- DAO is a decentralized autonomous organization with no intermediate central authority.
- It can benefit companies by increasing trust, transparency, and security.
- Investors also benefited from high-interest rates.
DAO is a traditional management organization that can structure companies. It is controlled and managed by a group of leaders as there is a lack of any central authority. DAO can invest in many assets and acquire companies, NFTs, and any other token.
What Is DAO?
A decentralized autonomous organization (DAO) lacks centralized authority. The primary goal of the DAO is to reform many firms’ existing management structures. It gives every member a vote, a voice and the opportunity to propose initiatives. It is popularized through blockchain technology and cryptocurrency enthusiasts. These are used to make decisions in a bottom-up management approach. DAO ensures security is the priority. DAO was created in 2016 by a group of developers.
Because there is no central authority, the group of leaders serves as the governing body. It relies heavily on smart contracts. These coded agreements dictate the decision-making based on the underlying activity on a blockchain and the voting process for DAOs is posted on the blockchain. DAO raises capital by trading fiat for its native token. The native token is the representation of voting power and ownership proportion across members. Then DAO can issue future tokens at a greater value. A DAO can invest in assets as well. For example, it can acquire NFTs, companies, or other tokens.
Benefits And Limitations
The benefits of DAOs are participation, publicity, decentralization, and community. The limitations of DAOs are inefficiency, security, speed, and education.
The pros of DAOs are:
- There can be more voices in the strategy, planning, and operations of the entity.
- Stakeholders are naturally incentivized to act more responsibly as votes on the blockchain are publicly viewable.
- A variety of individuals can come together to work as a single entity.
- DAO members may feel empowered to collaborate with like-minded individuals.
The cons of DAOs are:
- There is more burden to educate users as the collective voting population is diverse.
- The decision-making process is time taking because of more voting participants.
- The voting process is also time-consuming because gathering takes more time due to the decentralized nature of the entity.
- If the DAO’s security is not proper, then severe exploits such as treasury theft can happen.
Profits Of Investing In DAO Companies
The highest return is available to users after investing in DAO companies and it can invest in other assets as well which helps to raise more capital. There are key benefits of DAO development; use of smart contracts, operation via a computer code, instant trust and transparency, and community-based. Examples of DAOs are Herstory, PlearsDAO, Friends with Benefits DAO, Komorebi Collective DAO, and MetaCartel venture DAO.
Conclusion
DAOs have many features that can make processes in a company more efficient. The DAO model is best for many organizations as it is an immutable, transparent and trustless smart contract. The users can get higher returns after investments which is a great deal for any of the users.
