These Are the Top 3 DAOs Based On Their Token Market Capitalization
What is a DAO?
A DAO (decentralized autonomous organization) is essentially a form of digital government where the laws take the form of code and are transparently & immutably written on a blockchain. Within a DAO, the “community” democratically determines the rules and protocols that the organization will follow. Those rules are coded into smart contracts on a blockchain and can only be altered when a majority of the DAO members vote for change.
In general, DAO membership consists of holders or “stakers” of said DAO’s cryptocurrency token. Technically, a DAO doesn’t need to involve cryptocurrency, but the vast majority of them do. In the last year or so, DAOs have quickly become one of the fastest-growing offshoots of blockchain technology and there are hundreds of DAO tokens flooding the markets.
If DeFi is the forebearer of decentralized financial systems and NFTs are the digitization of property, then DAOs are the blockchain-oriented organization of human interaction. They offer a new way to govern groups of humans and their ongoing projects without the need for hierarchies, roles, bureaucracy, or any other potentially harmful bottleneck within a democratic system. As Yearn.Finance core contributor and noted DAO air traffic controller “Tracheopteryx” told CoinDesk in a recent article, “DAOs are a bet on the future of human organization itself.”
Top 3 DAO Tokens by Market Capitalization (via CoinMarketCap)
1. Uniswap (UNI) — Current Token Market Capitalization is ~ $1.3B
Uniswap is a DeFi company that built the Uniswap Protocol for exchanging tokens in an automated fashion. According to their site, “the Uniswap Protocol is governed by a decentralized community of UNI token holders and their delegates who propose and vote on upgrades to the protocol.” So while the Uniswap company isn’t necessarily a DAO, the Uniswap Protocol and the token exchange that it operates certainly are. Anyone who owns UNI is officially a member of the Uniswap DAO and can vote on future changes to their protocols.
Uniswap uses smart contracts to automatically set the exchange rates and operational mechanisms for trading a wide variety of tokens. You don’t need to own UNI to use the exchange, but simply exchanging tokens on Uniswap does not allot you membership to their DAO. This is a fairly common paradigm for the most popular DAOs and it basically positions the Uniswap exchange app as its own company that all “stake holders” can affect through democratic and decentralized processes.
2. Aave (AAVE) — Current Token Market Capitalization is ~ $240M
Aave is a liquidity market protocol that’s built for lending and borrowing cryptocurrency through automated and decentralized processes. In order to use Aave, you need to first deposit a certain amount of an accepted cryptocurrency token. After depositing, you’ll start to earn interest on your investment based on the market borrowing demand. You can then borrow other assets using your deposited funds as collateral. As is the case with Uniswap, you don’t need to own AAVE to participate in their platform. However, only AAVE holders will be able to participate as community members of their DAO.
3. MakerDAO (MAKR) — Current Token Market Capitalization is ~ $176M
MakerDAO is one of the longest-running and established DAOs in the DeFi realm. The MakerDAO protocol is tasked with issuing DAI, a stablecoin, and facilitating the lending and borrowing of cryptocurrencies in a peer-to-peer, fully decentralized system. While DAI is the stablecoin that the MakerDAO protocol produces, MAKR is their utility token that grants holders community membership. Both tokens are used as collateral for the MakerDAO lending & borrowing marketplace.
To use MakerDAO, potential lenders and borrowers need to deposit ETH in exchange for DAI. That DAI can then be traded for other cryptocurrencies at a rate that leaves the borrower with more monetary power than they started with. That borrower’s ETH is traded for DAI which is then used as collateral for the final trades or exchanges. So, DAI basically acts as the middleman between the lender and a borrower.
DAOs and the Future of Human Organization
The most popular DAOs and DAO tokens are primarily focused on DeFi and token lending, borrowing, or exchanging. However, the real innovations of DAOs are their revolutionizing of the way we organize humans in digital and decentralized groups. These decentralized autonomous organizations are putting into practice new ways for building, managing, and evolving digital projects/platforms with real-world implications.
