All About DAO (Part I): Decision Making in a Decentralized World
Imagine an organization where there are no shareholders, no board meetings, and no CEO.
Pooling assets and investing as a group of strangers into certain projects is not a new concept—there are crowdfunding platforms and P2P lending platforms around the world that do exactly that. However, imagine a world where the same thing can be done without a centralized platform, and there is no team behind the scenes managing operations. Welcome to the world of the Decentralized Autonomous Organization, AKA DAO.
In this series, we will compare different types of DAO with specific examples, examine the difference between DAO and traditional organizations in a deep analysis, clarify some misunderstandings, and explore the future potential of DAO, so be sure to stay tuned.
What is DAO (Decentralized Autonomous Organization)?
To put it simply, DAO is a new and different form of organization. Traditional organizations are usually corporations (e.g., Apple, Google, Toyota); LLC or Limited Liability Company, which is usually used by law firms and family offices; or a partnership, which is usually used by VC funds and PE funds. Just like other organizations, DAOs can pool assets from different individuals and organizations, decide what to do with the asset, and distribute profit to its backers.
The difference lies in that unlike other forms of organizations, a DAO is decentralized and entirely autonomous. In fact, it’s decentralized in a way that with some exceptions, usually DAOs do not have a team of people, such as the management team and board members, who can make decisions on behalf of the entire organization.
It is autonomous in a way that most of the operation and decision-making processes of DAOs are represented by rules encoded as a transparent computer program, usually a blockchain.
The Current State of DAO and the Potential Future Impact
Currently, there are already a number of DAO’s making a splash in the market, including:
- PleasrDAO, a DAO that consists of Defi leaders, early NFT collectors, and digital artists, has bought Snowden’s NFT for $5.5M and the original DOGE meme for $4M.
- BLOCKS DAO LLC is the first DAO to take advantage of Wyoming State’s new law and register as a DAO in the United States.
- BitDAO, a DAO established in June this year and already has a market cap of $23B, holds assets that can be used to provide liquidity to partners, and bootstrap new protocols such as decentralized exchanges (DEX), lending, and synthetics protocols.
- YGG (Yield Guild Games) is a DAO that owns game assets and brings players together to earn via Play-To-Earn economies.
Although it’s unlikely to happen, if DAOs replaced all of the other forms of organizations in the world, shareholders, board members, CEO, and so-called “companies” would become a thing of the past.
Part II ~ Part V
