The Way of DAO: Organizations in the Blockchain Era

WhiteBIT
Published 01 June 2022
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The Way of DAO: Organizations in the Blockchain Era

Content

The word “organization” in its traditional meaning is associated with paperwork, bureaucracy, and tedious waiting. However, those who are already familiar with the revolutionary ambitions of blockchain developers know the term DAO. In this article, we will talk about how organizations created on the basis of smart contracts function and how they can replace the usual organizational hierarchy.

What is DAO?

DAO is a decentralized autonomous organization supported by a smart contract. That is, instead of the “management → executors” hierarchy, there is a special mechanism that regulates the entire system of the organization’s activity. The “backbone” of such a structure is the set of rules written in the code on which all members of the organization rely.

Simply put, DAO is an analog of an ordinary organization with its board of directors, shareholders, and managers, only with a much more transparent and simple structure. You can create a DAO in the commercial, public, or corporate sector and thus get a more structured mechanics of interaction within the community.

Autonomous organization technology allows each member of the organization to participate in decision-making and thus contribute to the improvement of the community. Often, each DAO has its own native token that helps regulate the management and is used as a payment method to employees and contractors. Holders of these tokens can take part in community optimization by voting. To avoid the traditional “who-has-the-most-tokens-decides” scheme, DAOs implement quadratic voting, which does not allow large holders to have the voting prerogative.

Historical background

2013 was the year when the idea of an ​​autonomous organization was born. It was then that the blockchain developers began to talk about decentralized autonomous corporations (DAC), the main principles of which were to be:

  • decentralization;
  • transparency;
  • tokenization.

The concept was improved and implemented in the form of a DAO, a structure suitable for any organization of people motivated to optimize and develop their community.

DAOs are created on the blockchain. Today, Ethereum is considered the most popular blockchain for creating decentralized autonomous organizations. Although, the development of other successful L1 networks opens up a wide range of opportunities for creating new forms of DAO in these networks.

Types of DAO

First, participation in an autonomous organization can be divided into two types:

  1. Participation based on ownership. DAO tokens can be easily found on many platforms and used to exercise the right to vote in the organization.
  2. Share-based participation. Such DAOs are not always open to the public. Usually, to become a member of such an organization, you need to make a contribution into a certain cryptocurrency.

DAOs can also be categorized as:

  • investment DAOs, which presuppose collective investment in projects;
  • funding organizations that organize grants funding;
  • informational DAOs used for information retrieval (similar to Google search);
  • socially-oriented DAOs, which are engaged in the implementation of public and social projects;
  • educational DAOs;
  • legal DAOs that integrate blockchain into law, and others.

Perspectives of the DAO

The DAO concept is already being implemented in numerous companies that use smart contracts. In 2021, the state of Wyoming legislated decentralized autonomous organizations as a new form of organization. Shortly thereafter, The American CryptoFed became the first legally recognized DAO in the US. Then a wave of creation of autonomous organizations for investing in NFTs and other blockchain projects swept through.

In 2022, interest in the DAO has only intensified, with many analysts predicting autonomous organizations to completely replace traditional company structures and improve their work. In addition, the emergence of special DAO tools will help optimize the DAO functionality itself and balance the capabilities of community members.

DAO tokens on WhiteBIT

Our exchange offers a selection of DAO tokens that have managed to prove their effectiveness.

BADGER

Badger DAO is a decentralized autonomous organization that allows bitcoins to be used as collateral in decentralized finance (DeFi) applications. Anyone with a BAGER Governance Token has the ability to vote on proposals put forward by community members. The more BAGER a user owns, the more voting rights they have, and proposals that get enough community votes are implemented on the platform.

ANT

Aragon is an open-source software used to support and create Decentralized Autonomous Organizations on the Ethereum blockchain. ANT is the centerpiece of the DAO governance. It is Aragon’s native cryptocurrency, which gives holders the ability to vote on key decisions about the project’s future.

CRV

Curve is a decentralized stablecoin exchange that uses an automated market maker to manage liquidity. In August, the exchange launched a decentralized autonomous organization with CRV as its native token.

Conclusion

DAO is a new form of organization that is built using a smart contract on top of a specific blockchain. A characteristic feature of DAO is transparency, equality, and the absence of a hierarchy. There are numerous types of DAO that one can join either by purchasing the organization’s native tokens or by contributing as a shareholder. The prospects for decentralized organizations are huge, and they go back primarily to the desire of communities to develop in step with leading technologies.

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