DAOs are a concept that involves a group of people of shared interest running a community-led organization on the blockchain without having a central leadership.
According to Cointelegraph, A DAO works without traditional management and can exist for a number of reasons. For example, a community of art lovers could come together in a DOA set-up to pool funds together to flip digital arts, develop an art metaverse and benefit from the shared success. A football club DOA could give access to club fans that have bought all season tickets a good percentage to make certain key decisions in the season such as new coach hire, project development and even in player substitution.
The potentials of DAOs emergence are endless including enabling a transparent and quick decision-making model for business networks.
Do We Really Need DAOs?
There is no doubting how powerful the force of a group of people with a shared interest can be. People love to make decisions and have a say in making things work. To put it simply, people hate control and would rather love to be given the power to become contributors.
This is why the idea of DAOs and their launches have been disrupting startup initiation as we know it.
Take for example social networks like Facebook, Tiktok, Twitter, Wikipedia etc, they found business success in giving people the opportunity to create the world they wanted rather than create one for them. Microsoft’s initiative Encarta swallowed billions of dollars and still failed woefully to Wikipedia that found success by allowing people to build and make decisions. While these startups are chiefly not decentralized, they highlight what a DAO tends to achieve.
In the more decentralized space such as in defi, we have seen projects like Dogecoin and Shiba Inu have untold success beyond institutional expectations such as Wall Street. Defi and blockchain technology is gaining steam because people do not want to be told how much return is possible by tie analysts who have no money in the market.
Employees are now preferring remote working to onsite gigs where it is possible to work from home because people just love to have some autonomy and not be controlled like bots.
These are some of the bedrocks upon which DAOs exist and this is essentially why DAOs will continue to flourish.
DAOs Vs Traditional Startups: Operation?
Starting a business with partners requires a lot of funds and trust to ensure peaceful coexistence and alignment of vision. When it is with people over the internet, the risk ratio increases even further. However, with DAOs, you don’t need to trust anyone else anymore but the smart contract used to execute the DAO’s on the blockchain which is open source and verifiable by just anyone.
Let’s take a look at some differing characteristics:
For example, while a traditional startup requires human management and execution, a DAO is fully democratized.
A DAO also reserves voting for members for any changes to be made on the network.
Due to the fact voting is done on the blockchain, results are received immediately without intermediate intervention, therefore, increasing trust. In traditional establishments, a committee is usually set up to calculate votes which can be prone to manipulation due to human factors.
In a DAO, everyone in the community is involved to see the community succeed. When this happens and there’s a yield to pay, the smart contracts make the payments to members seamless and secure as well.
Examples of DAOs And How To Get Involved
Below are some interesting DAOs you can check out.
OdysseyDao and BanklessDAO are learning communities for web3 knowledge.
Friends with Benefit network and governance token $FWB is a good example of a great DAO project. The community is so engaged that its market cap now exceeds $84 million.
Others include MolochDao, LinkDao etc.
Future of DAOs?
According to DAO Analyst Christian Hasker at Hedera, “In the future movie studios will move to a DAO-based model to finance and decide which movies to finance. With the power of smart contracts + Token Service coming to @Hedera, it will be a great place to run your DAO.”
Decentralized autonomous organizations have garnered a lot of traction in the last few years and are now common in many blockchain projects which is good.
DAOs aren’t perfect either. The concept is a new technology that will have some flaws and improve over time.
To ensure the continued success of DAO systems in the community and in businesses, it would be important for the engineers and pioneering team to understand the initiatives that would best work with a DAO model.
Many more DAO initiatives will emerge and hopefully some to address student debt issues.
With the current trends, DAOs could possibly take over how startups are run as it improves shared risk and reward while building improved social communities.
For more on DAOs, follow up our #DAOSERIES