DAO (Decentralized Autonomous Organization) Revolution

A Decentralized Autonomous Organization (DAO) is a digital system facilitated by smart contracts. Smart contracts contain digital tools and protocols that help support certain transactions or other contract elements. The Decentralized Autonomous Organization (DAO) works with popular Cryptocurrency and digital ledger operations, where many world governments and businesses are taking action to foster greater transparency and anti–corruption innovations.

Decentralized Autonomous Organization (DAO) is a concept that has a little more detail than that and started to be fancied after the emergence of Bitcoin.

The ledger technology called Blockchain began as a component of the Cryptocurrency Bitcoin. In the Blockchain, a digital ledger system provides an immutable record and transparency of financial movement. In this model, the Decentralized Autonomous Organization (DAO) uses ledger and Cryptocurrency tools through smart contracts that help abstract and customize its interactions with stakeholders. Practical examples of Decentralized Autonomous Organizations (DAO) have shown how these models can be used for venture capital allocation and other types of business.

Decentralized Autonomous Organizations (DAO) can be summarized as an organizational structure in that we cannot come together under typical conditions in the world. Instead, we will create with people who think like us and similar things. These organizations are based on the internet and do not have a physical place. No individual or group owns or manages the organization; All powers belong to all structure members. All the decisions to be taken and the proposals presented are put to the vote with the participation of all members. As we can remember from the Blockchain structure, the data and resources of the institution cannot be accessed without the approval of the entire group. Economic theories and game theory are generally used to protect the interests of the organization and match the members’ interests.

Both before and after the pandemic process, we frequently talked about how traditional institutions could not adapt to today’s dynamic world due to their hierarchical structure and clumsiness. As a result, substantial companies, which have been in existence for many years and have a solid organizational structure, started to lose their superiority against small companies and startups. The most important reason for this was that they could not take quick decisions and maneuvers due to their cumbersome structure. As a result, their innovation capacity was much lower than startups, and their corporate culture was not open to transformation. In such an environment, the lessons we learned from what such structures (company, institution, state, local government, etc.) did wrong, new generation technologies, and changing working styles led to the need for a new corporate structure and thus the birth of Decentralized Autonomous Organizations (DAO).

Unlike traditional organizational structures, Decentralized Autonomous Organizations (DAO) are non–hierarchical, horizontal organizations. They are established with an utterly democratic understanding. The steps to be taken regarding the company are determined after voting with the participation of all members. More interesting is that thanks to the fully remote and automated infrastructure in operation, the decision was taken due to the voting being implemented directly, without any other intermediary or implementer, without waiting for a person to implement this decision. For example, a fund that needs to be distributed between departments is automatically transferred to the budget of the relevant unit as soon as the decision is made. All members can follow these activities, and all data is shared openly and transparently.

The technology behind Decentralized Autonomous Organizations (DAO) is smart contracts. First, a smart contract is created for the Decentralized Autonomous Organization (DAO). We can think of this smart contract as an organizational charter that contains all the organization’s rules, listing the assets and defining the terms of membership. After the agreement is written on the Blockchain, no law can be changed by any member unless voting is done and the approval of the majority is obtained. Since all transactions are visible to all members, it is impossible to change the rules (codes) of the Decentralized Autonomous Organization (DAO)’s smart contract regardless of the members. If any member tries to do something other than the code, the attempt fails. In addition, the organization’s budget and assets cannot be spent or used by anyone without the group’s consent, within the rules of the smart contract. Therefore, Decentralized Autonomous Organizations (DAO) act as fully automated systems and can be managed without the need for an important decision–maker or authority.

As with any company or institution, the Decentralized Autonomous Organization (DAO) must have financial assets and a budget to continue its activities. This budget consists of the capital set forth to carry out the organization’s activities or the tokens that individuals will receive due to their work. People gain the right to vote with the tickets they earn by investing or performing specific tasks, and thus they can have a say in the organization’s decisions.

How Does Decentralized Autonomous Organization (DAO) Work?

Decentralized Autonomous Organization (DAO) uses the Ethereum network and works with smart contracts, which is the most vital feature of this network. The purpose here is not to authority in the system decision–making power.

The Decentralized Autonomous Organization (DAO) was launched in April 2016 and has grown into the largest fundraising event ever seen in this ecosystem. Unfortunately, this led to a cyberattack in June 2016 that resulted in the theft of 3.6 million ETH, followed by a hard fork of the Ethereum network. Although trust in the Decentralized Autonomous Organization (DAO) has decreased and the community has been divided due to the cyber attack, this system has not lost its popularity. On the contrary, efforts for a safer infrastructure have been intensified and have begun to yield results.

What is Decentralized Autonomous Organization (DAO) Structure?

Each Decentralized Autonomous Organization (DAO) is structured differently, but generally, you accept the code in place when joining a Decentralized Autonomous Organization (DAO). Changing this code is not easy, and any change usually requires a vote among members.

To gain voting power or membership in a Decentralized Autonomous Organization (DAO), you usually buy governance tokens; Cryptocurrencies tied to a particular project. Unfortunately, in some Decentralized Autonomous Organizations (DAO), governance tokens can only be obtained in structured funding rounds, and sometimes demand exceeds the number of tickets available. However, by holding these tokens, members can often have equity in the Decentralized Autonomous Organization (DAO) and help shape the future of the Decentralized Autonomous Organization (DAO).

While it varies from Decentralized Autonomous Organization (DAO) to Decentralized Autonomous Organization (DAO), the weight of a member’s votes often depends on their contribution to the project.

Suppose a Decentralized Autonomous Organization (DAO) is not using governance tokens. In that case, wright may accept investment in other forms such as ether, the second–largest Cryptocurrency by market capitalization, as most Ethereum Blockchain powers the Decentralized Autonomous Organization (DAO). But, again, each Decentralized Autonomous Organization (DAO) has its system.

Beyond voting power, members can also work for their Decentralized Autonomous Organization (DAO). Typically, there is a range of internal jobs, including token distribution and treasury management positions.

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aNumak & Company is a Global Business and Management Consulting firm with expertise in building scalable business models for diverse industry verticals.