It was quiet for a while, but with the DeFi hype, more and more are appearing on the crypto landscape: DAO: Dcentralized TOutonous OROrganizations that are becoming the drivers of accelerated tokenization dynamics and therefore the hope of a great cryptographic utopia. Processes of redistribution, democratization, inclusion, reduction of bureaucracy: the expectations placed on DAOs are high, but not unrealistic.
No matter how different goals you may pursue, the basic concept is quickly summed up. DAOs are groups of decentralized investors that pool capital and decide on the use of funds and rule changes in transparent voting procedures on the blockchain. All members of a DAO have the right to vote. There is no hierarchy, presidency or collusion. All activities can be tracked transparently and no decision can be made without the consent of the collective.
At the heart of a DAO is the shared treasury, a kind of treasury, managed by a smart contract. Once set up on the blockchain, no one can make changes to the contract. Therefore, the deposits are safe from unauthorized access, assuming an error-free contract.
The subtle differences
In rough structure, all DAOs are the same, but the design can take very different forms. Companies, NGOs, municipal projects, urban planning, DeFi or Metaverse: the range of applications is wide. Most DAOs are open, “entry” is through the appropriate governance tokens. But there are also more exclusive representatives who demand a kind of dowry. The level of “automation” through smart contracts and AI also varies, as does the voting done between on-chain and off-chain.
With reservations, Bitcoin and Namecoin can be described as the earliest representatives of DAOs, but according to current understanding, DAOs began on the Ethereum blockchain. The first featured DAO was also a crucial test. The DAO “The DAO” was a huge success in 2016. In a short time, the organization raised US$150 million from over 11,000 investors, the largest crowdfunding project to date. Less than three months later, the super crash: the DAO was hacked, 3.6 million ethers, at the time around 60 million US dollars, were mined from the apparently flawed contract. The result: a hard fork that encapsulated the current Ethereum from the original version, known today as Ethereum Classic.
Rising from the ruins
It took some time for the DAO hype to resurface with the wave of decentralized finance (DeFi) applications. In the meantime, the DAO story reads like a success story. Total capital managed by DAOs currently exceeds US$9 billion. By comparison, just a year ago, Total Treasury was under $1 billion. The DeepDAO analytics service currently has over 4,800 DAOs, of which Uniswap DAO is the largest with over 300,000 members.
While a legitimate interest in DAOs is building, some expectations still need to be reined in. Regulatory, DAOs hang in the void. Apart from the US state of Wyoming, which formally recognized DAOs as LLCs, comparable to GmbHs, since July 2021, DAOs operate in the gray area. The authority to act outside of DeFi remains to be seen.
CityDAO, which buys land, parcels it out and sells it through NFTs, is an example of organizations’ wiggle room gradually extending into real life, but it remains a field test. Smart contracts are also not legal contracts. If hacks happen, investors lose.
DAO: It’s not a fashion
It’s impossible to predict where the journey will lead, but the fact is that DAOs are a huge opportunity, on many levels. Wherever people organize digitally and make decisions collectively, the swarming intelligent administrative apparatus opens up new possibilities, streamlines decision-making processes, and turns into reality a promise that is deeply rooted in the token economy: inclusion. Anyone can participate in DAO, regardless of geographic or social origin. Even if there are still many regulatory problems, not all expectations can be met, and success depends on a growing awareness of the crypto issue, examples like CityDAO give an idea of the gigantic potential of DAO.
Sorare: collect digital football cards on the blockchain
Collect limited edition football digital cards, manage your team and win great prizes.