The Hype about DAOs
A short comparison between regular communities & DAOs
DAO (pronounced as either Day-ho or Dow, depending on one's mood) is a short form for the word Decentralized Autonomous Organizations.
An unnecessarily long name if you ask me, something simpler like “Oga-less Organizations” might’ve been better to drive the point home faster but then “OO” doesn’t quite sound like a good enough acronym so… probably not.
What are Day-hos/Dows/DAOs?
Short story
It is an organization without a central authority, without a particular Oga/Boss.
Semi-short story
DAO is a Web3-related community where a group of people from all over the world come together & share a common goal. Just how a regular community on WhatsApp or Slack runs but it comes with added/distinct features.
Features like;
- Members of the DAO are familiar (even if it’s a little) with the web3/blockchain/crypto space & so they want to contribute in one way or the other towards related matters like raising funds for a cause or collection of digital assets.
- There is no central authority like in a regular community e.g. a Director, Admin, etc. In a DAO, every member has equal rights & equal say over a subject matter.
- Verified members of the DAO own tokens.
- Tokens are a form of digital currency issued by the DAO & they represent a form of ownership. As a token holder, you have the right to make contributions that have to do with the DAO’s governance.
- In a case where there is no consensus about a particular matter, or something needs to be added/removed, a proposal is put forward so that members/token holders can vote.
- Smart contracts — are a set of rules in the form of code that ensures that the winning decision/proposal is implemented. No human intervention is involved as it’s set to be automatic & transparent.
- Transparency because the voting process & the smart contract itself are posted on the blockchain where anyone can see. The transparency of a DAO forms the basis for trust among its members.
- DAOs have treasuries — the “bank” where the DAO funds or excess tokens are kept.
Based on these features, the value of a DAO in comparison to a non-DAO can be weighed. It all depends on the purpose & direction of what its needed for.
The Cons
As much as DAOs are centered around decentralization & “equal rights” of its members, they also come with their own hiccups such as:
- Complexity — regarding the blockchain space in general. There’s often more burden to educate diverse users on the new terminologies & processes involved with DAOs.
- DAOs aren’t yet fully recognized or accounted for in a legal sense. Because of its decentralized & anonymous nature (DAO activities are not restrained by anonymity), the majority of existing DAOs are unregistered & can be viewed as “alegal” rather than illegal.
- It takes longer for decisions to be made due to the fact that everyone has to be involved & decisions are not left to the “admin” alone.
- Exploits like treasury theft are possible if the DAO’s & smart contracts security is not properly established & maintained.
Wrapping up…
In summary, while DAOs and regular communities differ in their organizational structure, decision-making process, & level of transparency, they both serve as means for people to gather, collaborate, and face a common goal.
DAOs are a more recent development enabled by blockchain technology, while traditional communities have been part of the regular society for a really long time.
And so, the choice between them depends on the specific goals, values, and contexts of the participants.
Do you need a DAO or do you need a Whatsapp group?
These are the questions…
And the answer is, it depends.
✌ Until the next #WeWe (Web3-Wednesdays) episode