What are Decentralized Autonomous Organizations?
Can you picture a method to collaborate with individuals all over the globe without knowing who they are, setting your own rules, and making your own judgments all while using Blockchain technology? Decentralized Autonomous Organizations, or more commonly referred to as DAOs,, are making this a reality.
A DAO is considered a ‘faceless’ organization whose rules are stored within a computer program known as a smart contract. It is made possible by a technology called blockchain, wherein each of its members are responsible for governance rather than being dependent on a central administration. In this setup, there is no need for managers to intervene since the rules are integrated into the code directly. This reduces limiting rules and various hierarchical barriers that organizations face today.
Bitcoin is often referred to as the first fully operational DAO because it operates independently and is governed by a set of universal rules. The premise was simple — individuals from all over the world had to use their devices to solve mathematical problems in order to help ‘confirm’ a transaction. In even simpler terms, anytime an individual would like to send bitcoin to someone else, it has to go through a series of confirmations from a specific number of other users on the network. This process is called proof-of-work or mining, as individuals who help confirm transactions are also rewarded with bitcoin.
However, not all DAOs have experienced a smooth-sailing road. Slock.it was one of the more unfortunate projects, as the DAO code they utilized had a number of flaws. As a result, in June 2016, hackers were able to steal $50 million worth of Ethereum from the DAO before it was shut down. Despite the fact that the flaw was in the programming rather than the fundamental technology, the breach shook some people’s faith in the Ethereum token and DAOs in general. However, the resurgence of interest in DAOs has resulted from the emergence of Decentralized Finance (Defi) in 2020.
A blockchain records the financial transactions and regulations of a DAO. This eliminates the requirement for a third party in a financial transaction, allowing pieces of code to streamline them instead. Smart Contracts determine the firmness or stability of a DAO. The smart contract holds the organization’s storage and reflects the organization’s regulations. Because DAOs are transparent and public, no one can change the rules without others being notified and agreeing to it. Although we are accustomed to corporations with legal arbitration, a DAO can function very well without it since the responsibility is shared across its members.
DAOs have a more democratic structure than regular corporations. Any modifications to a DAO must be voted on by all members, rather than being executed by a single party (depending on the company’s structure). The majority of DAO financing comes from token-based crowdsourcing. DAOs are governed by the community, whereas traditional corporations are governed by CEOs, boards of directors, and activist investors.
DigixDAO is a good example of a DAO. The DigixDAO platform already has a token known as DGD, which was issued in a crowd sale and is now traded on multiple platforms. The DGD token grants its owners the ability to vote on DigixDAO’s development, giving each token owner a say in whether new development ideas are approved or rejected. A Proof of Provenance (PoP) system is utilized as the DGX token’s consensus method with Each token’s information stored on the Ethereum blockchain.
MakerDAO is another good example. The Developer Program (MKR) is based on the Ethereum blockchain and contains a collection of smart contracts. Its main purpose is to track, promote, and improve the value of the DAO’s stable currency. Maker DAO is one of the most popular programs and one of the first known DeFi applications. Compared to traditional banking options, the maker network created by the Maker makes it easy to borrow and lend in a simple, efficient, and organized way. In the DAO Maker network, the MKR token is used by contributors to the liquidity pool of the network. The governance powers it grants users aid them in regulating the protocol’s growth. MKR token holders are also in charge of deciding what to do with collateralized loan borrowers in special cases such as defaults or disputes.
The adoption of DAOs is dependent on the adoption of crypto
The rise of crypto usage is required for the expansion of DAOs, which is now taking place, and this implies that there will be more eyes on the surrounding crypto infrastructure. A decentralized autonomous organization, or DAO, is one in which stakeholders make choices without the need for intermediaries or representatives. Another factor is that the growing popularity of decentralized finance (or DeFi), which includes bitcoin, has resulted in an increase in the number of existing DAOs. Many crop farming, decentralized exchange platforms, and blockchain initiatives already rely on DAOs to keep them running in a transparent and beneficial manner with more developments in this space on the horizon.
It’s only logical that as people get more interested in digital assets such as crypto, they’ll become more interested in the system that allows them to operate without a central authority. Many DAOs are also being utilized for a variety of reasons, including assisting the growth of blockchain initiatives by providing appropriate incentives, and are for various non-intermediary purposes like charity, fundraising, borrowing, and buying NFTs.
Can you picture becoming a co-owner of a song written by a creator simply by utilizing bitcoin on an internet-based platform? Jenny DAO obtained its first NFT, an original song by Steve Aoki and 3LAU, in May 2021. This DAO is also known as a metaverse organization that allows users to hold fractions of an NFT rather than a whole, giving more expensive assets accessibility. The purchase of NFTs is overseen by its members, and the unique protocol’s smart contracts govern the vault where these NFTs will be added.
Furthermore, it is predicted that in the next three years, DAOs will acquire more traction and have a greater influence. Before that happens, there will be platforms like BitFans that introduce individuals to the concept of belonging to a digital ecosystem, having member-only perks, and feeling ownership of a content creator’s ecosystem through voting tools that allow them to decide on the direction the creators should take. To usher in web3.0 and DAOs, we’ll need to build utility tokens that unlock the full potential of tokenization and NFTs.
DAOs are predicted to become the most prominent topic of discussion when it comes to blockchain technology within the next 3–5 years. In the meantime, there needs to be a way to drive more adoption, such that individuals will understand how they work in the simplest way possible, as this will be the key.
BitFans is introducing the concept of digital fan clubs for brands and content creators alike. Individuals can mint and release their very own tokens tied to their respective communities. They will be able to create an ecosystem wherein fans, customers, and avid supporters can engage in unique interactions, gain access to premium content, and provide critical feedback.
In relation to DAOs, BitFans allows token issuers to give their community members a voice. By holding their tokens, they may be given voting rights to decide on various aspects of an issuer’s work, which could be their direction moving forward, potential suggestions for improvement, selecting partners to work with, and more. As the BitFans ecosystem grows, there will be new features that will provide more token utility for creators, such as the ability to mint their own NFTs and host smart contracts for internal community governance in the near future.
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