DAOs: What Do They Do? Do They Do Things?? Let’s Find Out!
Decentralized Autonomous Organizations (or DAOs for short), everyone in the crypto space has heard about them at least once but not everyone knows what they actually are or how they work, that is the reason why today we wanted to take a closer look into them to help those of you who lack said knowledge understand their characteristics, rules, and the way they operate.
So, what exactly is a DAO?
To start off, a Decentralized Autonomous Organization (DAO) sometimes called Decentralized Autonomous Corporation (DAC) is, like the name suggest, a community-led entity with no central authority or in other words an entity where there is no CEO or any type of individual with power over any aspect of the organization be it spending, bookkeeping, etc. Every decision regarding the project needs to reach a previously stipulated level of approval among members to be implemented and all of its parts, from the voting to the processes and activities approved are available for anyone to audit them if they so wish to.
But, how do they achieve this?
The main and central component of a DAO is a smart contract where the rules of the organization are defined and where the group’s treasury is held. This smart contract once uploaded to the preferred chain can’t be edited unless a majority of the community authorizes said edit, an amazing feature for building trust among members but a liability if the code on the smart contract contained any vulnerabilities or weak points at the time it was uploaded like it was the case with the famous The DAO incident of mid 2016.
Ok then, should I join one? And, how do I join?
Whether or not you should join one depends on your preferences, if you prefer putting your trust in a transparent contract that can be verified and audited at any time instead of in a group of individuals on the internet then by all means you should join one but be careful of understanding the model being used. There are different models for DAO memberships which also determine how voting and other key parts of the corporation work:
- Token-based membership: Holding the token grants access to voting. The governance token can be traded in a permissionless way in any public exchange or be obtained by providing liquidity or some other “proof of work”.
- Share-based membership: You need to submit a proposal to join the DAO, usually offering tribute of some value in the form of tokens or work. Shares represent direct voting power and ownership while giving the holder of said shares the ability to exit the organization at any time with their proportionate share of the treasury.
Closing thoughts
DAOs are a secure and reliable place of investment with transparent and community central intentions which makes them a must have for almost every portfolio.
If after reading this article you are interested in joining a DAO then we invite you join our Telegram group and check our project’s Pitch deck where you will find all the information in detail. We also invite you to follow us on social media and Medium so you don’t miss any new announcements, news or articles.
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