What is DAO? 

In recent years since the concept of Blockchain has been introduced, so far DAO has emerged as the most incredible concept to align with it. DAO/DAC abbreviated as Decentralised Autonomous Organisation or Corporation is the digital version of an organization where all rules and regulations are stated in the form of source code which was developed by Slock and is executed by various network nodes together through some consensus algorithm. The blockchain serves as the platform for the organization to run, most commonly Ethereum blockchain is brought to practice for writing DAO in Solidity Language. Its effective coding on a blockchain removes the need for a centralized governing authority. Hence, coined as “Decentralised” and “Autonomous.” DAO is meant to operate as venture capital for the decentralized space and Crypto world. 

 

Emergence & Setback of DAO 

The first stepping stone towards making the milestone by DAO was set in April 2016 after a crowdfunding campaign. In the initial phase of May 2016, a member of the Ethereum community announced the entry of Genesis DAO which was built as a smart contract on the Ethereum ecosystem. At the start of 2016, members of the Ethereum community declared the introduction of an inceptive DAO named Genesis, which was built on Ethereum blockchain as a smart contract. The creation period witnessed an unexpected boom phase where it gained 12.7 Ether which showcased as the biggest crowdfunding in history. 

The objective behind the introduction of this organization was to build a decentralized business structure for both commercial and non-profit enterprise yet it lacked on certain significant aspects due to which DAO was called off in June 2016 owing to iterative call vulnerabilities by bloggers and coding loopholes. As during this time, 3.6 million Ether worth $70million were stolen. Therefore, the funds were put into 28 days holding period under the terms & conditions of Ethereum wherein the ethereum network had been hard forked to move the funds back to their original owners. Later this hard fork came into force to use the original ethereum blockchain called Ethereum Classic.

There have been recent reforms in the DAO protocols towards their betterment which further made DAO as more reliable

.• The staked Digi DAO (DGD) tokens were unstaked in the initial phase for the second quarter.

 • The ETH tokens which were locked up in the DAO were moved to DigiDAO refund contract,

 • The refund could only be availed via My Ether Wallet, limiting itself to two transactions. 

 

Functions of DAO 

Proposal: The DAO token holder can submit a proposal anytime. This proposal defines the quantity of Ether to be paid to the service providers in the exchange for products or services. DAO is expected to engage in various proposals over time.

Vote: The decision regarding the proposal is taken by casting vote which is staked by the Ether control by the members.

Development: since we are aware that DAO operates as a smart contract to deliver on a service of objectives for which the payment is made for the predefined installment period in a lump sum. This further establishes the mutual relationship between the Ether holder and the service provider. 

Deployment: DAO can charge outsiders for using products& services as a part of the proposal. The revenue so generated is then sent to DAO which contributes to the growth and expansion.

 

Working of DAO 

  • Framing the rules: The initial step in creating DAO is to frame, design, define, and establish protocols for governing the entire crypto ecosystem. The rules and regulations so formed are stored in the form of a smart contract which is open, transparent, and immutable.  
  • Funding: After the required establishment of rules, the need for funding comes in an active role. The funds are raised through some crowdsource funding mechanism by the issuance of shares/tokens in exchange for money. Such funding transactions are done in just real-time unlike the period of 60 days in a traditional organization setup.  Funding also contributes to the expansion of the network as far and widely possible, by providing certain rights and privileges to the members through tokens.
  • Becoming Autonomous: Following certain deployment, DAO has emerged as a completely autonomous body i.e. free from external control. Everyone holding DAO’s native tokens owns a proportional corresponding stake. The action or votes in the DAO are represented by some form of Blockchain transaction whereas members are represented by Ethereum address. Such addresses are owned by a robot, human, IOT device, or even another DAO which makes it seamlessly automated and full-fledged mechanism.   The token provided to each member represents the share of DAO which is used to vote for decision making. The volume of tokens in the address is directly proportional to the intensity of control in the blockchain. Under this system of DAO running in the blockchain, the democratic approach the power of wilful delegation of authority exists

This majority voting system holds both pro &cons. The decision-making and funding serve as a significant advantage whereas the existence of the same delays the decision making the process prolonged and drawn-out.

Prominent Working Examples of DAOs.

With the comeback of DAO with more secure and subtle protocols, it gained the widest market base in the crypto ecosystem adhering to the following digital platforms:

  • Dash:  It is the widest and well-known project in the crypto environs which were founded in 2010 by Evan Duffield. Initially, it meant to serve as a fork to the Bitcoin space. In January 2014 it was improvised to create Xcoin which gradually became Dash. It consists of normal and master nodes. The master nodes are responsible for two critical functions of Dash as – Scalability (Instant send) and Privacy (Private Send). The funds generated out of Dash are distributed as follows as – 45% to the miners, 45% to master nodes and 10% for DAO governance.
  • Digi DAO:  This is recently dissolved in the crypto community by wide vote with the aim of building DGX on the Digi DAO platform. There have been more than 50 projects submitted on this platform out of which Neutral 4G, Bullion IX, and Sesocio.com are the notable ones. DigiDAO also funded projects related to marketing, off-ramp, on-ramp, community management, exchange integration & Uniswap liquidity.

Apart from these two prominent platforms, there are dORG; Augur, Steem, Aragon, Colony and etc. which have made DAO expand at a speedy pace.

 

It is quite evident now that there is no such concept which can claim to be fully decentralized & autonomous as the governance rules vary within the network. Yet DAO can be assumed to be the most architecturally, geographically, and logically decentralized in comparison to similar concepts. Owing to its certain characteristics DAO witnessed major growth & expansion. As in the year 2019 UK-based Nexus Mutual (first decentralized mutual insurance was corporate which resulted in the widespread acceptance of DAOs.  The DAO has set benchmarks and lessons at the same time for other invasions to operate and sustain in a long run.