DAO operations made easy with Yodaplus Multisig Vault
Multisig Wallets are the most diverse online wallets today. With them having multiple functionalities, they end up being used in diverse circumstances.
Multisig wallets offer a lot of permutations and combinations between the total number of keys and the number of keys required to access the funds. Thanks to this, we will today talk about the use case where Multisig wallets will come in handy for executive board decisions concerning DAOs.
Before that, let’s see what type of multisig wallet is required for the same.
m<.5*n Buddy Account
M = Signatures required to access your wallet.
N = Total number of signatures.
This type of wallet is used for corporate spending funds. So, wallets like 5-of-7 or 6-of-8 are usually types of Buddy Wallets. In cases where multiple people hold rights to the funds stored in the wallet, these types of buddy accounts ensure that the decision-making process for the transactions happens smoothly.
What are DAOs?
A DAO is a Decentralized Autonomous Organisation. This is an entity that doesn’t have a centralized leadership to it. A DAO is governed by a community of independent individuals, organized around a specific set of rules, and it is enforced on blockchain.
DAOs operate using smart contracts. Smart contracts are a set of codes that are set to automatically execute when pre-defined criteria are met.
As they are employed on the blockchain, DAOs are fully autonomous and transparent. They are open-source, meaning anyone can view the code. Even with the treasuries of the DAO, anyone can audit their built-in treasuries.
There is no hierarchy in such an organization. Even with this unique approach, the organization can still successfully conquer goals and advance while still being regulated by its native token. Since there’s no ranking, any member holding stakes has the right to propose an original concept, and it will be considered and enhanced by the entire group.
According to some, the Bitcoin network (BTC) is the earliest example of a decentralized autonomous organization (DAO). Most of the users in this network have never met, but despite this, the network exists through a community agreement. It also lacks a centralized governance framework, requiring miners and nodes to signal their support.
By today’s standards, however, Bitcoin is not considered a DAO. Dash would be the first true DAO by current standards, as the project features a governance structure that allows stakeholders to vote on how the treasury is used.
Why do we need DAO?
DAOs have an edge over traditional organizations, mainly because they are internet-native. Here, the lack of trust required between two parties is a significant advantage of DAOs. Sounds bizarre right? Well, as you would imagine, a traditional organization stands on the basis of an immense amount of faith in the people who run it, especially for the investors. But lucky for us, DAOs just require us to trust the code. The code never lies. It’s always easier to trust code because the DAO code is open source and is compatible with thorough testing before being released. After a DAO starts, no action can proceed without the community approving it first, and the action is public and verifiable.
DAOs allow investors to pool funds. By doing so, DAOs give the investors a chance to be able to invest in startups in their early stages, as well as decentralized projects. As a result of which, the investors stand to share the risk or profits that come out of these investments.
There’s also another major advantage of DAO. It solves the Principal-Agent dilemma. To put it in simple words, this is an issue that arises when there’s a conflict in priorities between a person or a group (the principal) and the ones making the decisions on their behalf (the agent). Many times, when the agent (in most cases the CEO) may work in a way that is not in line with the priorities of the principal.
DAOs use community governance to overcome the principal-agent problem. It’s not a compulsion for the stakeholders to join a DAO, and they do so only after learning the rules that govern it. They don’t have to trust anyone operating on their behalf because they’re part of a group with similar goals. The nature of a DAO incentivizes token holders not to be evil, so their interests are aligned. Naturally, as they have a stake in it, they would want the network to thrive. It would be against their self-interest to act against it.
Executive Board Decisions
While we’re talking about the principal-agent problem, there arises a question of how the executive board decisions are made when there are disagreements. When a company holds funds online, a multisig wallet is one way to store them. This is especially useful when it comes to DAOs.
Now we know that DAOs are internet native organizations, so they’re collectively managed by the members in it. They are equipped with built-in treasuries, ones which can only be accessed with the members’ permission. Suggestions that the members vote over the course of time help make all decisions.
The purpose of multisig wallets, in this case, is for the transactions and decisions to be conducted fairly. For example, you can have a 5-of-7 or 6-of-8 wallet to store all the funds, where each member holds one key. So, while making executive decisions, a single member does not have the power to misuse their key.
The best part about the buddy wallet type of multisig wallet is that a decision can be taken solely on a majority basis as well. Then, the majority can use their key and access their funds and transfer them. In addition, the members can even remove or add owners to the safe whenever required.
The company can reach a decision based on open discussions and use its keys to carry out the transaction. Executive Board Decisions are made much easier even when all members of a company have an equal and right say in it.
Conclusion
With this use case, Multisig Wallets effectively prove the proverb “Too many cooks spoil the broth” inutile. Too many cooks can make a well-informed decision without spoiling the broth, and no one emerges unhappy. Sounds like a win-win to me.
If you want to create your own Yodaplus Multisig Vault, you can just make it right here — https://www.yplusvault.com/
And, in case you are stuck somewhere, refer to this guide — https://help.yplusvault.com/
You can always comment below to let me know your experience.
Further Readings:
How to do Escrow Transactions using Yodaplus Multisig Vault?
