What Are DAOs And Do They Hold Any Future?

DAO - finwatchers.com

What is DAO?

DAO is an acronym that stands for decentralized autonomous organization—that is run by smart contracts and is owned and managed by a group of people. Smart contracts are lines of code and can be programmed to perform any given task.

DAO has no central leadership and has no hierarchical management and it can serve many purposes. You can take part in DAO by owning a Bitcoin.

Ethereum was the first technology that deployed smart contracts, and nowadays Smart contracts are deployed on various blockchain technologies.

Smart Contracts lay down the DAO’s rules and anyone having a stake in DAO can influence the decision on creating or removing new governance proposals.

The proposals that are approved by a majority of stakeholders move forward which prevents 

Proposals from being spammed. The majority, however, varies from time to time and is specified in the market.

Once any decision is finalized, the code is modified, and the community gets the updated information. In simple words, all the mundane tasks are operated through code, hence transparency is maintained.

Examples of DAO:

The earliest example of DAO is Bitcoin- it is operated through the agreement of its community, transactions are fully transparent and miners add the transactions in the public ledger of Bitcoin’s past transaction. However, by standard measures, Bitcoin is not considered a DAO.

Dash is a pure example of DAO. In-Dash, the stakeholders influence the decision on the use of treasury.

Decentralized finance or Defi also uses DAO to make applications fully decentralized.

Advantages of DAO:

  • Safe: DAO is completely safe, unlike traditional organizations where if the CEO or any senior position falls vacant or funds are taken back, DAO can not be disrupted, since there is no central organization.
  • Can not be Shut down: No one can shut down DAO, contrary to the standard organizations, government or any authority can not shut it down since it runs by smart contracts and all the major decisions are taken through voting by stakeholders.
  • Open-Source: DAO is open-source which means that the code is transparent to all its members and is also open to its members for improvement.

Dis-Advantages of DAO:

  • Vulnerable to Hackers - As we discussed earlier, DAO is an open-source organization which also makes it vulnerable to hackers who can look at its code and make changes.
  • DAO is fully transparent so no business secrets can be kept as secrets as all the details of transactions are available to everyone.

Use-Cases of DAO:

  • You can collect donations from people around the world and they can decide where they want to spend these donations.
  • You can also create a network of freelance contractors who can pool funds for different purposes.

Future of DAO:

The transparency and safety that DAO provides are found absent in standard organizations. The smooth working and trust that DAO provides are nowhere to be found and definitely holds a future. The smart contracts as believed by DAO enthusiasts already have the potential to make an organization smart by programming codes that can do different kinds of work such as hiring and cash management.

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This information is for educational purposes only and does not constitute investment advice. No person should rely on it to make any investment. Investing carries risks, including the loss of capital. All opinions expressed are subject to change without notice. Past performance is not indicative of future results. Always seek the advice of a licensed investment professional before making any investment.