An Autonomous Business Model? Meet the DAO!
“DAO”, a simple term that confuses many with the widespread fuss and Blockchain talk, simply put, is Decentralized Autonomous Organizations which refers to the concept of autonomous functionality of an organization’s business processes through codes. But, how? How can a complete organization function autonomously? How can you get these funds completely online? You’ll be surprised of the potentials DAOs hold.
How does it work?
Decentralized Autonomous Organizations have all the businesses’ decisions being taken care of through codes autonomously running and published on the Blockchain. This code specifies operational rules that organizations usually take according to specific criteria and is also referred to as smart contracts.
But, can DAOs get handed complete autonomy? The functionality and processing to get the final output could be completely handed to a DAO especially that it is an immutable code. However, the only human-related dependent function is the input or voting done on the organization.
Voting Systems and DAO Tokens
Although DAOs are automated codes that run for a smoother decision making, people vote upon those decisions in order to confirm the deeds. One can simply own the DAO tokens for the right to vote where s/he/they would then be eligible to:
– Vote on specific proposals for potential funding
– Handle funding proposals
– Earn their profit for the respecting funded projects
However, those rights are limited when it comes to the smart contracts since the code is immutable and not a single token holder could change or edit the code.
Importance of DAOs
A. Transparency & Trustworthiness
Imagine trying to start an organization where you involve funds and money with people you’ve never seen or interacted with before. Sounds risky! With DAOs however, the only thing you need to trust is the code, which’s quite reasonable as it’s fully transparent and available for all. What mostly makes it trustworthy is the fact that the code remains unchanged under any circumstances and is openly available for everyone.
B. Online Lateral Decision Making
The code runs completely online and does not even require human interactions. There, all individuals involved in the business can vote collectively in a collateral manner reducing the hierarchy and allowing all members to share effective opinions not to waste future beneficial funds. In fact, there are specific DAOs that even combine like-minded people willing to invest or needing the funds for their projects.
What are the types of DAO utilized?
1. Operating Systems
Any organization that creates its own DAO needs an Operating System to code its smart contract.
2. Protocol
One example of Protocol DAOs could be MakerDAO, which mainly serve as a token for voting and decision making for upcoming business amendments.
3. Collector
As for Flamingo, these types of tokens are majorly used for the creation and ownership of the NFT’s art.
4. Social DAO
To further encourage the egalitarian collateral system in DAOs, social DAOs act as a space for openly shared opinions and perspectives. One huge example would be Blockster.
5. Investment/Venture
This specific venture acts as a decentralized function for multiple Decentralised Finance (DeFi) operations. One example would be Unisway that has recorded an exponential rise for the investors’ revenue due to all the coin swaps done.
6. Media DAO
DAOs also expand to media and marketing where content creators could actually use them to directly contribute their work without the intermediaries and advertisement hassle involved.
7. Grant DAOs
This is where demand meets supply. In Aave for example, people who need funds can borrow from those with excess to help support investors and businesses in need for this fund.
Challenges facing DAOs
– People with greater tokens have a greater voting right although the decentralized concept calls for flat hierarchy
– Anyone who breaks the code locks the whole community funds
– DAOs do not have a single legal framework as they spread on multiple jurisdiction, but this remains as an unprioritized issue as all functions are decentralized
Future of Decentralization
People are still opinionated about a concept as new as DAO, for the code is still newly emerging which makes the interference of hackers easier. However, with a well-studied smart contract, we could see the boom associated with DAOs and all its constituents including DeFi, real estate, art, identification cards, charity, freelance, ventures and a whole ton of opportunities open for entrepreneurs who could witness their boom from the Decentralized movement occurring. Cut the middlemen and code!
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