The must-know DAO in 2022

The blockchain world uses technology to subvert the tradition. For example, DeFi is a subversion of traditional financial services, and the recent popular DAO is a subversion of traditional corporate forms. According to the data, there are currently more than 180 DAOs managing more than $10 billion in assets and attracting nearly 2 million members. But what exactly is a DAO? Through this article Mark will quickly lead you to the world of DAOs.

1. What is DAO

Features of DAOs

DAO (decentralized autonomous organization) is a decentralized autonomous organization based on blockchain. It operates through smart contracts of blockchain technology. In other words, the rules of the organization are written on the blockchain through code in the form of contracts. All the management, operation and transactions of the company are run according to the preset rules. The features are as follows:

1. Automated and unified rules
DAOs are organizations run by smart contracts, which are self-executing lines of code that are agreed upon by the initial developers and stored on the blockchain, because there is no leader, in addition to avoiding human negligence, funds can also be avoided by individuals or a monopoly of a specific organization.

2. Shared decision making
DAO decisions are made collectively, not by the CEO or senior management. In effect, members who own one or a predetermined amount of DAO's native tokens can propose and vote on smart contract changes, initiatives, investment ideas, etc., in a way that varies from DAO to DAO, thereby collectively driving the development and growth of the organization.

3. Membership stems from ownership of native tokens Membership in an organization stems from ownership of the DAO native tokens. The minimum threshold for the number of tokens required varies by DAO. Tokens can be purchased on or after the token issue date and can also be received as a deposit. However, there are still a small number of DAOs, and it is not enough to have tokens, but also requires written application and invitations from other members to join.

4. Breaking the limitation of time and space is conducive to transnational cooperation
The emergence of DAO solves the business restrictions between countries, removes the normative gap between different countries, reduces the cost of time and space, and provides a common set of guidelines, so that everyone can work under equal conditions.

The concept of DAO is actually not difficult to understand. We can think of it as a machine (a company) operating. Its governance mechanism is implemented through smart contracts. When the organization encounters future development problems or disagreements, members vote To decide the next step, the organization is no longer run by a small number of authorities.

Advantages of DAOs

• High transparency, anyone can view the code, voting results and other matters related to the organization.
• Barriers to entry are low.
• Cross-border cooperation is easier.
• By making rules through smart contracts, decision-making is more rational.
• Decisions are voted on by members of the community, not by a few authorities.

Disadvantages of DAOs

• Due to the characteristics of the blockchain, problems found cannot be modified arbitrarily, and it is difficult to respond to rapid changes in the market, which has its limitations.
• Because the organization is flat and there is no one clear person in charge, it often takes more time to make decisions.
• At present, there is still no relevant legal protection, and there are many vague areas.
• Most projects are based on a one-person-one-vote voting system, but one person can have several virtual wallets (accounts), and the voting results are still at risk of being manipulated.

2. Types of DAOs

I understand the basic definition of DAO, but there will be different types according to different industries. Next, I will introduce several types that appear frequently.

1. Protocol governance type (Protocol DAO)
This type of DAO has received the most attention. In many DeFi projects, governance methods such as DAO proposals and voting will be adopted to decide the project development direction. For example, Uniswap and Compound will make project development decisions in the form of DAOs.

2. Investment type ( Ventrue DAO )
Raise funds in the form of DAO, invest and earn income according to the votes of members. YGG, the world's largest chain game association, is an investment-based DAO organization. By staking YGG tokens, you can participate in its voting and governance, optimize community-owned assets to maximize utility and share profits with token holders.

3. Collector DAO
The recent popularity of NFTs has led to the emergence of collectible DAOs, the purpose of which is to collect NFTs. FlamingoDAO, PleasrDAO and Jenny Metaverse DAO are all DAOs that collect NFTs in order to create long-term value of NFTs, and can also help some artists who are just starting out or not well-known to gain income and attention.

4. Social DAO
Social DAO values social capital. It gradually evolved from group chat, and everyone changed from friends to colleagues after chatting. The crypto world is no longer just a way to make quick money, it’s also the best place to meet like-minded friends online. For example, having a Boring Ape NFT can unlock Discord for BAYC to participate in activities, in which case the perceived value of the community drives the value of the NFT.

5. Service DAO
It looks like a kind of online talent agency that brings together people from all over the world to build a product or provide a service, customers can offer bonuses for specific tasks, and once the tasks are completed, before rewarding individual contributors Part of the fee needs to be paid to the DAO's treasury, and contributors usually also receive the DAO's governance token.

The biggest difference between DAO and traditional organizations

1. Stakeholders can express their interest demands. Generally, shareholders of traditional companies have the opportunity to express their opinions only at the annual shareholders meeting. Through blockchain technology, investors who hold tokens can On important matters related to project development, express opinions by voting. For example, what kind of assets the DAO wants to buy, what investments to make, and so on.

2. Openness and transparency In the traditional world, organizations have always needed trust to function, especially when larger sums of money or major decisions are involved. All the rules of DAO are public, replacing trust in an open and transparent way. Any change requires a majority vote. Such voting happens on the blockchain, so no third party or intermediary is required.

3. Specific applications

Having said so much, let's cite some DAOs that are actually running so that you can learn more about related applications.

1. The First DAO - The DAO
Launched in April 2016, The DAO is the first decentralized autonomous organization based on Ethereum. It is positioned as an investor-oriented venture capital fund. Investors exchange ETH for company shares called "DAO token", which can be used To decide the future development of the company and get dividends, the voting projects are as large as the traditional shareholders' vote on the company's large-scale governance issues, as well as the activity voting on the details of how the organization allocates resources; in short, the person who holds the token can control DAO's assets and actions.

However, The DAO was later withdrawn by hackers with 3.6 million ETH. In order to allow the owners of ETH to recover the funds, Ethereum underwent a hard fork, and there was no loss in the end, but this hacking attack led to internal Ethereum community. The split also shows the dangers of DAO structures that are not yet fully mature. And within weeks of The DAO's debut, the entire organization collapsed and burned down.

2. BeetsDAO
Founded: Collectively focused on buying music-based NFTs
The community brings together all the fans who are fascinated by music-based NFTs, and the core of BeetsDAO is to pool funds mainly for group investments. But in some use cases, it's also responsible for building new art and music. Like last March, they bought four rare (EulerBeats Enigma) NFTs and generated audio files through algorithms.

3. ConstitutionDAO
Purpose of Founding: Collective Purchase of Copies of the U.S. Constitution Although it failed to win a copy of the U.S. Constitution auctioned by Sotheby's, the group successfully introduced the concept of DAOs into mainstream culture. It sheds light on the power of community organizations and the speed at which DAOs can raise money, shows how crypto groups can make a real difference in the world, and inspires several similar projects.

4. LexDAO
Established purpose: to convert legal services into code
LexDAO is not a law firm and does not provide legal advice, they are a group of legal engineering professionals who mainly develop tools that can be used by blockchain-related applications to replace some basic but very expensive legal services. For example, the organization's custodial system, LexLocker, is used to hold deposits when goods or services are delivered, without relying on banks or other third parties for guarantees of payment.

4. Problems to be solved:

Of course, such a new type of decentralized organization has not yet been used on a large scale, and there are mainly the following unsolved problems:

1. Legality
The regulatory environment DAOs face is fraught with uncertainty. It remains to be seen how different jurisdictions will establish regulatory frameworks for these new types of organisations. However, the ongoing uncertain regulatory environment is a significant impediment to DAO adoption.

2. Vulnerable to hacking
The desirable characteristics of DAOs (decentralization, immutability, transparency) inherently have obvious performance and security flaws. While the rapid growth of DAOs is indeed exciting, it also brings many risks that do not exist in traditional organizations. .

3. The focus of centralization Decentralization is not a state, but a scope, where each level is suitable for a different type of use case. In some applications, complete autonomy or decentralization is even more inefficient; although DAO allows multiple participants to vote at the same time, the governance rules formulated will always be a focus of centralization, and centralized organizations will reject it. open participation, but can lead to more efficient operations and greater resource savings.

5. The future of DAOs

With the increasing attention of DAO in the world, hundreds of developers are making technological innovations, improving governance mechanisms and voting solutions. In 2021.07, the Wyoming State Legislature officially approved the DAO Act, and the governor has completed the signing, which means that DAO can be used in the The state’s registration as a limited company, which will officially go into effect on July 1, is an important milestone for the DAO.

However, DAO is mainly produced by the decentralized development of the blockchain, which combines the overall technology with the development of the community. Now it is also absorbing the previous positive and negative experience and changing its form, and even trying new schemes and voting rules. Such architectures will be developed for more specialized applications in the future.

6. Mark's point of view

In the past, people may have the idea of "everyone is a decision-maker" and "everyone is equal to the participants" for decentralized organizations, but in fact, the detailed organizational structure and decision-making process still have to follow the specifications formulated by smart contracts. to decide. In addition, although the emergence of DAO is a process of decentralization, depending on the purpose of the organization, the power center still needs to exist, so that the overall efficiency can be improved.

Mark believes that DAO has a strong advantage in the digital world. It is possible to quickly set up an organization to gather opinions or conduct related fundraising, etc. In the future, when the DAO infrastructure is mature, it may be widely used in various On such issues, even some traditional official organizations will be transformed to use them.

Noun additions:
Smart contract: A set of rules based on software, run in the form of blockchain, and cannot be tampered with in the process, that is to say, fairness is guaranteed in the process, and it has not been arbitrarily modified by a third party.