DAO to Get the Most Out of Decentralization
Being a crypto enthusiast means learning new acronyms every week. Some are worth knowing, others take up valuable memory that could be used elsewhere. But as the future of business, DAO is one acronym everyone should know.
As you’ve probably guessed, the D stands for decentralized. This concept is the heart of blockchain technology. Here, it precedes Autonomous Organizations (DAO). It might not sound like much, but DAOs are tipped to make traditional corporations obsolete.
Let’s take a look at how this might be achieved.
What is a DAO?
A DAO is a group of like-minded individuals working towards a shared goal. Their activities are facilitated by the maturation of Decentralized Finance (DeFi). In the crypto sphere, a DAO’s goals might include stockpiling particular non-fungible tokens (NFT), using mining rewards to fund mutually beneficial initiatives, and trading on assets with shared risk. As you have no doubt noticed, all of these activities take place online. This is a defining characteristic of DAO endeavors and all blockchain enterprises.
Like blockchains, DAOs have no centralized authority. Their financial operations are not led by one individual or institution. Rather, the democratic model is employed. All members of the DAO are involved in the decision-making process. Those who invest more in the DAO get more of a say in the organization’s activities. But ultimately, the DAO needs a majority to make any decisions on how to spend the funds. However, its founding purpose is difficult to deviate from. This is because the DAOs action plan is solidified by a smart contract and written into the blockchain.
Here are some of the most popular types of DAO:
- Operating Systems
- Protocol DAOs or Web3 Infrastructure DAOs
- Investment DAOs
- Grants DAOs
- Collector DAOs
- Service DAOs
- Social DAOs
- Media DAOs
What Makes DAOs Popular?
It isn’t difficult to understand. Crypto enthusiasts adore any innovation that has the potential to replace a more traditional process. Decentralized Exchanges (DEXes) enable crypto users to trade assets, just as international markets make it possible to trade fiat currencies and tangible assets. In the same vein, DAOs have the potential to replace traditional corporations. The two entities are essentially the same. Two groups of individuals with a shared goal. Pepsi Co, for example, wants to dominate the soft drinks market. LexDAO aims to lead the world in providing blockchains with tools to replace expensive legal services.
Here are some of the most popular DAOs:
- Decentraland DAO
Who Can Benefit from DAOs?
The short answer is everybody. This is because a DAO provides the average crypto user with increased security. As with any organization, an individual benefits from the many skills and support of the collective. There is a level of knowledge-sharing that leads to better decision-making and results. As such, new members with limited experience can piggyback on the experts’ success.
DAOs also act as pools of assets. Of course, these funds are pooled for a singular purpose, laid out in the DAO’s smart contract. But pools also grant individuals access to opportunities they might not have ordinarily. Younger traders might have the knowledge to make successful trades but not the capital. As with any traditional market, certain opportunities have higher minimum buy-ins. DAOs can give these knowledgeable traders the backing they need to succeed.
DAOs are closely related to, and to a certain extent dependent on, DeFi models and vehicles. This means anyone who has experience using DeFi solutions can easily transition to a DAO. And why wouldn’t they? DAOs are free of human error and manipulation, secured by tried and tested blockchain technology, and free of bureaucracy.
What Are the Drawbacks?
The main criticism of DAOs is that they are largely unregulated. This is a problem for those who believe DAOs could replace corporations. Unfortunately, human nature is proven to be highly compromised. There is a tendency to take advantage of the lack of regulations with unethical behavior. Some of the biggest theft cases in history have taken place at DEXes. The popular phrase is true: criminals are made when opportunities arise. This is why regulations and security protocols are so important. Without them, the future of DAOs is less certain. But as already mentioned, DAOs like LexDAO are committed to making this concern obsolete.
If you are looking for increased security and a wider range of opportunities, a DAO could be a viable solution. DeFi has given crypto enthusiasts all the financial activities of traditional markets. If it is possible with fiat, it is now possible with crypto. DAOs aim to do the same for traditional corporate activities. Think of a DAO as a crypto corporation.
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