DAOs: Immense possibilities of this conception in the future

  • Decentralized Autonomous Organisations (DAOs) have been a topic of discussion lately, as the sector brings a lot of possibilities and opportunities with it.
  • Vitalik Buterin, the founder of Ethereum, highlighted that more companies might buy into the DAO system as it helps reduce operational costs and enhance companies’ finances. 
  • The possibilities of DAOs are yet to be completely realised, but it is making a significant position whether it’s in organisations, the gaming sector, etc. 

The Cryptocurrency industry is growing by leaps and bounds lately, with more and more coins and tokens introduced almost every day. And the sub-sectors like Metaverse, Non-Fungible Tokens (NFTs), Web3, etc are taking a firm position in the world of technology. With more and more entities, countries, and sectors integrating them. The ecosystem aims to be more Decentralised, community-driven, and structured.

One such sector is that of Decentralized Autonomous Organisation (DAOs), It has emerged to be an invention that is raising questions on the current systems of governance. They are setting new benchmarks and making people believe that maybe the hierarchical structures are not necessarily required everywhere.

What are Decentralized Autonomous Organisations (DAO)?

A DAO is basically an organization with a specific mission, and the members working in tandem according to a common set of rules on a blockchain. The primary focus is to eliminate the problem of requiring a third party. It becomes a trustless system and removes the need for centralized leadership.

But to be called a DAO, certain governing rules and policies as a smart contract on the blockchain are required. There goes the need for a central authority, and it helps to be firm with the initial goal of the organization. The success of a DAO is totally dependent on the strength of its smart contract. 

The First DAO was launched in 2016, which was an open-source framework aimed at Venture Capitalism. Undoubtedly, it gained immense popularity at the time. But the success was short-lived when a bug exploitation attack happened and it incurred a loss of around $3.6 million Ether. After which, a lot of DAOs were created and still, a lot is being created.

A Decentralized Autonomous Organisation primarily comprises three things, the Smart Contract, the set of rules known to all members, and the token spent within the system for rewards. 

Apart from this, DAOs also have a significant position in the gaming world. Blockchain gaming has attracted massive popularity lately with play-to-earn benefits, but a game utilizing the benefits of a DAO for its community is just the cherry on the cake. An example of one such platform that offers these games is Nest Arcade. Gaming DAOs have been a major interest for the Venture Capitals.  

In Fact, the founder of Ethereum, Vitalik Buterin, highlighted that most companies might buy into the DAO system because it facilitates in reducing operational costs and improving the finances. 

ALSO READ: DAOs tax consideration and legal implications

DAO: Merits and Demerits

A few Advantages that DAO offers are transparency, faster decisions, no central authority hence power lies equally. But DAOs also come with a few risks like everyone is involved and this can be a disadvantage sometimes like decision-making approval from everyone. And it also faces criticism from the perspective of no regulatory framework, and skepticism always hovers around it.

A few robust use cases of DAOs are:

Faith Tribe is the first entirely decentralized platform for fashion creatives. This open-source design platform is specifically focused to give fashion creatives a position in the world of Metaverse as well as the physical world. 

Paragen is an organization focused on helping projects in their preparatory phases before they launch. And it is one of the great examples of DAO used as project launchpads. Some other examples are Gains Associates, Tangible, etc. 

Decentralized Autonomous Organisation has opened paths for people who want a better work environment and staff management. There are a lot of drawbacks with the traditional systems, and true decentralization of the public and private governance is the need of the hour. DAOs have been utilized in several projects like BitShares, Digix, Dash, etc. 

The DAOs have been in the limelight in the crypto industry. Even the crypto projects are coming up with their DAOs now. It is to look forward to what all the sector could bring with it. As all these technologies are still evolving, their full potential is yet to be entirely unveiled, but their integration in some way or the other seems inevitable. 

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Source: https://www.thecoinrepublic.com/2022/02/27/daos-immense-possibilities-of-this-conception-in-the-future/