The Innovative Nature of the DAO Business Model

Innovation is strategically crucial for contemporary organizations to keep up with the ever-changing market and evolving technology. Innovation in business models is vital to bridging the gap between strategic plans and actual practices.

Decentralized Autonomous Organization, or DAO, as a blockchain application in governance, is believed to be an innovative business model, triggering new thoughts and practices with its decentralized way of governance. Now let’s take a closer look at how DAO is innovative.

Organization Structure

Compared with the traditional centralized autonomous organization that consists of a group of shareholders exercising ownership on behalf of the organization based on the percentage of shares, the new form of DAO is a breakthrough in organization structure enabled by blockchain technology.

As can be seen from the figure, most centralized autonomous organizations are managed top-down by a small number of managers, with a downside of lack of transparency. On the other hand, DAO still needs to be managed by a team of collaborating elites, but only in a structure based on small-scale cooperation of several independent facilities.

(Singh, M., & Kim, S.,2019. Blockchain technology for decentralized autonomous organizations. Advances in Computers)
(Singh, M., & Kim, S., 2019. Blockchain technology for decentralized autonomous organizations. Advances in Computers)

Decentralization allows for greater freedom in operation. DAO can perform various activities from investment funding to ordinary data storage, transforming the previous coordination mode into a digital, world-connected coordinated governance model and leading to a new era of economic freedom without control from third parties.

Smart Contracts

DAO relies on smart contracts to record data and transactions in the organization. Smart contracts and dApps provide autonomous authentication to carry forward organizational processes, tasks, and designs. The value of smart contracts lies in being used as software codes to bind the logical algorithms of the decision-making process, which makes the activities conform to rules and contracts.

For instance, the digital signatures and smart contracts of DAO can be used to monitor transactions and effectively prevent fraud. Also, dApps and smart contracts can be used to communicate with stakeholders through network nodes. This helps with relationship maintenance without human intervention, ensuring contract transparency and indestructibility while facilitating healthier relationships through complying with regulations and valuing security and privacy.

Revenue

DAO promises to maintain secure and transparent channels in the public ledger, which is reliable and immutable. This shows that the transparent revenue brought by blockchain technology is conducive to building a solid business model revenue stream, meeting customer needs, and providing satisfying products or services. The transparency of DAO helps alleviate the information asymmetry between buyers and sellers.

Without a third party involved, the financial transaction process is simplified, saving the need to duplicate contracts in different records and ensuring the optimization of transaction cost and the standardization of refunds and service accounting. DAO opens up a plethora of revenue stream models for organizations. These revenues come from maintaining APIs and infrastructure, developing applications and professional services, smart contracts, network mining, and SLA management.

Partner Network

The construction of DAO also requires a strong partner network and even creates a partnership-based ecosystem through traceability and automatic control between network nodes. Not only do partners share the responsibility for spreading value, but they also reduce risk, optimize operations, and expand access to resources. It is predicted that open-source DAO platforms, open APIs, community-based codebases, and public deployments will form a healthy non-intermediary ecosystem, which is beneficial for mitigating risks, reducing costs, and dealing with uncertainty.

MixMarvel DAO Venture is an example in this case. As shown in the MixMarvel ecosystem graph below, the components of its business model can be taken as valuable tools for the management to strategize, plan, and innovate specific challenges while using DAO technology. Following the target operating model (TOM), the management can guide the organizational restructuring’s strategizing, implementation, management, and operation phases.

Dangers and Controversies

However, DAO also faces some dangers and controversies.

Legal issue

To cite an example, the attack incident of early DAO projects has touched on security-related legal issues in several countries, such as tax issues. However, as disruptive decentralized technologies become a critical business issue for start-ups and market players, governments and financial regulators have gradually moved from an initially tense hostile manner to a more cautious market-friendly approach.

Risk of investment withdrawal

DAO startups snowball, but it may take a long time to gain profit. However, the common feature of investors is that they expect to benefit in a shorter time. Therefore, if no benefits are obtained for a long time, DAO will face the risk of investor withdrawal.

Tension in governance

Research on layered technology infrastructure has analyzed DAO’s configuration yet ignored the relationship between the different roles in the governance process. In other words, combining technical analysis with institutional arrangements to deal with issues of politics and power is very controversial. For example, there are concerns that the development and control of DAO may have a conflict of interest due to potential employment contractor status.

Future Outlook

Blockchain governance has presented new challenges coming from different protocols, participants, and ecosystems, determining how the technology evolves.

Some believe that with the development of DAO and blockchain, DAO projects will gradually mature and show more overwhelming advantages than many existing solutions. It is even possible to build a unified single currency platform using DAO technology.

DAO can be more than a technical product or a platform. It can be imagined as a virtual entity representing a business, an organization, or a community. Digital solutions nowadays no longer require static governance but seek a more open democratic approach to government.

Many people hold up an idealistic vision of DAO democratization, still exploring how the system of DAO can promote a new situation of democracy and make large-scale crowdfunding possible.

In a nutshell, DAO symbolizes a revolution and a new stage of business model innovation.

About MixMarvel

MixMarvel is the world’s leading blockchain content-incubation platform and creators community. By in-depth exploring the open world and integrating world-renowned IP with high-quality content, MixMarvel connects investors and mass users through asset distribution, content publication, DeFi tools, infrastructure, community co-creation, and other diversified scenarios in a new ecosystem of dapps. Its ecosystem comprises a broad portfolio of FT/NFT assets, including the MIX, RPG, and HEROES tokens; blockchain content including the GameFi application DeHero; and infrastructures including Rangers Protocol and MixMarvel SDK. For more information, visit https://linktr.ee/MIXMARVEL.

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