What Makes A DAO Successful?
Decentralization has been a rising concept in the past few years and there is a very good reason for its popularity. It aligns with the concept of democracy – one of the oldest orders of humanity. Even with democratic systems, though, the decisions are made indirectly, taking the governing out of the hands of the people. With crypto assets and DAOs, this can take on a new shape and change forever by giving more power to the people.
Let’s read on to find out how!
In This Blog
What are Decentralized Autonomous Organizations (DAOs)?
Decentralized Autonomous Organizations or DAOs are self-managed organizations that exist on the blockchain. They run on a set of transparent rules. What sets DAOs apart and makes them unique is that they reduce or eliminate the need for managers or central authority.
DAOs operate based on a voting system. This system allows owners of crypto assets to have a direct say in decision-making. These crypto assets are DAO’s native tokens that function as a cryptocurrency. Any new proposals and suggestions get voted on by members of the DAO community as well, making it the ultimate decentralized system. This is because the community is the one making a direct contribution to the final decision-making and comes together to vote on each proposal.
Any proposal that achieves a consensus then comes into practice.
Since a DAO exists on the blockchain, it has no physical existence. It automates blockchain decisions and allows investors to send money to and from anywhere. The blockchain also ensures complete transparency over these transactions. That means every member knows where every transaction is coming and going.
How Does a DAO Work?
DAOs operate through smart contracts. But what are smart contracts? Smart contracts are agreements between group members that exist in the form of a code that executes itself. To become a member of the DAO, people buy tokens. These tokens give them voting rights and a place in the decision-making process.
A great example is that of Uniswap. In this DAO, anyone who is a part of the platform can take part in the decision-making process. It is a virtual world that uses the UNI token which gives voting rights. Many major brands such as Coca-Cola, Morgan Stanley, and Adidas are a part of this DAO.
For people building a startup, DAOs can help reach big investors, allowing them to gather considerable funding. Not only do entrepreneurs have access to local investors. But they can also get in touch with investors around the world without any legal barriers.
This is an extremely lucrative advantage of DAOs. For a business’s security, the owners can also include specific clauses in the smart contract they design.
How DAOs Can be the Key to Improving the Way We Work and Organize
Many people today looking to start organizations wonder how they can exchange values in the workplace in a trusting environment. People want to organize themselves safely and efficiently with like-minded individuals like themselves, no matter where they live around the world.
But it’s hard to trust someone over the internet – a person you have never met or worked with before. With DAOs, you essentially don’t need to trust anyone in the group. The only thing you need to trust is the DAO code, which is completely transparent and verifiable by everyone.
In contrast to traditional companies, DAOs have a decentralized management style. What that means is that all members of a DAO get a chance to vote for future changes. The decisions are not solely made by the higher management or a single person. Essentially, in a DAO, no one is in charge.
This not only creates equal opportunity but also opens up new avenues for collaboration amongst members.
Here are a few differences that summarize how DAOs can improve the way we work and organize:
Runs on a centralized authority
Runs on a fully decentralized and democratized system
Depends on a single party for structural changes
Provides voting rights to members for any future change
All organizational activity is private and limited to the public
All activity is available to the public and is fully transparent
Intermediary required to enforce changes
All services are handled on the blockchain automatically in a safe and secure manner
Requires human handling of transactions and processes which is prone to error and manipulation
No intermediary is required to implement changes
In addition to these differences, DAOs also have many advantages. Let’s take a look.
Advantages of DAOs in our Workplaces
Apart from more decision-making power, DAOs can give us more control over where, when, and how we can work. Instead of having one employer and a typical 40-hour week, we can work only several hours a week with several DAOs. This is one of the top reasons why people are so excited about DAOs. They will be able to earn through several different income sources and projects.
For instance, nowadays, online influencers and creators make money through content monetization, sponsorships, consulting, and coaching. They do all of this simultaneously, dedicating a few hours every week to each project. This helps them diversify their income sources and build their wealth.
Not only that, but DAOs also show great promise when it comes to doing more fulfilling work. Since DAOs are largely dependent on technology, many of the processes that we today have to do manually will be automated. This will free up the time for contributors to do what they like and get their creative hats out. After all, we are the most useful versions of ourselves when we are creating something we like that is of value.
Freeing up time would also give employees more time to work on high-value tasks and less time on mundane, day-to-day tasks.
This will be a great solution to our increasingly disengaged workplaces. Today’s workplace structure not only produces subpar results but also contributes to workplace stress.
Members will also have more choice over what projects they want to work on. Jobs that align with their strengths and values will produce better results and create productive employees.
How Does a DAO Make Money?
DAOs usually make money through investments made by the organization. People who are initiating a DAO can also earn money by convincing investors to fund them in their business idea. When a DAO is first made, its rules are written into its code in the form of smart contracts. These smart contracts run whenever certain decisions or actions take place.
Everyone in the DAO agrees to follow these rules when they buy into the group. Subsequently, if those rules are violated, the funds of the DAO are locked and nobody can use them any longer. This is how a DAO ensures that everyone follows the rule and that the organization makes money. Since everyone on a DAO shares the risk of the group, everyone has a vested interest in ensuring that the community runs as smoothly as possible.
Group members also get to share the reward if a DAO works effectively. If the DAO does well, its members get more crypto assets or currency. That currency increases in value within that particular DAO.
How Do You Contribute to DAO?
With so many advantages, it is only natural to want to contribute to a DAO. I will teach you exactly how to do that.
1. Decide Whether DAO is the Right Choice for You
2. Figure Out the Different Ways of Contributing
To understand the different ways of contributing to a DAO, start socializing with people. You can also join DAO’s live events and talk to members live.
You should also ask for help from DAO’s core contributors. More often than not, they are happy to help and provide mentorship.
3. Start Contributing!
How you can contribute to a DAO depends on your skillset and how much time you have. You can start by participating in community conversations and sharing useful links. You can also promote the DAO on social media. If you want to get involved a bit more, join one of the core projects by talking to a team lead about how you can get started.
If you have more time, consider becoming a core contributor to the DAO. You can become a team lead and handle application processes that take place over that DAO.
Everyone has a different number of hours to give. Based on that, find what works best for you in terms of contributing to a DAO. This way, you will play your part in implementing the power of this decentralized and transparent system that is fair to all.
Further reading: Web3: The New Phase of the Internet
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