In November last year, an auction was held in New York where 13 surviving copies of the United States Constitution were up for sale. One of the bidders was Digital Group trying to buy a copy of the Constitution. ConstitutionDAO (yes, that’s what they called themselves) lost at the auction, but generated enough buzz to replace mainstream media and heads of business organizations.
But what is DAO?
DAOs are essentially blockchain organizations on the Internet with no central authority. Imagine a group of friends coming together to start a venture. DAOs work similarly, except that the group does not choose a leader and is governed based on a set of rules that they set in the form of a code. These codes are stored immutably on the blockchain as smart contracts and are executed each time a decision is made. Most of the DAOs are hosted on the Ethereum network. They are open source, autonomous and transparent, providing an equitable setup where each member has the right to have their own opinion, which passes through the consensus radar before becoming a reality.
With zero hierarchy present, decisions are made through consensus within the community. The DAO has a treasury accessible to members when the members unanimously approve it. DAOs are related to Internet-native organizations serving traditional and unconventional purposes. They can be a group of freelancers, a charitable organization, a law firm, an investment firm, a meta-like social community, or any number of functionality that can be worked on through a DAO setup.
The DAO is being considered the next big thing in the Internet business sector.,
The DAO has been operating in the crypto space since 2016. The first DAO to operate a venture capital fund was able to secure $250 million worth of ETH And was an instant success. These blockchain-based decentralized organizations, despite being in the limelight for their ‘sensational moves’, are calmly ‘creating a new ecosystem for digital startups’. No wonder billionaire Mark Cuban recently tagged him asThe ultimate combination of capitalism and progressivism.’ And the popular VC firm Andreessen Horowitz led the DAO as well as a multimillion-dollar funding round in the firms backing the DAO formation.
Today, 180 DAOs are collectively operated by over 2 million members in the blockchain space and have a combined value of AUM. $10 billion in (assets under management). These DAOs look after the management of some of the largest crypto protocols, including MakerDAO, Compound, Away, Kyber Network, DAOStack, Dash, Tezos, Bancor, etc.
They also help manage many small organization systems related to crowdfunding, media, tokens, social communities, etc. please daoBelonging to a group of crypto fans, the Wu-Tang Clan bought the only existing copy of the album titled Once Upon a Time in Shaolin for $4 million. The DAO spent a further $4 million on the original Doge Meme NFT. Then, there are other DAOs like HerstoryDAO run by a certain group of women and non-binary artists, MetaCartel Ventures DAO investing in early-stage startups, Friends with Benefits DAO operating as an invitation-only social club, and The list continues.
What is the next development in the DAO field?
DAOs have the potential to leapfrog from existing organizational structures such as cooperatives, LLCs, banking organizations, etc., to offer a trusted, decentralized setup without any corporate headquarters. By enabling transparency, arbitrage and automation in the setting up of a financial organization, DAOs can play a vital role in the move towards Banking 2.0. DAOs like MAkerDAO, Swissborg, Uniswap, Compound, Aave, Curve DAO, etc. are some of the important names that are writing new chapters in the finance sector offering crowdfunding, lending and lending, money management and exchange utilities.
Consider the 2.5 billion unbanked global population and consider what would happen if DAOs became a part of these people’s lives. With a simple mobile device and an internet connection, the untapped potential and customer base of billions can be brought under banking and other allied services.
Speaking of cooperatives and LLCs: The structure of the DAO is such that it can easily be adapted to the legal framework of the LLC. Wyoming, a state in the US, has already passed a law in 2021 that recognizes DAOs as legal entities giving DAOs the same legal protections as LLCs. When it comes to cooperatives, DAOs look like their long-lost but much-evolved cousins. DAOs can better optimize collective ownership functionalities through economic rewards, new forms of social capital, and governance. PartyDAO, formed in 2021, is a good example of an Internet cooperative that completed million-dollar deals through collective bidding and partial ownership.
The DAOs are also the truest social community of the future, where each member contributes to the development of the community they choose to hang out with. The DAOs work on how people collaborate online through social tokens – a direct impetus towards building a virtual social economy.
Tasks 4.0 – The next iteration of Tasks has been gathering momentum for some time, and DAOs may be the biggest contributors to the ‘maker economy’. They challenge centralized structures and bring together developers, artists, investors and other stakeholders under one roof. In addition, developers and artists can monetize their work and data by tokenizing them into fractional tokens, which can be traded for other tokens. Coinvise is a web3 platform that provides tools for members to generate tokens. BAYC and Friends with Benefits DAO are other examples.
DAOs can also contribute to decentralized funding for both for-profit and non-profit initiatives. They are the next logical extension of capital formation in Web3’s decentralized interface. DeFi is the future, and The DAO is best suited to lend DeFi utilities to its members. The DAO is also leading non-profit and charitable initiatives through crowdfunding and decentralized governance. Some examples include Save the Children Organization, Charity DAO, Endowment, Code Green etc.
While The DAOs have yet to spark a revolution, these mini- to macro-scale Internet organizations can rebuild businesses and transform work like never before.
Disclaimer: The cryptocurrency is not legal tender and is currently unregulated. Please ensure that you do an adequate risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information in this section does not represent any investment advice or the official position of WazirX. WazirX reserves the right in its sole discretion to modify or change this blog post for any reason at any time and without prior notice.