The world is moving towards a more democratic online presence; hence, DAO development services have become prevalent today. However, it is still a new concept used in some projects, and we are still waiting to see its full potential.
Imagine an online world that lets you
- organize with other people, who you do not know,
- establish specific rules, and
- make decisions autonomously through Blockchain.
DAO is a community entity with complete decentralization authority. It is a decentralized organization management system based on the use of smart contracts.
Understanding Decentralized Autonomous Organizations
The digital currencies experiencing fame and fortune today are decentralized. Meaning no single institution has rights to it. The government, central bank, or other giant corporations do not get a say in how they operate.
DAO is governed entirely by its members, who collectively make major decisions about the future of the project, such as technical upgrades and treasury allocations.
The decentralized status of these entities allows for better security and privacy of users that are not available under the standard currencies and their transactions. Here, DAO Blockchain development services help provide a system for transaction.
DAO Development Services – Key Features of DAO
As the name suggests, DAOs have three core features:
Decentralization: Not governed by one single, centralized entity.
Autonomous: The DAO can automatically execute operations on its own without any intervention.
Organization: The DAO is governed by its own predetermined rules, like an organization.
Why Do We Need DAOs?
To begin an organization with other people and finances requires trust among the team. However, it is challenging to trust people you have found online. DAO takes the issue out of the situation as the members only need to trust the DAO code that is 100% transparent and verifiable.
A company can change the rules in an instant. Their terms of use and policies vary to meet the business demands. In the current times, Twitter is an excellent example. They have a set new rule with a change of management that has sparked debates.
The presence of a decentralized autonomous authority will add more clarity, and changes like this will become challenging. The current online ecosystem has big names helping your brand.
DAO Blockchain Development to create democratic platforms makes the new technology worth more.
DAO Development Services – How do DAO functions work?
DAO functions on a set of rules that sets it apart from the traditional organizations that exist today. Here is how DAO functions:
- The core team of the community establishes the Rules of DAO with the use of the DAO Development services and smart contract. These rules are very transparent, visible, and understandable to the protentional member of the community so they can easily understand the protocol function for each step.
- After the rules are defined, the further step is to look for funding. DAO needs to find out how to receive financing. This is achieved by protocol rules to sell tokens to get funding and get the DAO treasury to fill up.
- In exchange for their investment, token holders get voting rights that are proportional to their investment. Once the finances are in order, DAO is ready for deployment.
- Once the code goes into production, the only way to change the rules is to reach a consensus through voting. It means that no special authority has the right to change the practices in DAO unilaterally. Instead, all the token holders are responsible for the decision.
Examples of Decentralized Autonomous Organizations (DAOs)
Currently, there are several Decentralized Autonomous Organizations. Here are some of the most prominent examples of the companies:
- Uniswap – One of the biggest popular DAOs operates as a cryptocurrency exchange built on the Ethereum blockchain.
- American CryptoFed DAO - It positions itself as a kind of crypto-equivalent to the US Federal Reserve and aims to enable fee-free trading using its token, known as the Ducat.
- BitDAO – its decentralized investment fund backed by PayPal founder Peter Thiel, created to allow anyone to buy a stake in web3 and de-fi startups and initiatives.
- LexDAO - This DAO aims to create smart contracts capable of carrying out legal services.
Benefits of Decentralized Autonomous Organizations
A collective group or individuals would want to pursue a DAO structure for various reasons. And some of the advantages of the structure include the following:
Decentralization
The decisions that affect an organization are approved by a collection of individuals, not a central authority. It takes away the power from a small group and gives it to the people at large.
Publicity
DAO allows voting on decisions and makes them publicly viewable. The system incentivizes positive actions and discourages negative ones.
Participation
This management system gives users higher stakes in the company. It empowers the users and helps them feel connected with the community.
Community
DAO, as a concept, revolves around helping people come together and build something using an internet connection. It creates a strong community where token holders have voting rights that affect the changes in organizations' operations.
Limitations of DAOs
However, DAO is not without its own set of drawbacks. Here are some common disadvantages of a DAO organization.
Speed
While the voting system does positively impact an organization's operations in good times, in the case of contingency scenarios, the same feature can turn into a major setback. It hampers the speed of decision-making, which can turn fatal for an organization.
Education
It will take longer to educate users from diverse backgrounds and levels of academic education.
Inefficiency
It takes significantly more time to accumulate all the users with voting rights due to the decentralized nature of the organization.
Security
The company also needs to maintain the highest security standards on DAO treasure, as theft and misuse of funds are possible in such an organization.
DAO vs Traditional Organization
Decentralized Autonomous Organizations are widely different from the Traditional companies that operate today. Here is a chart that discusses the difference between the two types of companies.
| Feature |
DAO Organization |
Traditional Organizations |
| Organizational Structure |
Flat and Democratic Management |
Hierarchical Management |
| Voting |
A Mandate for changes in Protocol |
A Sole Party makes changes, as per the structure |
| Governance |
Based on Community |
Based on investors, board of directors, executives, and activists. |
| Transparency |
Fully Public and transparent |
Private with limited public involvement |
| Handling of Services |
Automated |
Requires humans labor |
| Funding |
Financial contributions align with governance rights,making the investors,both workers and owners |
Initial funding through partners and members |
| Legal Definition |
‘Generic Partnerships’ |
Centralized legal entity |
The new properties of organizations built as a DAO
Here are the key characteristics of DAO:
- A core group makes the concept.
- Completely visible framework.
- One person does not lead, and verification can be done at multiple points.
- Every DAO member has access to the firm's financial details, making the company publicly auditable.
- To make changes to the code or protocol, voting in a transparent manner is mandatory.
- It is possible to add DeFi, NFT, and utilitarian use cases into the system.
Conclusion: Get DAO Development Services To Create Your Organization!
Decentralized Autonomous organizations are the future-ready business models you can invest in today. With its share of benefits and drawbacks, DAO is fast becoming the preferred business model, and many companies and entrepreneurs are already investing in the technology. Get your DAO Development services to create a company that resonates with the masses, gives them a voice, and adds to their experience.
Get in touch with MoogleLabs to discuss the details of your project, and we will provide end-to-end solutions for your company's needs.
FAQ
What is a DAO?
DAO stands for Decentralized Autonomous Organization, which relies on smart contracts and code governance for operations. It is a community-led company that is driven to help a community through a brand-new system or operations.
How much does it cost to start a DAO?
The initial filing fee to register DAO as an LLC is $100. However, depending on your expertise in the area, it can take more money to set up a DAO, especially if you need developers for the job. In such cases, you can get more people to invest in the idea first and then start the development process.
What are some examples of DAOs?
DAO organizations are becoming more prevalent in today’s time. Some well-known examples of DAO include Uniswap, American CryptoFed DAO, BitDAO, and LexDAO.
What is a DAO in NFT?
DAO in the Blockchain world stands for Decentralized Autonomous Organizations. It is a new type of organization that relies on Blockchain for funding and running.
Is Ethereum a DAO?
Ethereum is the perfect foundation for DAO, and as an organization, it does have several features of a Decentralized Autonomous Organization, but it is not one. In the case of DAO, there is an on-chain governance, but Ethereum has an off-chain administration.