The delirium of Blockchain and Cryptocurrency will not stop immediately. As more people become aware of disruptive technologies in the digital space, new improvements are also being made to these technologies. The Defi and NFT industries have experienced tremendous growth in the past couple of years, and currently the metaverse and Web3 are the technologies that are making the digital space glow.
It is not yet clear where these pioneering technologies will lead us, but we are confident that they will provide many benefits. When Web3 and NFT converge, many platforms want to leverage technology and infrastructure to make the NFT ecosystem more decentralized, community-led and ecosystem driven.
Using both social construction and leadership, the destruction of the decentralized autonomous organization is of the highest degree. The DAO is one of the great inventions that challenges current control systems. By using NFTs, DAOs are changing our understanding of how organizations and systems are managed, and further enhancing confidence in the idea that the best form of governance has nothing to do with hierarchical structures.
Looking at the problem of the principal agent that limits the growth of organizations and prevents agents from feeling part of a team, you can see why decentralized organizations that foster community participation are so important.
Is there anything you could change with your current organization if you had the opportunity? Administration? structure? payment system? What if your current organization could help you feel like a more important part of the team by bridging the gap between managers and employees? Or to put it better: What if you became a part of running your organization? Does this sound interesting? This is what we will discuss here.
I understand DAO
From the name alone, you can probably get an idea of what a decentralized autonomous organization is. The DAO is a contract-based organization, and the members work together according to a common set of rules coded on the blockchain. The main purpose of a decentralized autonomous organization is to help eliminate a serious problem in many traditional organizations – the “lead agent” problem.
As the common English phrase says, company of two; Wood is the crowd. Organizations need more hands-on deck. But with each new person joining the team, there is sure to be some difference in interests, priorities, and goals. This often leads the parties to make selfish choices. DAOs avoid this problem by presenting as an untrusted system, eliminating the need for centralized management.
Related Topics: DAOs Should Be Completely Autonomous and Decentralized, But Are They?
There are several criteria that a company must meet before it can be considered an independent decentralized organization. Governing rules and guidelines in the form of a smart contract should be placed on the blockchain – this helps eliminate the need for a central authority and also prevents any party from making decisions that deviate from the original purpose of the organization. The treasury of the organization should be available only with the consent of the whole group, or at least in a predetermined percentage.
A short story about DAO
The first DAO implementation failed simply because stakeholders did not take standard precautions. The first DAO was created in early 2016 and was simply called DAO. It was an open source platform focused on venture capital. It was an instant hit, amassing over $250 million in Ether (ETH) – note that ETH was worth about $20 at the time.
This massive success was short-lived as the DAO suffered a loss of nearly 3.6 million ETH in a mistaken attack in mid-2016. It has not recovered. Since then, there have been several attempts to launch a successful DAO, and many more are currently being created. (The Faith tribe, discussed later in this article, is one of the closest to fully decentralized.) DAO’s success lies in the strength of its smart contract. And as an investor, you should take the time to study open source smart contract code to look for red flags or anomalies.
Related Topics: The Development of DAOs and Why They Are Expected to Go Popular in 2022
How does DAO work?
Every DAO is based on three main things:
Smart contracts included.
A set of rules known to all participants.
A code that can be used in the reward system.
The smart contract contains the rules and small details of the DAO, everything from the list of participants, investment amount, who represent the majority of stakeholders, workflow and reward mechanism.