They’re changing the way decisions are made, executed, and regulated.
DAOs are enhancing the transparency of decision-making routines and distributing equal power to all its members.
People today want quick results, when they’re buying a property or taking a loan, they expect the whole process to be carried out seamlessly. On the contrary, there’s a lot of paperwork to be done to verify the authenticity of business deals and agreements.
That’s the inherent problem that a DAO looks to address. By operating within a decentralized ecosystem and using smart computer codes to automate custom processes, the members involved are significantly enhancing the pace at which processes are undertaken.
The existence of well-managed DAOs is great for both companies as well as those who are seeking their services. Within the last few years, several DAOs have made it mainstream and helped serve different real-world use cases such as crowdfunding, and proposal execution.
In 2023, this eminent innovation of the blockchain ecosystem is rising and catching a peak that is set to revamp the way businesses operate and enforce increased transparency within the participating members.
Let’s take a look at why DAOs are rising and how they are being used in real-world scenarios.
What is a DAO?
DAO is the acronym for Decentralized Autonomous Organization.
At first take, that sounds a little alien-like but you’ll get past it when you understand what it really means. There are two components that make a DAO.
- Decentralization — This means that power within a DAO is decentralized or non-centralized. Every inherent member constituting the DAO has an equal say in all matters concerning the governance and execution of the processes that happen within the organization.
- Autonomous — DAOs use smart contracts i.e. computer codes that automate business processes or any other facilitation of agreements/deals without human intervention. DAO developers are hired within the organization to create smart contracts that govern the execution of their fundamental business goals.
DAOs are formed when a group of people comes together with a shared vision and purpose. They are strictly bound by mutually-agreed rules and protocols that are in turn enforced by smart contracts. Nobody has an upper hand in this model of organizational structure. Decisions are implemented based on the popular vote of the inherent members.
How does a DAO work?
A typical DAO works by issuing smart contracts that determine the protocols and rules by which they operate. Initially, a group of people having a shared vision and business objective come together and form the so-called decentralized autonomous organization.
To enforce transparency and automation of business processes, they devise smart contracts using the underlying blockchain-coding programs and languages. Once the smart contract is written, it governs the principles by which the DAO operates and suggests to new members who are interested in joining the organization that these are the rules they have to follow.
In order for the DAO to expand and run at full efficiency, funding is required. Those who invest in the undertaking of the DAO are issued native governance tokens by which they have an essential voting right and a stake in the organization’s profits. The tokens are given to the stakeholder based on the investment margin.
Any change in the working of the DAO or execution of smart contracts can be made only when there’s a majority vote by participating stakeholders and members.
Why are DAOs Rising Substantially Today?
DAOs are effectively taking a toll on how businesses operate worldwide. It’s the inherent way they operate that makes every business model incorporate such a working model.
A traditional company that’s tied to the frontlines of hierarchical operation always puts concrete power in the hands of top-line management or the CEO of the company. Companies like Apple, Netflix, Tesla, etc all have this hierarchical distribution of decision-making capabilities.
In this model, there are two drawbacks. The first is that all major decisions are made by one central body or person who nobody can cross-counter. The second is that a hierarchical flow takes a lot of time to implement decisions and most processes never needed that.
That’s why a DAO is so incremental to the future of business undertakings and dissemination of power.
- Under the DAO model, decisions are made on the popular vote of the group and no one individual has an upper hand over the other.
- Secondly, business processes are conducted seamlessly with the regulation of smart contracts that automatically verify transactions or the authenticity of a particular deal.
- DAOs can improve and scale consistently as more funds are being pooled and voting rights are equally distributed amongst the stakeholders.
- There’s a sense of accountability that DAOs bring as it’s open source and anyone can view the authenticity of a particular vote and hinder the participation of members who exploit rules.
Real-world Use Cases and Current DAOs
There are many real-world use cases that a DAO helps to effectively implement with so many DAOs already operating with these models. DAOs like DAO Maker, Aragon, and Bit DAO are using blockchain technologies and smart contracts to execute various business processes seamlessly and with increased transparency.
Crowdfunding and funding for decentralized projects are one of the areas where DAOs are flourishing. When a startup or project requires funding, the DAO reaches out to its stakeholders and other members and gathers funds by issuing native crypto tokens.
Depending on the investment margin, the investor is given a particular amount of tokens and voting credibility. Several dApp projects have been funded under the DAO mechanism with millions of dollars being collected via smart contract approval.
Another use case of the DAO has been in the voting spectrum where voting rights are given to members based on their contributions. DAO Maker is one of the popular DAO-governed DeFi projects that allow members to cast votes and changes the protocols and working of the organization.
NFT-supported investing, decentralization in the metaverse, etc. are a few of the several sectors where DAOs are reinforcing their transparent and automated way of operation.
DAOs are the Future!
There’s no doubt that DAOs are the future of business operations and undertakings. It’s only a matter of time before the concept of decentralized autonomous organizations become mainstream in almost every business model least incorporating elements of the framework to enhance operational efficiency.
Join us at IBC Media to work towards the implementation of successful DAOs and revolutionize the way businesses operate and decisions are taken.
About IBC Media
IBC Media is building the largest, global blockchain ecosystem initiative from India. The company has a pioneering legacy of managing partnerships and establishing grassroots efforts in the Indian market. IBC Media’s debut event — IBC 2018 was a major success which had a confluence of top-line government attendees, VCs, regulators, blockchain companies, speakers, and sponsors.
IBC 2.0, the second edition in this series is the kick-start to IBC’s massive 5-year agenda with a global focus on creating Web3 industry-ready talent across 1000 engineering colleges, building 1000 DApps, a top-line talent pool of 1 Mn developers and 10 Mn retail investors.
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