Decentralized autonomous organization (DAO) Explained

#dao #blockchain #zeeve
Hello, welcome to Zeeve. So, today we will know more about the DAO or the decentralized autonomous organization.

DAO is an organization where a group of people come together for a common objective. The organization is decentralized in nature, and it removes the middle parties. The complete organization is autonomous and works on smart contracts. Mainly it got popularised after cryptocurrencies came into demand.

In essence, DAO ensures the community has control of the organization’s funds and determines the usage of funds. The whole community gets to decide how and where a specific amount of funds will be used and who should be entrusted with the fund’s handling.

Presently, DAOs are used for many purposes, such as charity, fundraising, investment, borrowing-lending, decentralized finance and exchanges, or collecting NFTs.
These DAOs work on a bottom-up approach. That is, individuals at the bottom level take the decision and build a larger system.

There are people known as token holders who are selected exclusively. The token holders are the decision-makers. Thus, the powers are distributed uniformly in the DAOs.

The working process depends on smart contracts. Voting is being done on the network. Since the underlying technology of DAO happens to be blockchain. The voting process is transparent, and people on the network can see others' responses.

Users have to select between mutually-exclusive options. Voting power is often distributed across users based on the number of tokens they hold. For example, one user that owns 100 tokens of the DAO will have twice the weight of voting power over a user that owns 50 tokens.

Three major steps in the creation of a DAO are:
The coding of a smart contract which is done carefully because once deployed, the smart contract can only be changed when the token holders agree.
A funding round is done to choose the token holders, or we say, the decision-makers
Final deployment of the smart contracts and token holders agreeing on how to proceed forward.

The DAOs are transparent and cost-effective. Furthermore, they are great when it comes to collaboration. The cost of operating a DAO is less as it reduces the paperwork and administrative expenses.

In 2022 the market stood at 10 billion. The numbers clearly indicate how big the market is and how DAO will become more useful in future.

An organization can adopt the DAO model to govern its activities. However, we need to improve voting governance and make it more accessible even to those who don’t understand blockchain and crypto.

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