What are DAOs?
There are many faculties to cryptocurrency, especially when it comes to Ethereum’s blockchain network. Whilst Bitcoin was the pioneer when it came to decentralised digital currency, Ethereum was the pioneer of blockchain-based apps and organisations, utilising the network to create its own metaverse ecosystem.
Organisations, specifically, have entirely changed the way in which traditional organisations and businesses can operate. They are known as DAOs – which stands for “decentralised autonomous organisation” – and they are constructed by rules which are encoded as a computer program, unable to be influenced by centralised governments.
What Exactly Is A DAO?
Put simply, DAOs are groups of people that form for a specific purpose, such as investing in start-ups, purchasing and managing NFTs or managing a crypto-based business. Each governing body has to oversee the allocation of resources and are tasked with ensuring the long-term success of the specific project.
The DAO is run by its members without the need for any middlemen or interference from governing bodies or banks. Cryptocurrency itself is the currency which controls proceedings, helping to manage the treasury and vote on certain authoritative decisions.
To give an example, PleasrDAO is a group of artists who have focused their work within the metaverse, formed to bid on artworks and fractionalized them by cutting the assets into pieces. They were responsible for buying the original DOGE NFT for $4 million, later fractionalising it into 16,969,696,969 fungible tokens and making it worth $336 million – each individual coin being valued at $0.019.
Why Do DAOs Exist?
In many ways, DAOs can be far more transparent and efficient than traditional organisations, as all decisions get made on blockchain and appear on the blockchain ledger. This also allows organisations to make decisions which are far more democratic. Every participant gets the chance to vote, not just the executives and the bosses. In this way, the organisation is run entirely by the sum of its parts, making it quite a revolutionary idea.
It should be noted, however, that DAOs are in their teething phase. In terms of adequately summing up DAOs and why they are important, there are not too many success stories to choose from – the first DAO was launched in 2016, meaning there have only been six years of development and innovation. DAOs of today are also known as “protocol DAOs” as they only manage projects that are based around crypto itself. It is hard to distinguish whether a DAO model would really work when it comes to traditional business projects.
What Are Some Examples Of Successful DAO Projects?
One of the DAOs making waves at the moment is the social DAO Friends With Benefits, which has nearly 4,000 members. This is a token-gated community where members can discuss developments in the market, trade job leads and strategies, and also hold regular meetings about the future of cryptocurrency and the DAO itself.
BeetsDAO is another organisation which holds nearly 60 members, all of whom pool together to fund group investments in music-based NFTs. As well as this, they have been responsible for commissioning new art and music, with the creation, launch and sale of the “Nyan Dogg” NFT being particularly infamous – the original artist raked in as much as $250,000 as a result.
Other popular 2022 projects include Uniswap, which is a decentralised exchange that allows investors to swap ERC-20 tokens without the need to facilitate the trades – Curve, which is designed to make swapping ERC-20 tokens for stablecoins easy and efficient – and AAVE, which allows borrowers to interact with each other outside of a centralised intermediary.
So DAOs Are Essentially Decentralised Businesses?
In essence, this is true. DAOs are an idea of what businesses could become in the future, especially now that we are heading into a Web3 landscape where decentralisation may be key to how we all operate. As mentioned before, it is a relatively young concept, and every DAO is based around cryptocurrency investments and trading, so it is hard to see exactly how it will integrate into the traditional business landscape.
It Sounds More Like Crowdfunding Than Business Running. Is Decentralisation Necessary For That?
One of the drawbacks of DAOs is that, yes, many could ironically be better off using a centralised, crowdfunding platform. ConstitutionDAO, for instance, once raised $47 million, and its users had to pay around $1.2 million to Ethereum in fees alone.
So Should (And Could) I Start My Own DAO?
You could indeed start your own specific DAO. You would need to hire a team of developers to code the smart contract, and the idea would have to be strong enough to gain enough members to make it work. A popular platform for creating DAOs is Aragon, which allows users to set up their own organisations on the Ethereum blockchain.
Are DAOs Going To Be The Future?
With Ethereum having recently undergone the merge, it is likely that it will become a leading crypto platform by 2030 – perhaps even overtaking Bitcoin. With this in mind, it is likely that DAOs will stick around and could be especially prominent in the world of Web3.
DAOs Are Part Of The Metaverse, But Isn’t Crypto Dropping Every Day?
While it is true that cryptocurrency is heading into its second crypto winter, it would be foolish to assume the prices will remain low indefinitely. Cryptocurrency is renowned for its fluctuation and volatility. If a coin goes down, it is likely that it will go up again. Bitcoin, for instance, ended 2018 – which was the last crypto winter – 73% down on $3,709. By 2021, it had reached a height of $65,000. Nothing is ever certain, and cryptocurrency is still predicted to rise in the future.
Okay, But When Will Crypto Rise?
There are various predictions about when we will see a change from a bear market into a bull. Some experts predict that it could be as early as 2025 that users trade Bitcoin for $65,000 and trade Ethereum for $4,944. It is hard to say for sure, but so long as cryptocurrency is with us, it is likely that DAOs will stick around and continue to thrive and develop, so now is as good a time as any to get involved.