What is a DAO? The Fascination of DAO Challenges Financial Organizations
First came the ICO trend, then DeFi, followed by meme coins, GameFi, and most recently, the NFT trend.
Could DAOs be the next trend in 2023-2024?
In this article, we will delve into finding answers to this question by exploring:
Concept of DAO
Examples of DAO operational models
Why DAOs need tokens?
Why DAOs are the trend of the future?
What is a DAO?
💡 DAO stands for Decentralized Autonomous Organization, meaning a decentralized self-governing organization.
Unlike traditional organizations (like Facebook, Google,...), DAO operates over the internet.
The rules and structure of this organization are written in code, enabling it to function independently without human intervention.
DAO (Decentralized Autonomous Organization)
Instead of having an executive director or a board of directors, DAO is collectively owned and managed by its members.
DAO is not necessarily a formal company; it can be a group of people pursuing common goals.
You can use the DAO model for a project to manage finances, community governance, and value sharing, which is infinitely flexible.
Typically, money in the DAO model is in the form of crypto assets. The money deposited into the DAO can be used for specific purposes or distributed according to smart contracts and the desires of the community.
⇒ In summary: If Blockchain is a country, DAOs are companies built within those countries. These companies can operate independently or autonomously.
Example of DAO Operational Model
💡 A simple example of how DAO operates: Suppose you have an idea to build a website for a project that could benefit the organization or promote common goals.
You just submit a proposal to the community, attach a quotation file and your detailed plan. The community will vote, and if approved, the DAO's reserve fund will automatically transfer money to your wallet address.
The smart contract is pre-programmed to execute this in a straightforward manner, enabling the organization to operate smoothly and independently.
So far, you must be eager to know how to invest in DAO models. Therefore, in the next section, I will help you understand more about the role of tokens in DAOs.
Why Do DAOs Need Tokens?
In shareholder meetings of traditional corporations like Apple or Netflix, shareholders vote and direct the company's course. Then, the CEO ensures compliance with the directions set in the shareholder meeting.
In a DAO, there are no shareholder meetings. Instead, decisions are made by the community.
Most DAOs have their own governance tokens, which are used to incentivize contributions. If you hold tokens, you have the right to participate in governance, vote on future project developments.
Typically in the Crypto market, a DAO can issue millions of tokens, each token representing a voting right, and those holding the most tokens may have the largest voting power.
Read more: Treasure DAO (MAGIC): the largest GameFi & NFT ecosystem on Arbitrum
Advantages of DAO
The advantages of DAOs are increasingly evident: DAOs help participants reclaim rights they have long been denied.
Plans of an organization, usually known and decided by a select few, are now open for all members to know and vote on, resulting in actions carried out as desired by the majority.
DAO inherits transparency from blockchain, where anyone can verify them, which is useful because for financial organizations, you can easily detect any misappropriation.
Members of the organization do not emphasize familiarity and trust because all actions are now recorded on-chain, opening up new potential for collaboration.
As a web-based organization, anyone can join without any barriers, and you don't even need to be a formal employee to contribute to the organization. You can even contribute anonymously.
Applying game theory, participants hold a portion of the DAO, so they choose proposals to develop the DAO, and proposals are carefully considered to benefit the majority.
And many more advantages make DAOs a much more advanced governance model than traditional company models.
Disadvantages of DAO
Along with the advantages, DAOs also have disadvantages such as:
Vulnerable to manipulation: whales can hold large amounts of tokens to manipulate the governance mechanism or exploit DAOs for personal gain, but as long as the token allocation is reasonable and not too concentrated on one person or group.
Another barrier to DAOs is the structure largely focused on financial aspects or token appreciation, which may hinder other long-term goals.
Next, the most exciting part: how many types of DAOs are there?
4 Types of DAOs
It must be said that DAOs are a very flexible governance model applied in many fields.
There are 4 main types as follows:
- Investment DAOs
Simply put, these focus on investment. Members use shares (amount of tokens held) to vote on organization activities.
For example, The LAO: a Ventures DAO where capital contributors receive proportional shares and have voting rights or project proposals for other members of The LAO to vote on, consider whether to invest or not.
Or the latest shared NFT buying models like PartyDAO, solving the problem of NFT investor's capital.
- Protocol DAOs
These are protocol projects where token holders have voting rights on decisions within the protocol such as upgrades, fee adjustments,...
This type has many blue-chip projects like Compound, Marker DAO or Uniswap.
- Social DAOs
These are communities built around a token, a typical example being FRIENDS with BENEFITS. Where you just hold FWB tokens to participate in their community.
This community organizes many events, creates content, and manages their own NFTs.
FWB token holders can access private groups, and if their members make positive contributions, FWB token prices will increase, attracting more attention and contributions.
This may be the most suitable type for DAO's spirit, with this approach from the bottom up, rather than from the top down like other models.
- Media DAOs
This is the destination for influencers or content creators who want real fans willing to invest in you like buying tokens, buying NFTs more than just follow, subscribe.
This type motivates content creators more, helping them create more value and earn more money.
Is DAO a big opportunity?
Returning to the initial question in the video, is DAO a big opportunity for us or not?
Certainly yes!
Crypto projects
The DAO ecosystem has seen tremendous growth recently with the emergence of hundreds of new projects.
Governance is a standard use case for project tokens, the larger the project, the more valuable this use case. In fact, the DAO model has become a "must-have" for developing DeFi protocols.
The application of DAO is endless, any project or community can apply DAO to governance.
Investor or contributor
DAOs are still quite new but developing very quickly, with investor status, this is a great opportunity for us to find potential investment branches and establish positions for ourselves.
Looking at the figures on DeepDAO shows: The value held by DAOs has the potential for significant growth.
If you're not an investor, the simplest thing you can do is contribute to DAO and receive token rewards.
DAO tools
We can also provide necessary services for DAOs like community management, voting, contribution tracking, treasury, aggregator,...
DAO tools will play an increasingly important role in enabling DAO to be widely applied.
Gamer Similar to gaming guild DAOs, where participants can farm games or rent NFTs or accounts to earn profits. DAOs are opening up real job opportunities for participants.
Or you're a content creator, look for opportunities with Media DAOs, the sooner the better.
In general, DAO is an opportunity for anyone who knows how to seize it!
