Imagine a functioning community where everyone lives comfortably, doing what they want. No work, no stress, no hassle. The autonomous system provides everything without the need for human intervention. It might be a bit of a stretch, but this is the exciting concept of the decentralized autonomous organization, also known as DAO.
What Exactly is a DAO?
A decentralized autonomous organization is just like any other operating business or company. Except that it’s decentralized, meaning everyone holding a share of this DAO has the right to vote and is eligible for a profit percentage. Moreover, DAOs function autonomously, without the need for employees and managers to run them.
How does it work?
A DAO is built on the blockchain made of smart contracts that validates all transactions. A DAO functions by following a set of rules installed within its codes and program, and it will continue to operate even after its developer abandons it.
Pros of DAOs
Unlike other organizations and businesses, a DAOs priority is its community and shareholders. So the profit they make goes towards the project and the investors. And there’s more to DAOs than just profit potential.
Because of DAOs unique function that limits any unnecessary human interference, the project is less likely to be manipulated from within.
Immune From the Government
Governments can’t enforce demands or stop a DAOs operation because it is merely a web of codes and programs that functions on its own. So if they want to intervene with it, they’ll need to purchase most of its shares to implement any changes or demand.
The community owns DAOs entirety, not just any single individual. This makes it fair and favorable to its community as they can work together and impose rules, improvements, and changes that would benefit everyone.
Cons of DAOs
DAOs are open source, allowing everyone to access, view, and interact with them. Though the transparency is great, it poses some risk that needs to be addressed. And below are some of the downsides of DAOs.
Vulnerable to Attacks
DAOs being open-source, are vulnerable to cyber-attacks, which is a severe threat to the business and finance.
DAOs can be made safe and secure by applying more complex programs and encrypted codes. But if someone is knowledgeable enough, it can be breached and tampered with, so a DAOs security would only be as good as its developer.
No Business Secret
Businesses invest a reasonable amount of time and money in coming up with new ideas and innovations to achieve a goal more efficiently. And they can take advantage of this to increase their overall output and sales. But due to DAO being open-source, such secrets and strategies can be viewed and copied by their competitors.
We can view a decentralized organization to be a downside itself. We explained earlier that the success and future of a DAO would be at the hands of its shareholders, which is good if you’d think about it.
The only problem is the imbalanced distribution of that power. Because the more shares a person holds, the more authority he would have to make judgments. That means whales can manipulate the trajectory of the project to benefit themselves. And this could lead to results either good or bad.
Examples of DAO
Decentralized autonomous organizations can be any business or platform that offers some kind of service or entertainment. It could be a game like Decentraland, an investment platform like BitDAO, a platform for freelancers like RaidGuild and Mirror, and even for a specific niche such as BeetsDAO for music lovers. DAOs can be virtually anything that serves a purpose for anyone.
We hope you find this article helpful and valuable. Also, check out some of our works to learn more about this fascinating digital space about Cryptos, NFTs, and blockchain games. See you at the next one!