While the world was gaining a grasp over Bitcoin, Altcoins, NFTs, and Metaverse, the next big trend came into the limelight – DAO. It stands for Decentralized Autonomous Organizations which is nowhere like an actual organization that we often relate the word with instead it is a set of crypto wallets that are managed by individuals.
DAOs are known to manage assets, develop protocols, and vote on community issues. Despite its long-term existence, it was in the year 2020 when DAOs took the front seat in the crypto sphere when Ethereum was trading at $230.
What are DAOs?
The concept of DAOs was inspired by the decentralized nature of cryptocurrencies when in the year 2016 a group of developers created this automated organizational structure. Though in the same year, DAOs were de-listed from certain digital Exchanges owing to major programming errors which led to the loss of 3.6 million ETH.
However, the concept of DAOs gained significant importance for its two basic features – automated and decentralized identity. Initially, it acted as the source of venture capital fund which is based on open–source code without the need for a management structure. Thus, DAO is software that runs on a blockchain network and provides a built-in model to the users for the management of the codes.
What makes DAOs different?
Being based on blockchain and smart contracts DAOs are certainly decentralized in nature. However, one of the most unique aspects here is the voting norms.
Voting system
The rules and governance which are coded in smart contracts cannot be changed without voting from DAO’s members. No few members have the majority say instead members of each DAO vote on equal footing towards decision-making. This unique feature adds to the better transparency and participation in the DAOs ecosystem. Now, does that make you curious about obtaining voting power or membership in DAO?
Governance Tokens
To obtain DAO’s membership all you need to do is buy governance tokens (the cryptocurrencies tied to certain projects). Generally, these governance tokens can be obtained through structured funding rounds where demand usually exceeds the availability of the tokens. Thus, by holding these tokens you can own equity in the DAO and contribute to building its potential future. Though the norms for each DAO project vary, what has been observed in most cases is that weight of the member’s vote is defined by the size of their contribution to the project.
Non-governance Tokens
Alongside, let us suppose what if DAOs do not use any governance tokens? Is there no way out to obtain DAO membership? In case DAO does not use governance tokens then it might accept an investment of other forms to consider for membership. Like most of the DAOs, consider Ether, the second-largest cryptocurrency in terms of market value and power DAOs ecosystem. So, it is considered to read all the norms separately for each DAO and understand their respective regulatory requirements.
What are DAOs used for?
DAOs have made immense dominance in the entire ecosystem by supporting investment, charity, NFTs purchase, fundraising, etc without the need of intermediaries. For example, DAO can serve as the best tool for accepting donations from across the world and facilitate members to take justifiable spending decisions. Last year in May 2021, Jenny DAO made the first step towards incorporating DAOs in the art world too.
The first NFT acquisition for an original song by Steve Aoki and 3LAU was made. Thus, DAO has emerged as the metaverse organization to provide fractional NFT ownership. Alongside, allowing members to oversee NFT transactions and its unique Unicly protocol is based on smart contracts also ensures secure control over the vault where NFTs are added.
Can DAOs be a trend in 2022?
In the year 2021 DAO went from mere crypto jargon to a mainstream event because of the continuous surge in numbers and total funding. Irrespective of the form and objective of the DAOs they have started to create a major impact on mainstream funding culture too.
| DAOs | Objectives |
| Beets DAO | It focuses on supporting the purchase of music-related NFTs. |
| Bit DAO | Largest treasury across the world with $2.5 billion investment. |
| Constitution DAO | Allowing group efforts to buy a copy of the US constitution. |
| Decentraland DAO | It is a decentralized city planning committee based on metaverse. |
| Friends with Benefits DAO | It is a membership-only crypto club with tokens attached to it. |
| Maker DAO | It is the largest DEFI’s central bank and also a creator of DAI. |
| Mirror | A decentralized blogging platform to benefit creators and writers. |
| Please DAO | Group of NFT artists for pooling funds to & supporting digital art. |
Honestly, the list of DAOs is more elongated and its global applications too. As a result, DAOs are all set to command the crypto sphere in the year 2022 too.
Final Words
The ongoing wave of mainstream institutional investment in DAOs is an indicator of industrial growth and advancement. From art to sports to blogging to history, DAOs have created their mark in each domain and are certainly the next big thing after NFTs.
