DAOs — Introduced & Explained
What are DAOs?
Decentralised Autonomous Organisations, better known as DAOs, are decentralised networks which utilise smart contracts in their system to ensure proper governance between its users.
In layman’s terms, it is an entity built around like-minded individuals who follow a set of rules, written into code, and decide on every action of the entity through proposals brought forth by a member and voted on by the remaining members.
DAOs operate on a flat hierarchy and the decisions in a DAO are made only when consensus is reached between members, which is aided by the voting power each member holds. Governance tokens issued by the creators of the organisation aid the voting process as users stake these in order to cast a vote.
Why should we use DAOs?
The main attribute which gives rise to the popularity of DAOs is the level of transparency within the entity. It is completely open-source meaning that the details of each proposal are readily available, the voting history is continuously updated, and even the voting records of particular token holders can be observed. In DAOs, the community of its users are generally called upon to generate interesting ideas and implement changes within the entity, with the hope that it leads to the future development of the project.
This level of transparency is achieved through the use of code written out in the smart contract of the entity before deployment. Users will be inclined to trust something that cannot be altered to one’s advantage in the future, and they can easily verify the information available.
Staking is an essential aspect of the growth of DAOs as this limits the spamming of proposals. Generally, a certain amount has to be staked before a proposal can be sent and this staking will be in the form of the governance token of the organisation.
One such new entity that achieves DAO status is the HeliconNFT ecosystem; stay tuned for how it does just that and more details on its operations.
Disadvantages of DAOs
As with all new ideas, there will be some disadvantages accompanying its implementation. There are still a lot of underlying issues regarding the level of security, the actual structure of the organisation and the legitimacy of the operations. Moreover, any code error in the smart contract can be easily exploited by bad actors present within the community and more often than not, flaws in smart contracts are harder to fix after they are spotted.
Conclusion
DAO’s have slowly but surely become a mainstay in the web3 and decentralised future that is beckoning. The whole purpose of blockchain adoption is to give users the power back and DAOs contribution in this is like no other. Having a say in the operations of a project is paramount to creating an ecosystem where the community members get the final say. Amid its disadvantages, which accompany any new idea, if we don’t fully accept it on its merits, then we will not be able to reap its benefits.
