What are DAOs, and Why Do I Care?
Can you imagine a way of collaborating with people worldwide without knowing them and establishing your own rules and decisions all encoded in blockchain? Well, DAOs are making it real.
Many internet users are looking forward to starting their social organizations, but they want a trusted environment where they can exchange values. DAOs can help provide these users with a safe and effective environment to work with like-minded people all across the globe.
With the growing popularity of cryptocurrency, DAOs have become much in demand. Investors living in all parts of the world, both individuals and companies, are attracted to them. It will not be wrong to say that DAOs are among the top most-discussed blockchains topics right now. Scroll down to find what DAOs are and how they can benefit you as a consumer.
What are DAOs?
A decentralized Autonomous Organization is represented by a group of people pursuing a shared goal using highly secure blockchain technology to make decisions transparent and efficient.
In simpler words, you can think of DAOs as a group of friends pooling funds to buy their favorite gaming console or as sophisticated as a popular non-profit organization with thousands of donors, dozens of board members, and billions of dollars on the table.
The opportunities and benefits DAOs can provide to people are limitless. People worldwide are excited about crypto, NFTs, and the idea of decentralized finance as it allows them to perform transactions without the need for agents or intermediaries.
However, with a DAO, it is just not a payment system. Instead, it is an organization that operates without a central authority or needs for a top-down hierarchy.
History of DAOS
Currently, DAO hosts many organizations and brands that offer different services. The first company that DAO hosted in 2016 was The DAO. Within a short period of a month, the company had gained popularity and raised a huge profit of 150 million dollars.
However, soon after gaining immense popularity, a flaw in the underlying organization's rules was exposed. Investors previously attracted to it lost their trust in the organization's security.
Later, the organization focused on strengthening the security codes and made a successful comeback within a short period. However, it took the organization some time to regain investors' trust.
After the revival, different companies joined the DAO platform, including Friends with benefits (an exclusive social club that requires people to pay for an entry) and MetaCartel Venture (a for-profit business that invests in recently-started decentralized applications.
How does a DAO work?
A DAO works on the concept of smart contracts. Smart contracts are programs stored on a blockchain that run automatically when certain actions are completed. It includes how the treasury or pool of funds is managed.
Smart contracts govern all the funds. Therefore, no one can spend or take the money without a vote from all the members. Usually, votes are required to become a member of DAO.
However, two main types of DAO membership are:
If you want to become a member of this type of DAO, you need a token. If you know about blockchain technology, you must be familiar with the fact that blockchain technology uses tokens to complete transactions.
With a token-based DAO, you will have the right to vote based on your token ownership. However, now you must be wondering where to buy these tokens from? Usually, these tokens can easily be bought on the best cryptocurrency exchanges or earned through solving cryptographic puzzles.
It is much easier to join a token-based DAO than others. You will need to buy the appropriate token to become a member.
With this type of DAO membership, you must have a proposal instead of token ownership. You will gain membership or shares in the DAO by contributing something, usually some work. The more you contribute to this type of DAO, the more powerful you are.
Moreover, your proportion of the treasury will also depend on your shares. However, joining a share-based DAO can be quite challenging as it requires votes of existing members on your acceptance. If they think your contribution is worthy enough, they will grant you membership in DAO. Else, you will lose the chance of becoming a DAO member.
This type of DAO membership may make sense to venture capitalists who want to find interesting projects to invest in. Later, when you leave a share-based DAO, you can take a proportion of treasury based on your shares.
Why should you care about DAOs?
DAOs are undoubtedly one of the hottest blockchain topics, but what makes it worth the hype? Why should you care about DAOs? Here is the list of major benefits of DAOs to help you understand how DAO can change your life for good:
DAO provides users the opportunity to invest and be a part of the rapidly growing DAO community. Who does not want to be a part of an organization that makes huge profits? Of course, no one.
DAO provides its users with a set of clear rules and instructions. From voting to all transactions, everything will be transparent. Every member will have the right to participate in making decisions for the accelerated growth of the organization.
DAOs provide a great opportunity for users to collaborate globally as the advanced blockchain technology makes them borderless. The rules of participation are fixed. Therefore, the members will no longer have to worry about discrimination or favoritism.
Once the decision is made based on the DAOs rules and regulations, smart contracts are automatically created.
Because DAOs do not have a centralized authority, they are self-governed by their communities. They can operate and manage processes themselves without overshadowing authority figures, empowering all the members involved.
People can invest in a DAO without disclosing their details. You can invest in any DAO community of your interest anonymously, which allows you to be more flexible and experimental with your investments.
Potential for wealth
The DAO token or membership could potentially become valuable with time, depending on the community. If the DAO community you are part of rapidly grows and has a treasury worth of million dollars, you might be able to sell your token for much more than you paid.
Furthermore, if a DAO gains profits from projects it has invested in, you might also be entitled to share.
DAOs are becoming immensely popular among investors for all the right reasons. Many people from all parts of the world are investing in DAOs to make huge profits for themselves. The explosion of NFTs and crypto all across the internet has also fueled people's interest in DAOs.
Investing in a DAO is a simple process. You need to find a project of interest and put your money into it. However, in some cases, you might need to submit a proposal. If your proposal is amazing enough to grab the attention of existing members of the DAO you like, you will be granted permission to join the community. However, when deciding to join a DAO, you must compare different organizations and choose the one where you see the potential for growth.
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