If you’ve spent a considerable amount of time in the crypto industry and you’ve done your research, you’ve probably already heard of Decentralized Autonomous Organizations (DAOs).
However, despite the hype, most people still don’t have a complete grasp on what they are – and, more importantly, what they can be used for, and how they could vastly improve our efficiency in the near future.
We’re living in a very exciting time for technological innovation. Organizations like DAOstack are already coming up with solutions that could make DAOs mainstream within the next few years.
So, let’s break down the main things you should know about DAOs.
1 – DAOs are business vehicles that operate through smart contracts.
The idea behind a DAO is that it acts as a self-governing organization that is controlled by an incorruptible set of rules.
The purpose of a DAO is largely to eliminate the involvement of third parties – also known as ‘middlemen’ – in financial transactions in order to improve efficiency and save money.
Vitalik Buterin, the founder of Ethereum, has stated that DAOs are an ‘underrated paradigm’.
He has also suggested that providing these smart contracts were supported by a Turing complete platform, DAOs could eventually be organized to run without human managerial interactivity.
2 – Users can vote to decide how DAOs allocate their resources.
DAOs are not controlled by a single entity. Instead, they are controlled by the users.
When a DAO’s funding period is complete, people can then make proposals regarding how the money should be spent. Members of a DAO can vote for or against these proposals.
Their votes will we weighted by how many tokens they have in their possession. These tokens are divisible, indistinguishable, and can easily be transferred between accounts.
3 – DAOs could be the future of business.
Over the past couple of years, we have witnessed a strong influx of interest towards the concept of DAOs, and how we can use them to make organizations more efficient.
As it stands, of the major problems with DAOs is that they are currently largely inefficient. Distributing decision making can be an extremely difficult process – especially for extremely large organizations.
For instance, it is important for organizations to establish who can make proposals, how they should be made, and which proposals should be brought to the attention of voters.
DAOstack is working to solve these issues to make DAOs mainstream. It can effectively be thought of as a ‘Wordpress for DAOs’.
So far, the reception from investors has been phenomenal. In fact, it was so good that the DAOstack ICO was completely sold out in as little as 66 seconds.
4 – The first DAO created on the Ethereum network was known as ‘The DAO’…and it failed.
The organization known as ‘The DAO’ is probably the most well-known example of a DAO. In June 2016, it launched with over $150 million in crowdfunding behind it from over 11,000 members as a result of its excellent marketing campaign.
However, even throughout the crowd sale, several people expressed their concerns about the code being vulnerable to attack.
Soon after the launch, one of The DAO’s creators, Stephen Tual, announced that a ‘recursive call bug’ had been found within the software. However, he reassured users that there were ‘no DAO funds at risk’.
Unfortunately, as the developers worked on fixing this bug, an unknown developer discovered how to exploit it and drain The DAO of the Ether it had collected throughout the token sale.
By the 18th June, the attacker had drained The DAO of over 3.6 million Ether, which they then stored in a ‘child DAO’.
This resulted in the loss of over $50 million, and the price of Ether plummeted from over $20 to under $12 in a matter of hours.
5 – Dash is the first DAO recognized by international law.
Dash is an open source peer-to-peer cryptocurrency. It offers instant, private transactions, and operates a self-funding, self-governing mechanism.
The currency was originally released on the 18th January 2014, when it was known as XCoin. On the 28th January, it was renamed to Darkcoin as a reflection of its focus on anonymity.
Then, finally, on the 25th March 2015, it was renamed Dash – a shortened version of ‘Digital Cash’ – to reflect its focus to become a mainstream digital payment system.
Dash aims to become the most secure, user-friendly, scalable payment system in the world.
The Future of DAOs…
DAOstack, and platforms like it, could be just what we need to solve some of the major problems currently facing DAOs.
Ultimately, it is hoped that it will make DAOs more mainstream.
Despite the setbacks faced so far, the crypto community will continue to push forward to unleash the potential of DAOs.
With the way things are going, it is becoming increasingly likely that they will play an important role in our society in the years to come.