03 May, 2022

What if you could organize with people all over the world, without knowing who they are, and without having to rely on anybody else to make decisions for you? What if you could do it all using Blockchain technology?

How can we trade values in a trusted environment?  Despite the fact that blockchain enables automated trusted transactions and value exchanges, internet users around the world desire to organize themselves in a safe and healthy manner to work with like-minded people, across the world. DAOs are trying to make this a reality.

What Is It About DAOs That Makes Them Unique?

DAO (Decentralized Autonomous Organization) is an organization whose rules are encoded as a transparent computer program “Smart Contract”, which is governed by the organization’s members and is not affected by a central authority. Because the rules are built in the code, there is no need for managers, thereby eliminating any bureaucracy or organizational barriers.

A smart contract is responsible for the strength of a DAO. The smart contract serves as a representation of the organization’s regulations and as a repository for the organization’s storage. Since DAOs are open and transparent, no one can make changes to the rules without the rest of the community knowing. Although we are accustomed to organizations having legal status, a decentralized autonomous organization (DAO) can function perfectly well without one since it can be constituted as a general partnership.

Smart contracts are already being used on a wide range of blockchains. Those who have an interest and decide to participate in a DAO are subsequently granted voting rights, and they have the ability to influence how the organization functions by voting on or proposing new governance initiatives.

This strategy protects DAOs from being flooded with proposals: a proposal will only be approved if it receives the approval of the majority of stakeholders. The method by which that majority is calculated varies from one DAO to another and is described in the smart contracts.

It’s easier to put faith in code that’s been made public and can be thoroughly tested before going live. Every action taken by a DAO once it has been formed must be approved by the community and must be entirely transparent and verifiable by anyone.

In contrast to typical corporations, they feature a more democratic organizational structure. Any adjustments to be made in a DAO must be approved by a majority of the members, rather than being done by a single party (depending on the company’s organizational structure). The funding is primarily derived through crowdsourcing platforms that issue tokens. The management is centered on its community, whereas the governance of formal businesses is based mostly on executives, like Board of Directors, Stakeholders, Shareholders, and so on. The activities are completely transparent and are handled by international users, although the operations of typical enterprises are private, with only the company knowing what is going on.

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How can DAOs be fully operational?

A DAO is formed and launched in three stages: creation, testing, and launch.

Those that work on the DAO code will set the rules of the organization and will specify the reasons for which the group will be formed. Due to the fact that changes to the code may only be made by group vote once the DAO is launched, this step requires rigorous testing of the code.

Decentralized autonomous organizations rely on a common vault of cash, which must be raised from their participants. People who support the group’s cause can purchase a stake in the organization by agreeing to purchase a specific number of tokens in exchange for a participation in the organization. During this stage, it is possible to set governance norms.

The DAO’s code is released onto the blockchain at the time of launch. From this point on, the only way to amend it is through a collective vote of the stakeholders. Thanks to this, the lead creators no longer have control over the project.

Bitcoin is widely regarded as the world’s first fully functional decentralized autonomous organization, because it has programmed laws, runs autonomously, and is regulated throughout a consensus mechanism. Obviously, it’s not like every DAO has achieved the same level of success as Bitcoin.

DAOs require the following components in order to be truly useful: a set of rules under which they will function, a source of money in the form of tokens that the organization may use to incentivize members in participating in specific activities, and the ability to vote on the rules that will govern their operations. Additionally, and perhaps most importantly, has to be a well-designed and secure framework.

One significant flaw in the voting method is that even if a security issue is identified in the system’s initial code, it cannot be fixed until the majority of voters agrees on a solution to the problem. A fault in the code may allow hackers to take advantage of a security vulnerability.

What is the current state of DAOs?

DAOs have been used for a variety of reasons, such as finance, donation, crowdfunding, and even the purchase of non-fungible tokens (NFTs), all without the involvement of any middlemen. For  you to get a better understanding, try to consider the fact that a DAO can receive contributions from anyone in the entire globe, and only  the participants can determine how the money is spent.

Imagine that you would want to buy a very expensive piece of art, but you can’t afford it. Today you can become a co-owner of it by simply utilizing cryptocurrency on a web-based platform. All this through a DAO, that will make possible to have a fractional interest in it. DAO’s  members will be able to supervise the acquisition of the NFTs, and smart contracts will be in control of the vault where it will be stored. Let’s see some successful DAOs.

There was one event last year in which ConstitutionDAO, a group of around 20,000 people like you and me, managed to raise more than $40 million to auction for a copy of the United States Constitution. However, despite being overbid by fund manager Kenneth Griffin, the effort demonstrated the power of what a DAO could achieve.

NFTs are rare and expensive digital assets, FlamingoDAO (which is an organization of cryptocurrency investors) manage to purchase expensive digital assets in the name of its community. 

Another interesting project is Komorebi Collective (Komorebi is a Japanese idiom that describes sunlight streaming through the leaves of trees), another decentralized organization that raises funds for investing and promoting exceptional women and LGBT users.

One last successful DAO project I wanted to share is LinksDAO, who was able to collect funds  in order to purchase and create its own crowdfunded golf course. The group offered club memberships as non-fungible tokens (NFTs), raising more than $10.5 million in the process, and has already sold out of all of their available memberships. All NFT’s owners receive a stake in the club and they also have the right to participate in discussions on how the golf club will be structured and it will evolve in the future.

Cryptocurrency is changing the way businesses operate as we know them

A growing number of organizations are already adopting or evaluating to change their structure into a DAO with the goal to perform some of their activities in a decentralized way, being conscious that crypto involvement into businesses is everyday more real and that the legal problems that could have been connected to are being addressed.

While decentralized autonomous organizations (DAOs) are not yet widespread, they appear to be gaining popularity among many creators. They aim to create a democratically run organization in which all of its members have a say in how it is run. The majority of analysts and industry insiders believe that these sorts of businesses are not only gaining in popularity but they will eventually displace certain traditional businesses.

So what are you waiting for? Maybe it is time to start to dig some information about these DAOs, find the project that might better suit, always Do Your Own Research first, and who knows maybe also you will take part in one of these new crypto communities that are already taking advantage of new opportunities, but with a community spirit in mind.

The future is bright, ladies and gentlemen, and it’s just around the bend.

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