The diverse phases of evolution in the blockchain and crypto space have been responsible for spurring many new use cases. Decentralized finance services and non-fungible tokens or the metaverse are just the tips of the iceberg when it comes to blockchain and crypto. Among the many opportunities evolving in this space, decentralized autonomous organizations (DAOs) have been gaining a lot of traction.
Developed with the vision for creating internet-native organizations under the ownership and control of the members, DAOs offer favorable prospects for capitalizing on the benefits of crypto and benefits of blockchain. The advantages of DAO speak loads of the value they bring to the table. How are DAOs a significant entity in the rapidly expanding crypto and blockchain ecosystem? Does it have any relevance to the emerging web3 landscape? Let us find the answers to these questions in the following discussion with an outline of the benefits of DAO.
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Background of DAOs
The first thing you need before reflecting on the top DAO benefits is a clear understanding of what a DAO actually is. Take note of the fact that even if DAOs have turned out on almost every crypto discussion forum in recent times, they have been around since 2016. The design of the first-ever DAO showcases an overview of the definition of decentralized autonomous organizations. Developed as an automated and decentralized organization, the first-ever DAO worked as a venture capital fund.
However, the organization did not have headquarters in any posh locality or a board of directors. On the contrary, the DAO was developed on the basis of open-source code without the conventional centralized management structures. Why build a DAO in the first place? While the pros of DAO can set clear reasons for using them now, what could have inspired the first-ever DAO?
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Importance of DAOs
The term DAO gives out a lot about the reasons for which it came into existence. You have “decentralized” and “autonomous” as the clearly evident answers for your doubts. DAOs are not affiliated with any country to ensure complete decentralization. Basically, the developers of the first DAO aimed at shifting the decision-making power towards the members of the organization with a crowdsourced pool of funds.
DAOs leverage blockchain for defining the voting powers for members in proposals for shaping up the future of the organization or project. At the same time, decentralized autonomous organization advantages also present critical components for the web3 landscape. Therefore, DAO is a compelling choice for anyone interested in developing solutions in the present consumer-centric environments.
DAOs don’t allocate control of a business or entity to one individual or group. On the contrary, the control of the business and entity is vested in the group of supporters or members of the organization. In addition, the DAO benefits have also made a mark by introducing tokens, which serve as vital tools for voting on different improvement and protocol proposals. Multiple DAOs with popular examples such as Curve DAO, MakerDAO, and others have encouraged many developers and business owners to opt for DAOs. What is the reason behind the demand for DAOs?
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Benefits of DAOs
The foremost highlight of the advantages of DAO focuses on decentralization, an essential trait of decentralized autonomous organizations. DAOs focus on achieving the maximum extent of decentralization according to their basic design principles. The concept of complete decentralization generally loses value in other endeavors. However, the equation changes in the case of DAOs which rely on collective participation rather than depending on one individual.
In the case of a traditional publicly-traded company, the CEO and the board of directors have the final say in decision making and other initiatives by the company. As a result, employees, users, and customers don’t come into the picture when thinking about the future direction of an organization.
For example, many customers may have issues with a new product by a company. In such cases, the manufacturers may present one perspective while employees may offer one, with none being anywhere close to the views of customers. Now, imagine the same company as a DAO, where users can vote for the ideal traits they want in products.
With the pros of DAO in decentralization, members of an organization can express their voice for the organization’s future. Many of you may point out that DAOs are not completely decentralized due to the DAO tokens. How? Well, members with more DAO tokens are likely to have more voting privileges. However, the voting power is distributed significantly more in comparison to traditional organizations with centralized leadership.
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Another significant answer for “what are the advantages of a DAO?” would refer to the scope for community involvement. Decentralized Autonomous Organizations or DAOs introduce the facility for communities all over the world to connect with each other and work on productive goals together. Anyone can enter the world of web3 with just an internet connection and governance tokens of a DAO.
Participation in DAO delivers the unique value advantage of contributing to new projects such as creating new domains like the Ethereum Name Service (ENS) or new play-to-earn cryptocurrencies. In addition, decentralized autonomous organization advantages also reflect how DAO participants can have a sense of ownership. As a result, they can drive members for innovation and set new precedents for financial rewards in return for participation.
Every member of a DAO has unique privileges for shaping the future of the organization. Stakeholders in a DAO can submit proposals for improvement and changes in protocols. The most important thing here is that DAOs don’t restrict the decision-making privileges to the boardroom. With promising inputs from multiple members of the DAO, the organization can introduce innovative developments.
Speaking of community involvement, you can round up on another notable mention among DAO benefits with the active stake of each member. The mechanisms underlying DAOs primarily focus on the idea of allowing members to exert their stake in the organization. First of all, DAO governance tokens imply the necessity for burning or spending the tokens to earn voting rights. Therefore, members are more likely to be considerate and thoughtful of every vote. In other words, governance tokens on DAOs introduce the ability for all users to influence the future of the DAO project.
You should also note that every vote on the DAO blockchain is completely public, thereby ensuring that users are accountable for their votes. For example, a DAO can more likely identify the customers who wish for changes in a product. At the same time, the literal thought behind the design of DAOs ensures a foolproof system. Most important of all, DAOs can prevent spamming of the community with bad ideas.
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How Are DAO Benefits Relevant Now?
In the initial stages of developing cryptocurrencies and blockchain technologies, the creators primarily focused on the elements of decentralization and transparency. Both these aspects served as critical aspects for ensuring neutrality and independence alongside prioritizing the interests of the whole group.
The new focus on decentralization helped in preventing centralized control in a small group with vested interests. Such an approach also helped in preventing manipulation alongside opening up the doors for real-time actions. When compared to the advantages of DAO, these benefits seem a bit limited. If you can create a global financial platform running under collective ownership and management, why cannot you build an organization?
The concept of a decentralized autonomous organization showed the possibilities for discovering new ways to define an organization’s structure. Shared economy platforms have served as a crucial aspect of the world’s development, with some notable examples in eBay and Uber. The pros of DAO help in introducing rich and connected experiences in organizations without any centralized intervention. DAOs can help in building new markets which can set their own standards for pricing and quality.
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The final overview regarding the benefits of decentralized autonomous organizations advantages suggests a positive picture of their significance in the broader crypto ecosystem. Decentralized Autonomous Organizations are one of the integral highlights of the emerging web3 landscape with many promising value benefits. Starting from decentralization advantages to an autonomous structure, DAOs provide new definitions for an organization’s structure.
Think of it as a new approach to bring every member of the organization, including leadership, users, employees, and customers, on one page for decision making and control. The applications of DAO in decentralized governance applications will rely profoundly on the benefits offered by DAOs. Learn more about DAOs and their work, along with an outline of the notable use cases associated with them.
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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!