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KNOW ABOUT DAO
A decentralized autonomous organization (DAO) is an entity with no central leadership. Decisions get made from the bottom-up, governed by a community organized around a specific set of rules enforced on a blockchain.
DAOs are internet-native organizations collectively owned and managed by their members. They have built-in treasuries that are only accessible with the approval of their members. Decisions are made via proposals the group votes on during a specified period.
DAOs are internet-native organizations collectively owned and managed by their members. They have built-in treasuries that are only accessible with the approval of their members. Decisions are made via proposals the group votes on during a specified period.
Why do we need DAOs?
Starting an organization with someone that involves funding and money requires a lot of trust in the people you’re working with. But it’s hard to trust someone you’ve only ever interacted with on the internet. With DAOs you don’t need to trust anyone else in the group, just the DAO’s code, which is 100% transparent and verifiable by anyone.This opens up so many new opportunities for global collaboration and coordination.
How does a DAO work?
As mentioned, a DAO is an organization where decisions get made from the bottom-up; a collective of members owns the organization. There are various ways to participate in a DAO, usually through the ownership of a token.DAOs operate using smart contracts, which are essentially chunks of code that automatically execute whenever a set of criteria are met. Smart contracts are deployed on numerous blockchains nowadays, though Ethereum was the first to use them.
These smart contracts establish the DAO’s rules. Those with a stake in a DAO then get voting rights and may influence how the organization operates by deciding on or creating new governance proposals.
This model prevents DAOs from being spammed with proposals: A proposal will only pass once the majority of stakeholders approve it. How that majority is determined varies from DAO to DAO and is specified in the smart contracts.
DAOs are fully autonomous and transparent. As they are built on open-source blockchains, anyone can view their code. Anyone can also audit their built-in treasuries, as the blockchain records all financial transactions.
Examples of DAOs
Decentralized autonomous organizations have gained traction over the last few years and are now fully incorporated into many blockchain projects. The decentralized finance (DeFi) space uses DAOs to allow applications to become fully decentralized, for example.To some, the Bitcoin (BTC) network is the earliest example of a DAO there is. The network scales via community agreement, even though most network participants have never met each other. It also does not have an organized governance mechanism, and instead, miners and nodes have to signal support.
However, Bitcoin is not seen as a DAO by today’s standards. By current measures, Dash would be the first true DAO, as the project has a governance mechanism that allows stakeholders to vote on the use of its treasury.
Other, more advanced DAOs, including decentralized networks built on top of the Ethereum blockchain, are responsible for launching cryptocurrency-backed stablecoins. In some cases, the organizations that initially launched these DAOs slowly give away control of the project to one day become irrelevant. Token holders can actively vote on governance proposals to hire new contributors, add new tokens as collateral for their coins or adjust other parameters.
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