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What is DAO?

By Kushal Mewada posted Thu March 02, 2023 08:17 AM

  

Have you heard about DAOs? Well it’s not easy to explain but we will make it a piece of cake for you. Remember those zombie genre TV series like Last of Us and The Walking Dead, where the government collapses and people are on their own. This blockchain based concept of establishing a Decentralized Autonomous Organization is quite similar to the TV series we mentioned above right, but with no brain-eating zombies. To withdraw all the decision making power that the government possesses and make it independent of a centralized authority.

Explaining the Basic and DAO’s Use Case

Decentralized Autonomous Organization or DAO is methodology to carry out crucial and impactful processes without any biases. The decision is not dependent on a higher ruling body and favors all the suggestions present before the DAO. How does it works you may ask? Well for the beginning you need to form a legal structure that is based on DAO characteristics, now you need a token holder or participant, and lastly voting power is distributed against these individuals eliminating the middleman that could jeopardize the decision.

But wait, how is it applicable? Through Smart Contracts, DAO are defined using smart contracts. And as they are integrated with blockchain technology they possess all the blockchain benefits such as scalability, security, and the most important decentralization. For example: An entity hosts a charity event with lots of money being donated, now they can execute a decision making process using DAO structure to decide where to spend the money. This creates transparency and equal opportunities making the system robust and completely immune to unfair trading practices.

Spotlights and Spitting Facts

Did you know that the first DAO entity was instituted in the late 2016s. But due to lack of proficient knowledge and poor development framework the status of the project was updated to inactive. There were around 3.6 million Ether tokens, on the stake as there were hackers who gained control over the tokens easily. That's 14% of all the ether tokens present in the world.

This did not stop the megaminds behind developing a robust tool which will eliminate the dependency on a centralized authority to take charges. Soon Web 3.0 will surface for users which may lay a strong foundation for DAO tools and technologies. Don’t scratch your head, one of the important connections between Web 3.0 and DAO is ownership of data as well as utilizing the data for the “benefit” of people.

Epilogue

Currently there are three types of DAOs known to the blockchain development community: Capital Allocation, Social, Governance. Every DAO represents a unique characteristic and they all are decentralized, at least they say they are, but you know right. Fun Fact: DAOs can be monetized by trading fiat currencies for native tokens.

There are ample benefits to establishing a Decentralized Autonomous Organization if you are an entity that includes a group of individuals that wants to parley rather than raising swords and shields. It enables an organization to make better decisions, include a fair voting system, and allow communities from all around the world to trust one another. Suggestion: you can reach out to an educated and expert blockchain development company who can reshape your business ideas according to the DAO and blockchain technology.

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