What Is a DAO Crypto?

What Is A DAO Crypto? DAO is a structure that helps everyone to remain creative, realize the maximum of their personal potential, receive fair remuneration and be in a team of like-minded people, associates.

DAO crypto is a blockchain-based form of organization or a company that often has its native tokens. Such organizations are not run by a director or managers, but by code.

DAOs are horizontal structures. They differ in their functions, there are development teams, venture funds, gaming guilds, social communities and so on. What they have in common is that they are all run by users, not top down or hierarchically. 

Tens of billions of dollars of value are created and controlled by what some people call a “Telegram group with a bank account.” In terms of their culture, these structures are similar to MMORPG guilds and international organizations. These groups may consist of several thousand people, even strangers to each other, but with common interests and a common bank account, and without any central authority.

Some observers think that the emergence of the DAO will change how people run communities, reshaping not just companies but ultimately the global fabric of society as a whole.

It is a new form of economic and social interaction, as the vertical management paradigm is being replaced by a horizontal model, where thanks to decentralization, each DAO participant is a full co-owner and has equal access to information and decision-making. Unlike a vertical organization, where goals and objectives are set for an employee by managers, DAO opens up scope for collaboration of independent participants who collectively achieve the common goal.

Anyone who buys and holds the DAO’s tokens can vote on important issues directly related to the DAO. DAOs use smart contracts (algorithms that perform a specific function under certain conditions) instead of traditional corporate structures to coordinate the efforts and resources of participants to achieve shared goals.  DAO is a way for people to come together in large coalitions, united by a common idea, while following the basic principles. DAO members  can make decisions in a balanced way without the need to trust the honesty and decency of the executive body (which is now a smart contract).

The DAO can be a charitable organization that accepts donations from anyone , and anyone can become a group member and vote to determine how to spend the donations. It can also be a network of freelancers who pool their resources and knowledge. It is possible to create a DAO-venture fund that combines investment capital with a voting system. The money paid out can later be redistributed among crypto DAO members.

How does a DAO work? Each DAO has its own structure, but the key aspects include:

mission;

treasury;

fund management.

What Is the History of DAO?

BTC can be considered the prototype of the DAO, since the cryptocurrency operates according to an open participation consensus protocol that coordinates the behavior of a vast network of strangers. However, the Bitcoin network does not have the complex governance mechanisms of a DAO. Ethereum became one of the first fully autonomous platforms. ETH lacks complex mechanisms with rules for  platform management and voting, but it was its smart contracts that formed the basis of DAO platforms. 

Let us start our description of DAO crypto from an interesting fact: the news of the first DAOs appeared back in 2013. However, at that time they had nothing in common with the current organizations. At this time, the very concept of decentralized, transparent and anonymous management of the organization began to be implemented.

In 2016, one of the first large organizations of its kind began its work. The main goal of the organization: the creation of a fund that was anonymously and transparently managed by the community. For example, it would be possible to invest in projects and funds by voting. It was after this moment that more and more such organizations began to appear in the market. One of the main problems that such autonomous organizations must solve is the Principal-Agent dilemma.

What Are DAO Key Features

Meaning of DAO crypto is as follows:

Lack of hierarchy and decentralization: all members are equally investors, co-founders and contributors. 

Transparency: open source that anyone can see. Due to blockchain, anyone can view 

history knowing see how decisions are made.

Free  Access: Anyone with access to the network can own DAO tokens, getting the power to make decisions. Although this rule does not always work, sometimes access is still given via or vote participants’ vote. 

Democracy: Investors can change the rules of the DAO by voting on new proposals.

Onboarding: DAOs can hire the necessary professionals as the project develops. For example, if a project needs a UX designer, then this can be written in smart contracts and voted on.

Role structure: A DAO can be described as a set of roles that participants play in an organization. Roles may change depending on the purpose of the organization. They can include developers, customers, couriers, operators, manufacturers and anyone.

Voting mechanism: a fundamental element of the DAO. This aspect is critical because actions such as raising money, investing and refurbishing can only take place if there is a majority vote. 

Reputation mechanism is another fundamental element. It helps to shape the reputation of participants keeping the system in a state of meritocracy and avoiding the emergence of aristocracy and asymmetric structures.

Participant motivation: the difference between DAO and a large corporation is that DAO participants are self-motivated and do not need to be additionally stimulated and motivated by high salaries.  All DAO participants are open and active.

Ideology and culture: DAOs are people-oriented, as they are communities of people. 

Therefore, DAO is primarily a community that develops its own culture of communication and system of values. DAOs are  strongholds of humanism and anthropocentrism. DAO changes economic relations because it is a tool that allows you to build new institutions, both commercial and non-commercial. These can be new forms of businesses, non-profit charities, and even government institutions. This didn't happen before. 

DAO is a kind of hybrid between a cooperative and an online community on the blockchain.

A cooperative is an organization in which all members are stakeholders with their own rights. A community or community is simply a group of people who are united by a common theme and interests. 

Blockchain means distributed ledger, smart contracts and voting. These three elements provide a new form of organization that solves existing problems. Previously, cooperatives suffered from the absence of decision-making mechanisms. Communities suffered from a lack of funds. And if money appeared, then they immediately became the cause of conflicts due to the implicit rules of the game. 

Is Fully Robotic DAO Possible?

Since DAO is controlled by smart contracts and an algorithmic voting system, a fully automated/robotic economy can be created using smart devices, blockchain and Artificial Intelligence. Imagine an AI-powered self-driving car that moves around the city in a car-sharing mode. Thanks to  smart contracts, the car is completely autonomous and knows exactly what it should do, making decisions on its own based on algorithms. It itself finds passengers, transports them and accepts payment. Such a car can even refuel itself by paying for electricity or fuel through digital assets and decentralized applications. Now imagine that such a car is a member of the DAO – a fleet of autonomous vehicles. Part of the profit from transportation will automatically be returned to investors. 

The main thing to understand from the description of DAO crypto is that such organizations exist according to rules that are pre-programmed, after which they work autonomously, performing their functions. They are able to turn a profit and expand without the intervention of a boss or outside interference.

But does DAO crypto have meaning without the participation of people? So far, full autonomy or a robotic economy is under development, and all steps to develop such a system are at the experimental stage.

Complete autonomy is a fantasy, and it is not needed. DAO is a community of people. And people are not autonomous, they, of course, have willpower and freedom of choice. Another issue is that we want to minimize and relieve management processes, we want to make the rules of the game as algorithmic as possible in order to defeat collusion, fraud, and so on. And we also need to protect society from people who make a lot of noise, but of little use. And just to secure the DAO from such characters, we can program the reputation institution, the multi-signature system for security, make the rules of governance transparent, and also the proposal system with automatic on-chain execution.

What Is Not a DAO?

Not all decentralized systems can be called DAO. For example, distributed file storage Torrent is decentralized. The main difference between real DAO and decentralized algorithms is that any DAO deploys smart contracts and has internal capital, which is used by voting to encourage users or to develop the project. Torrent services do not have such funds, and the Torrent algorithm is not controlled by smart contracts and does not have a voting system.

How Does a DAO Work? 

Description of DAO crypto would be incomplete without mentioning its working model. 

You can imagine DAO works as a three-story building. On the first floor there is a blockchain, where transactions between addresses take place. On the second floor there is a smart contract, which makes it possible to program the movement of funds from one account to another according to a given logic. On the third floor there is a DAO as such –  several more smart contracts that allow you to manage the first two floors. Management occurs through voting which requires a token. This is, of course, a very simplified explanation.

Types of DAO Crypto Description 

1) Cryptocurrency companies and projects. The most common example. In order for a project to call itself a DAO, it needs to have a voting system and project management through its tokens.

2) Investment funds. It is also extremely common in the DAO segment, since such funds allow collective voting and investment decisions.

3) NFT investments. There are projects that invest in different NFTs. DAO organizations are also often found there. Such structures are similar to investment funds.

4) Educational DAOs. Some organizations are developing the direction of cryptocurrency and blockchain education by voting to further add new details to the courses.

5) Legal DAOs. Such companies are trying to combine law and top smart contract technology.

What Are DAO Advantages?

Accessibility for everyone. Any person who has the ability to access the network can become a member of the DAO and make decisions by simply buying the organization's tokens on the exchange. 

There are no privileges and no hierarchy. Each user and network member has equal rights, 

and any party with any views can take part in the vote. 

DAO and trust. The very essence of the DAO idea enables people to interact with each other, solve problems together and achieve common tasks and goals. At the same time, without the need for great trust in other people (everything is controlled by the smart contract algorithm). 

Transparency. Everyone can see what decisions were made when.

What Are DAO Disadvantages?

Description of crypto DAO mineses should include: 

Hacker attacks. DAOs, like many other crypto projects, are constantly online. This means that they are not immune from hacker attacks that can steal funds from the project or break the system.

Regulation. So far, DAOs do not have any regulatory framework. Although, in general, like most cryptocurrencies.

What Are the Prospects For DAO Development?

The peak of DAO development came in 2021, when there was a wave of development of large DAO funds, crypto companies and NFT projects. It is logical to assume that these organizations will continue to develop smoothly and consistently, as well as improve all their parameters. Many experts predict that DAOs will be actively developed in 2022-2023 and beyond.

DAO crypto meaning is changing: we are waiting for a real trend towards autonomous decentralized organizations. This will be largely due to the potential wave of recognition of the DAO. Soon, DAOs around the world will begin to be recognized by states and enter the legal field of activity. For example, some US states have already passed laws that recognize DAOs as a new form of company. In addition, DAO expects a qualitative update of the systems and work services themselves. For example, the principle of voting will become even simpler, and the distribution of roles between users will reach a new level. This will increase the efficiency of the entire system as a whole.

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