Table of contents
Dao
A decentralized autonomous organization, which can be pronounced as (Dow), is one of the emerging niches in this era of blockchain technology. So many people have always given their ideas about what it is, but by doing a little research, one can easily figure out if you are in a community with a common interest where you can be kicked out by an admin or in a community where everyone hates you so much that they have to vote to let you go, no matter how annoying you are.
What is a Dao
Dao is a decentralized form of an organization governed by code which is written as a smart contract and deployed on the blockchain this is an organization without a central power instead it is governed by every member of the community with a common goal i.e for the success of the vision of the community.
Features of Dao's
Creating a DAO can be daunting, as there are many things to consider. However, the structure of a DAO, or its features, are also important. DAOs are decentralized organizations that can run on their own without a leader. To survive, DAOs should have the following features, but not limited to:
A treasury
A means of Voting
A smart contract where the rules and regulations binding such organization can be uploaded to since it's immutable
A goal they want to achieve or Community shared Objective.
A treasury: A DAO Treasury is a fund that is controlled by the members of a decentralized autonomous organization (DAO). It typically holds and manages the cryptocurrency or tokens that are used to fund the DAO's Projects and Operations. The treasury is used to fund the development, maintenance, and expansion of the DAO's ecosystem. The treasury is controlled by the DAO's smart contract, and the rules for how the funds are managed, allocated and spent are encoded into the smart contract. The Treasury is managed by the members of the DAO, and the members vote on proposals for how the funds should be spent. members can also vote on proposals to increase or decrease the size of the treasury by issuing or burning more tokens owned by the Dao, respectively.
Means of Voting :
DAOs typically use a voting system to make not only decisions but also allocate funds from their Treasury. The specific voting system used can vary which all depends on the Dao, but some common methods include:
Token-weighted voting: Here Each member of the DAO holds a certain number of tokens, and the number of tokens a member holds corresponds to the number of votes they have. This means that members with more tokens have more influence in the decision-making process of which some claim is not a fair voting process and we have seen this play out on certain occasions though.
One member, one vote: Each member of the DAO has one vote, regardless of how many tokens they hold. This ensures that all members have an equal say in the decision-making process. now this way everyone has an equal say in the voting process but some argue it's not also a fair way due to Sybil attacks, also members having a different level of knowledge and engagement may not have the zeal to go out to vote and also low voter turnouts but it's a sure democratic voting process
Delegative voting: Members can delegate their voting power to other members of the DAO, allowing them to vote on their behalf. This can be useful for members who may not have the time or expertise to participate in the decision-making process but also not advisable to some because some persons who delegate their votes might not get to have whatever they have in mind being voted for.
Quorum-based voting: A certain percentage of the members must vote in favour of a proposal for it to pass. This ensures that the decision-making process is representative of the entire membership.
Time-based voting: Proposals are open for voting for a certain period of time, after which the votes are tallied and the proposal is either accepted or rejected.
These are some common methods but different Daos can use different methods and also can combine some of them.
Smart Contracts to store the rules to the Blockchain:
A smart contract is a self-executing contract with the Conditions and the agreement written into code. In the context of a DAO, a smart contract will be used to store the rules and regulations of the organization. The smart contract is deployed on a blockchain, and the rules encoded within the contract are automatically enforced by the blockchain.
The smart contract for a DAO typically includes the following elements:
Token management: The smart contract manages the issuance, transfer, and other use of the tokens by the DAO.
Voting system: The smart contract includes the rules for how members can vote on proposals and the style and preferred voting system of the Dao
Treasury management: The smart contract manages the funds held by the DAO, including how the funds can be collected and also spent.
Membership management: The smart contract includes the rules for how members can join and leave the DAO if need be.
Proposal management: The smart contract includes the rules for how members can submit and vote on proposals for spending funds or making other decisions.
All the rules and regulations of the DAO are encoded into the smart contract, and the contract automatically enforces these rules, ensuring that the DAO operates transparently and fairly therefore if need be the Dao can run entirely on Code. The members can interact with the contract using a web3-enabled wallet and can also see actions and decisions taken by the Dao.
The smart contract is immutable, so the rules written and uploaded can not be altered.
Common Goal :
A common goal in a DAO (Decentralized Autonomous Organization) can be said to be a shared objective or purpose that all members of the organization wants to achieve. The common goal most times are encoded into the DAO's smart contract and is used to guide the organization's decision-making and actions.
Examples of common goals for a DAO include:
Investment: DAOs focused on investment may have a goal of maximizing returns for their members through the management of a shared portfolio of assets of which is not limited to cryptocurrency.
Decentralized Finance: DAOs that focus on decentralized finance (DeFi) may have a goal of providing a wide range of financial services to their members such as lending and borrowing, trading, and insurance.
Community-building: DAOs focused on community-building may have a goal of bringing people together to work on shared projects, such as open-source software or the creation of decentralized marketplace.
Governance: DAOs that focus on governance may have a goal of creating a transparent and fair system of decision-making, where members have an equal say in the organization's actions and can vote on proposals.
Research and Development: DAOs that focus on R&D may have a goal of researching and developing solutions and Cutting edge technology for for the community.
Having a common goal for a Dao helps to align the members towards a shared objective and enables the Dao to achieve its purpose effectively. The common goal also helps the Dao to decide on the proposals, allocation of the funds, and the future direction of the organization.
Benefits of a Dao
Dao's offer a number of benefits of which the name itself gives it away, some of the benefits Include:
Autonomy: DAOs are autonomous and operate independently, without the need for intermediaries or intermediaries fees every one or member of the Dao follow in the decision making in the Dao.
Global participation: DAOs can have members from all over the world, and the decentralized nature of the organization allows for global participation and decision making thus not limiting anyone from getting involved unlike traditional organizations
Innovation: DAOs can foster innovation and experimentation, as they allow for decentralized decision-making and experimentation with new organizational models.
Transparency: DAOs are transparent by nature, as transactions and all decisions are recorded on a public blockchain. This ensures that all members have access to the same information therefore making informed Decisions.
Decentralization: DAOs operate on a decentralized network, meaning that they are not controlled by any central authority unlike most centralized organization. This increases transparency and reduces the risk of fraud or censorship.
Though DAOs is still a new Concept but we can its potentials and what it can bring to a traditional organization infact in most blockchiain communities members of DAO's are rewarded for being active participants and so on also DAO's have its limitations of which we are going to discuss.
Disadvantages of DAO's
It's important to note that DAOs are still a relatively new concept, and Some of the limitations and Disadvantages listed below of DAO's can be reduced with the right set of rules, technical setup and Know how. Also as technology evolves and ecosystem rules matures, these limitations may be reduced or eliminated entirely.
Sybil attacks: A Sybil attack is when an attacker creates multiple fake identities to vote multiple times and sway the outcome of a vote. With the one member one vote system, it would be relatively easier for attackers to create multiple fake identities to vote multiple times and sway the outcome of a vote.
Lack of regulation: DAOs operate outside of the traditional legal and regulatory framework, which can make them vulnerable to fraud and other types of abuse.
Complexity: Setting up and managing a DAO can be complex, as it requires a thorough understanding of blockchain technology and smart contracts.
Voter apathy: In a large DAO, some members may not be fully engaged in the decision-making process and may not vote at all. This can lead to a lack of representation and a lack of quorum.
Lack of protection: DAOs operate without the protection of traditional organizations, such as legal and financial protections.
While DAOs seem to be the future of organizations, there are still many things that need to be done. Most DAOs that are currently running still have one or two loopholes or similarities to running a centralized or hybrid organization. Until DAOs are accepted legally, they will still operate in the shadows unlike centralized organizations. However, with the power demonstrated by DAOs, it is clear that they have the potential to empower not just the wealthy, but also the common person.