Decentralized Autonomous Organization (DAO) is one of the best known concepts blockchain technology has introduced so far. “Decentralized” means that no government action is required, and “independent” refers to the validation of smart contracts and coded events in the block chain. The creation of the DAO was first announced by some ethereum blocking chain The creation of the DAO was an outstanding success, producing ether worth $ 150 million at the time. In addition, this value reached a value of $ 250 million, recognized as the largest crowdfunding in history.
Understand the meaning of the term and the important points involved.
Table of contents
- What does DAO mean?
- Why are DAOs needed?
- How do DAOs work?
- How to use DAO?
- In charities
- In the freelance business
- Pool investments
- How to get DAO membership?
- Token-based membership
- Share – based membership
- Misunderstandings around DAO
- Decision ideas
What does DAO mean?
As you already know, DAO means decentralized autonomous organization, but what exactly does it mean? Well, it’s a blockchain-based technology that allows users to organize and control themselves. Users must play along with self-executed public blockchain rules. The system is free from the control of any central party. In addition, users can receive funds from the DAO by reflecting their pitch to the community. Now that you have learned the basic concept of DAO creation, we can move forward with its roles in the blockchain.
Why are DAOs needed?
When someone wants to build an organization with another party, the involvement of money and finance in this process requires a lot of trust in the parties you work with. But it’s not a wise way to trust your business to anyone you’ve only been dealing with on the Internet. But using DAO eliminates the stress of finding trustworthy people because the DAO system gives you 100 percent credibility and transparency in your DAO code. This step forward offers so many opportunities for global collaboration.
So that is why DAO holds its importance in the world of trade. Now let’s see how it works.
How do DAOs work?
An intelligent contract is the foundation of the DAO. The DAO Group’s rules and organizational rules are included in the smart contract. The rules cannot be changed once the contract has been published in Ethereum. However, the voting system can be used to approve changes. If a member does something that does not conform to the logic and rules of the generated code, the function stops working. Without the group’s permission, no one can use the money, because a smart contract also defines funding. The DAO group makes decisions entirely without a central authority, and donations are awarded automatically when votes are accepted. Smart contracts are untamed when sent to Ethereum. No one can just change its rules without getting caught by other members, because everything in this system is public.
How to use DAO?
Here are some examples of how DAO can be used:
- In charities: DAO allows you to accept memberships and donations from people around the world, and the organization in charge can decide how they can use those donations.
- In the freelance business: Another excellent example of using DAO is to create a network of contractors who are willing to pool their resources for office space and software orders.
- Pool investment: A private equity fund can be set up to pool investment capital and rely on companies to support it. Subsequent refunds can be redistributed among each DAO member.
DAOs are highly functional in a number of financial areas, users can use DAOs according to the legally required scenario. All you need is a DAO membership.
How to get DAO membership
There are several categories to qualify for DAO membership. Membership can complete the voting work process and other important tasks of a decentralized independent organization.
In primarily decentralized trading, these tokens can be exchanged for unauthorized trading. Depending on the type of account, members can obtain full permission for all activities. At the same time, others must provide liquidity charges or other evidence of credibility. In either case, just getting an ID will give you access to the vote. This is commonly used to regulate huge decentralized strategies and tokens.
Share-based membership is more restrictive, but quite open. All interested members can register with the DAO, usually by making valuable donations in the form of a mission or tokens. Receipt of shares gives members unlimited ownership and voting rights. Group members are free to leave at any time with a share of the profit they earn.
Although the DOA has emphasized its importance in Blockchain mode, there are several errors around the term.
Misunderstandings around DAO
- First of all, let’s talk about the “decentralization” part of the DAO. It is confusing whether decentralization should only be established at the level of the primary block-chain organization or whether it should also be carried out at the administrative level (for example, no centralized group should limit the DAO).
- Second, whether the DAO should be fully independent and automated, meaning that the DAO should operate without human intervention, or whether the idea of ”self-regulation” should be viewed from a more sensitive perspective is a matter of confusion. For example, while a DAO as an association may require the support of its users, its administration should not include the tendencies of a bit user group.
- There is a few discussion about when a user group related to a smart contract can be considered a real “organization” (free from any legal recognition). For example, it is confusing whether a simple presentation in a smart contract implementation is a prestigious activity or whether a more reasonable level of participation is necessary, such as a governance model or collective communication between members.
The term “decentralized autonomous organization” is now well established in the EU blockchain platform. DAOs have become critical in helping with systematic business, providing robust decision-making tools, and eliminating the need for paperwork and external authorization.