What is a DAO?
DAO is short for Decentralized Autonomous Organization. These organizations are a change from the traditional organizational structure, to an internet based, collectively owned and organized-by-members model. The mission of DAO’s are to foster community-inclusion, reduce disparity between Owners/Management and Employees, and the divergence of interest, priorities and goals of all those involved.
Within DAO’s members can establish their own rules and vote on key decisions using the Blockchain, without bureaucracy or hierarchy. With transparent rules written in code and defined by Smart Contracts, community members advance proposals to change or improve the protocol and vote on these recommendations. Participants acquire the DAO’s native governance token and use it as a tool to exert their voting rights and own equity in the DAO.
What is the Criteria of a DAO?
Smart Contracts involved (rules, members, amount invested, who the majority stakeholders are, workflow, reward mechanism, etc)
Set of rules known to all members
A token that can be spent within the system for rewards and voting
Advantages of DAO’s using Blockchain technology
- The Blockchain provides a secure, trusted and distributed ledger to monitor and track digital transactions. It ensures independence and neutrality, while being transparent and limiting bureaucratic hurdles typically present in traditional organizations.
- DAO’s remove the traditional central management structure. Therefore, ideas do not need to pass through the hierarchical chain to make it up the decision chain.
- Anyone can make a suggestion which requires a token fee to encourage well thought and researched ideas, over random and vague ideas.
- Members are equally responsible and stakeholders for the organization's progress and success.
- Being fully automated DAO’s encourage the participants to focus on more rewarding aspects of growing an organization.
- DAO’s help reduce operational costs and improve efficiency in an organization. They also reduce human error and manipulation.
Downsides of DAO’s
- Although transparent from the beginning, the more tokens members own, the greater their weight in the DAO’s decision and voting power.
- DAO’s are not bound by geographic borders and therefore dependent and subject to the legal frameworks of different nations.
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