If you’ve been in the crypto space for enough time you’ve probably heard about Decentralized Autonomous Organizations (DAOs) in passing. These are organizations that operate on blockchains and are controlled by a series of smart contracts, which dictate the policies and operations within the network.
Decisions within DAOs can be made according to any metric you care to mention — one vote per user, votes in proportion to their contribution to the network, or votes in proportion to some other external metric, etc — but the key is that community members collectively make decisions based on pre-existing rules, which brings a lot of interesting applications in mind.
You could, for instance, create an online bank where every depositor gets a vote on policies and assets are held by smart contracts.
In practice, DAOs enable the creation of thousands of different types of organizations and we’re only beginning to understand their true potential. Unfortunately, they typically get passed over in favour of sexier things like NFTs; which is a terrible shame for the blockchain industry as a whole, as DAOs hold a lot of promise by themselves, and shouldn’t play second fiddle to anyone.
Today we will be righting a few of those wrongs and explaining some of the different variants that DAOs come in with a respective example. Furthermore, we will also address how this new tech can change the world.
The different genres of DAOs
DeFi/Cryptocurrency — Cardano
This is the type of DAO that you’re likely most familiar with due to the fact that blockchain was invented because of Bitcoin. However, since then the organizational structure of currencies has evolved.
Cardano is the first proof-of-stake blockchain platform to be founded on peer-reviewed research. Its protocols allow you to build DeFi and governance microservices. ADA is the native token of Cardano and can be staked to earn rewards, as well as exchanged in secondary markets.
Users get votes in proportion to their stake in the network and guide its development communally.
Prediction Markets — Oracle DAO
Uncertainty is a part of life, but what if you could insure against it? Insurance, at its core, is a bet between one party that thinks an event won’t happen, while the other party believes it will happen. Hence, if you create a platform that connects people wanting to take both sides of the coin, then you have an active insurance/betting market.
Oracle DAO is such an organization, which brings these two parties together and based on the Augur decentralized prediction market platform built on the Ethereum blockchain, but it is community-led instead of controlled by a foundation. As such, the DAO members can direct the development of the platform to add the functionality that they desire, and this is funded via small fees exacted with each operation.
Lending — MakerDAO
Access to capital is the number one factor correlated with economic success throughout the world. Consequently, access to loans is a priority for people and organizations wishing to promote economic development. However financial institutions often decline to give loans to certain types of borrowers. DeFi has stepped in to solve this problem.
One such peer to peer lending DAO is MakerDAO, which is built on Ethereum and allows lending and borrowing of cryptocurrencies without the need for a middle man. MakerDAO is a smart contract service that manages borrowing and lending, as well as two currencies: DAI and MKR to regulate the value of loans. It is relatively stable, as the system’s stability is maintained through the supply and demand for loans.
Conclusion
We have not even begun to cover even a fraction of the available types of DAO. At the time of writing, according to a paper by UCM and Harvard titled “An overview of decentralized autonomous organizations on the blockchain”, there are presently over 1500 DAOs, and the industry is quite young, so there is still plenty of room to explore new organization models.
However, there are already banks, social media platforms and more will soon begin to appear. The future is quite bright, and we’ve barely scratched the surface here.
What we can say with confidence is that “DAOs” are not limited to one type of business. The structure is flexible enough to tackle many different industries and it’s quite exciting to see the future unfold. We don’t know what the future will be like, but at the WACEO we’re certainly excited to oversee DAO’s future development!