Digital Autonomous Organization (DAO) is a service, a new version, or a reality that is a must for modern world companies to accept as soon as possible. DAO is more than just a crypto buzzword. Conducting organizational meetings is still a behind-door process, and only selected people are involved in the actual decision-making process. Thus, a virtual organization named DAO has come into existence to manage decision-making processes and treasury management over blockchain technology. There is no central leadership for DAO. From a technical point of view, we can say that, in order to make a firm's management structure more open and transparent, DAO is prefaced by relevant open-source code.
Given the technical definition of DAO, DAOs are organizations that are neither controlled by organization members nor influenced by central government but are merely social organizations represented by rules encoded as a transparent computer program. For deciding how to fund DAOs, members of DAO can come together, discuss and establish a mission.
How Do DAOs Work?
Creating rules through community voting via smart contracts:
Using smart contracts is vital for creating sustainable and autonomous DAO, and thus one can conclude DAOs operate using smart contracts, which lay foundational rules of how a DAO is to serve. The foundational rules remain unchanged unless the DAO 's care community members vote upon them. In order to take effect, operational workflows, governance systems, and incentive structures will need to be voted on.
By Purchasing The DAO's Native Tokens, Users Can Fund DAO's Growth:
The next step after writing smart contracts onto the blockchain is acquiring funding. DAO 's native tokens are cryptocurrencies tied to certain projects. Native tokens can be used for voting or incentivizing certain activities on the protocol. In DAO, smart contracts require creating and distributing internal property like native tokens. DAO's native tokens can be purchased by individuals or entities interested in participating in the DAO's growth. Voting rights proportional to holdings of token holders is being provided to token holders. Moreover, token holders can own equity in DAO, which helps shape the future of DAO.
Receive Governance Tokens to Influence The Token Distribution and Treasury Management:
All of the decisions of DAO will be taken by token holders once there is enough funding for a DAO to kick-off through a consensus vote. Then work will be done towards the most beneficial outcome for the entire network by the community members as the DAO's stakeholders. DAOs, where governance tokens can be expected in return, can be taken into consideration by members for work beyond voting rights. These include roles in token distribution and treasury management.
DAO's Benefits In The Real World
Nowadays, DAO crypto tokens are multi-purpose tokens like they are being used for charity, investment, fundraising, buying and creating NFTs and many more. For example, there is a decentralized city planning committee in the metaverse in Decentraland DAO. This committee is meant for deciding moderation of content, LAND policy and auctions.
The benefits of DAOs and their native tokens in real-world are outlined below as:
Decentralized, Automated And Transparent:
The decentralized and transparent nature of DAO gives members of DAO full ownership of maintaining the protocol. Moreover, decisions are executed automatically because of smart contracts, which means DAOs are automated. The DAO organization only pays for existing on the blockchain, thereby increasing their profit margins, and in comparison to other traditional companies, DAOs eliminate all third-party transaction costs.
In the organization, each token holder is given the decision-making power proportional to the tokens held by a member. However, decision-making power doesn't give the holders more privileges or rights. Changes that further develop the protocol can be affected by token holders, which makes it truly democratized space and rewarding.
Potential Investment Returns
Governance token owners in a DAO are like equity holders in early-stage start-ups. This equity becomes extremely precious after becoming successful. A fixed percentage of the transaction volumes on the exchange is being rewarded to the DAO members, who are also the token holders. Because of this, one can emerge as a more stable token user with a long-term investment mentality. DAO tokens are differentiated from other non-DAO tokens by these reward mechanisms.
DAO has many benefits for its stakeholders by carrying out corporate operations autonomously through smart contracts. A new world of corporate governance is being created by assisting many blockchain projects to achieve the ideal decentralization. One benefit is acquired by providing full ownership on decision-making that can be rewarded accordingly. Many organizations will look to adopt DAO platforms for their businesses in the future.
Before making a purchase or investment in the DAO token they trust in, it is important that users always DYOR with popularity, utility and promising future of DAOs skyrocketing.