What are DAOs?

Cryptocurrency changed the way we look at finance, gaming sector, assets and much more. From financial transactions to owning a digital art, cryptocurrencies have influenced many aspects of today’s world. 

However, there was one more thing which needed the touch of crypto i.e. the way people work. Typically, we just apply for a job, go for interview and work for the company to get paid. More often than not, you have to be physically present at your workspace, with the exception of remote jobs. 

‍

Now that’s where DAOs comes in. There are a number of DAOs being created for different projects and anyone willing to work can be a part of that DAO and contribute remotely. In this article we are going to introduce you to this new concept of DAOs and how you can take advantage of them. 

What Are DAOs?

To put into simple words, DAOs are just an online internet community that have a common shared bank account. It is when a group of individuals gather and combine their capital. This is done via a cryptocurrency. DAO stands for Decentralized Autonomous Organization.

‍

DAOs were invented or discovered when a group of people thought to make use of the anonimity and decentralized nature of the cryptocurrencies. As the crypto world is decentralized, it provides a lot of opportunities for the people who know how to make use of it.

‍

DAOs were made basically to automate decisions and carry out crypto transactions on their own. DAOs act as a form of venture captial fund and they were made over an open-source code. DAOs use the Ethereum network to achieve their decentralized nature.

‍

The purpose of making a DAO was so that the human error involved in the transactions could be reduced. It would allow users to send or receive money without having to part with their privacy. 

‍

DAOs can be made to raise money for charity. They can also be made when a group of people want to contribute their money for a project. All the individual members would contribute using cryptocurrencies and the amount they contribute would decide the amount of tokens each person would get. All the terms of the DAO would be decided via the smart contract.

‍

Types Of DAOs

DAOs are not something that have a very definite meaning, its meaning can be flexible based on how you are making use of it. So to understand them better, let us give you some examples or types of DAOs:

‍

1. DAOs can be used as a profit organization that collect cryptocurrencies or NFTs and then use that money to make more investments elsewhere.

2. They could also be fund-raisers for non-profit organizations that help better the world selflessly.

3. DAOs could also be used to invest in decentralized applications.

4. They could help individuals raise money by staking money in IDO projects via liquidity pools.

‍

Difference Between DAOs And Traditional Organizations

DAOs are usually democratized because every person contributes in them whereas traditional organizations are more hierarchical. What this means is that if a decision has to be made in a DAO, it would be voted upon but in other organizations, the decision maker would be a single person.

‍

Whatever services a DAO offers are handled in a decentralized manner whereas in a traditional organization, human effort is involved or something that is centrally controlled and hence, can be manipulated. DAOs are always transparent while traditional organizations tend to be anything but.

Structure of DAO

DAO is quite complicated and bit different from other systems. Every DAO has a different structure, but every joinee agrees with the code of conduct. The structure of DAO comes in play here. 

‍

To change the code, firstly the community needs the votes and the votes are dropped by the members of DAO. Just like we see in our daily life, the final decision depends upon the majority of votes. 

‍

But the twist is that when you vote, you should opt for governance tokens. These tokens are unique for every project. These tokens are quite hard to get, in some DAOs you can expect governance tokens by structured funding rounds. 

‍

There are benefits of holding these tokens, like a member can have equity in the DAO, so they can lead other members and shape the future of DAO. Other than that, all DAOs differs from each other in many aspects. The differences can be so huge that you might not even see governance tokens in some DAOs, they are basically backed by investments, for example Ether. 

How Do DAO’s Work?

As the whole concept of DAO revolves around decentralization and cryptocurrencies, the working of DAO is quite straight forward. With the blockchain technology at its heart, DAO works on an auto-pilot mode once created. 

‍

Software engineers or blockchain experts are given the work of designing the code on which the DAO will be operating. Usually, using the native coding language of the blockchain, smart contracts are made and they help in running the DAOs. 

‍

Once the outer structure has been established, people with similar interests who want to join the DAO would have to agree to the code and then they will be able to participate and work with the DAO.

‍

Later on, to make any changes or upgrades in the organization, voting system is used where governance tokens play a major role. We have already talked about the voting system and other aspects of DAO. Let’s sum-up DAOs and see what have we learned so far. 

Conclusion

Winding up with this article, I hope you understood every bit of shared information. DAO in simple terms is a community where money is involved primarily. So you have to take utmost care of what decisions you make. 

‍

Apart from that if you have any queries regarding this article, you can comment it down. If you have any topics in your mind that you want to be covered by us, please do share with us! Till then check out our website and stay tuned with us!

‍