Dao

Combining my knowledge and the information I've learned, I would like to share a basic introduction to DAO with you. I hope to receive more suggestions from those in the community who have a lot of experience in DAO to have more perspectives to discuss.

1. What is a DAO?

  • DAO stands for Decentralized Autonomous Organizations, known as the Decentralized- Independent Governance Organizations.
  • In simple terms: 
    • A DAO is an organization or business governed by a community instead of focusing on one member or a small group of members.
    • The DAO is governed by pre-programmed rules and regulations and can only be changed when the community votes on proposals through Blockchain technology to ensure transparency and safety.
  • This video describes how a DAO works: https://www.youtube.com/watch?v=KHm0uUPqmVE

2. Why do we need a DAO?

  • DAO is a safe way for a community to collaborate on the Internet because it is governing through pre-programmed rules and regulations and a database of activities stored on the blockchains so anyone can access to verify the information at any time transparently and efficiently.
  • DAO helps reduce unnecessary human-intensive work to focus on jobs that bring higher value to the community.
  • DAO helps increase the ability to cooperate and coordinate organizations on a global scale with thousands of members.

3. How does DAO work?

  • DAO works based on governance rules (Governance) defined from the beginning and encrypted through Smart Contracts (smart contracts) or a Blockchain platform (Bitcoin, Dash, ...)
  • When these Smart Contracts or Blockchains come into operation, no one can change them unless approved by a community vote.
  • Anyone who wants to make changes to the government needs to propose to the community to vote on whether to approve or not.
  • Any actions that are not predefined in the governance rules will fail and cannot be performed.
  • Anyone can access the organization's defined rules and actions with ease and transparency.

 

4. Comparison between DAO and traditional organization:

DAO:

  • A DAO is usually structured as flat and non-hierarchical
  • A DAO's stakeholders generally decide on its rules by votes. 
  • For any proposed change is done automatically and publicly. These transactions and rules are stored transparently on a blockchain. 

Traditional organization:

  • Traditional organizations follow a hierarchical structure with centralized authority.
  • Changes can be requested from the top or can be voted on, and the results are usually managed privately and not publicly.
  • Organizational activities are often non-public and easily manipulated

5. Member of DAO

Members of DAOs are divided into two main groups:

  • Token-based membership: DAO members participate in governance by owning DAO's Governance Token. Members obtain tokens by receiving incentives tokens for contributing transaction validation to the network (Miner/Master Node/Validators) or buying and selling through exchanges and benefiting from rising token prices.
  • Share-based membership: Unlike Token-based, members of Share-based membership will contribute capital to receive a share corresponding to the amount of capital contributed, members will use their share to vote for decisions of the DAO. . In return, members will receive equity, dividends of the organization and benefit from the business performance of that organization. With Share-based membership, participating members often need to have conditions corresponding to each project and cannot buy shares on the market.

6. DAO classification

There are ways to classify DAOs as follows:

Membership Structure:

  • Token-based: Bitcoin, Dash, MakerDAO
  • Share-based: MolochDAO, The Lao, Metacartel

Use Cases:

  • Blockchain Platform: Bitcoin, Dash
  • Protocol: MakerDAO, Uniswap, AAVE, Compound, Synthetix
  • Project: BadgerDAO, PieDAO, YAM Finance
  • Investor - VC DAO: Rada, Stacker Ventures, Metacartel, The Lao
  • Creator - Curator: Mirror, Zora (Rac), YGG
  • Community: PleasrDAO, Karma
  • Guilds: Raid Guild, Deep Work, Lex DAO

7. Supporting tool for DAO development

 

For the DAO ecosystem to grow, tools are needed to help build and deploy DAOs faster. Here is a list of tools used to develop DAOs:

  • DAO Frameworks: Aragon, Bravo (Compound), Colony, DAOstack, Snapshot
  • Controllers: DAOHaus, Alchemy, Vocdoni
  • Treasury: Parcel, Enzyme, Coordinate, Gnosis Safe, LLama
  • Work: SquadDAO, Radicle, Rabbithole
  •  Aggregators: Boardroom, Tally

8. Summary

  • The ecosystem of DAOs is growing and continuously expanding and has moved from early forms to many new use cases.
  • There are still several issues that need to be resolved for the DAO ecosystem to be genuinely complete associated with the core issues of Blockchain technology: Security, performance, and gas fees.
  • In general, DAO is still a model expecting to change the way traditional organizations and businesses operate in the future. 

The above is my understanding of DAO. I hope to receive more comments from you to supplement and improve information to help the community understand this exciting model. 

Disclaimer: The contents presented here are my personal views and opinions and are not investment recommendations. All investment and trading moves are risky, and you should do your research and make your own decisions.