique stakeholders at the same time. While DAOs are still years away from complete autonomy, astute organizations may already spot areas where inputs are excessive before implementing DAO-component technologies to streamline processes without the risk of their businesses collapsing.
DAOs have the potential to change the way businesses run, both as a concept and as a technology. Digital Autonomous Organizations, like other crypto use-cases, have a bright future ahead of them if individuals devote time to learning the ins and outs of the concept. To summarize, DAO can be anything from a channel to a social networking platform to a trading platform (Automated Market Makers), and everything in between. It's just a rendering of a much more physical concept that evolved into a massive decentralized corporation.