Decentralized Autonomous Organizations (DAOs) are a powerful tool to replicate the activities of business entities without many of the inefficiencies that plague traditional companies.
In a simple form, a DAO is a smart-contract governed structure collectively owned and managed by members. Decisions are made via proposal and put to a vote to ensure a democratic structure.
DAOs are popular in the crypto world because they allow people to work together on business ventures transparently and securely. All a participant needs to do is trust the code.
Understanding DAOs vs. Traditional Business Structures
What are some of the differences between DAOs and traditional businesses? First, DAOs are usually flat in structure and fully democratized.
People have an equal say and the opportunity to vote on different proposals.
Legacy businesses are often hierarchical. The decision-making process might rest in a small group of people or the CEO.
Traditional businesses often require a lot of human management and outside auditing to keep processes running smoothly to prevent manipulation.
Services found in DAOs, like distributing funds, are handled automatically by transparent and fully open smart contracts.
PhoenixDAO’s Push To Transform Online Identity
PhoenixDAO is a great example for those interested in learning more about these member-owned communities.
Functioning as a community-based decentralized platform, the entire Phoenix ecosystem aims to revolutionize digital identity and virtual authentication.
All spending across the Phoenix ecosystem comes after the community votes on proposals. Every PHNX (the native platform token) is posted on a running budget page to promote transparency.
In contrast to some other DAOs, Phoenix’s DAO is set to be self-sustaining through revenue-generating products and does not rely on outside donations.
Users gain voting rights by staking PHNX into the DAO’s contract to participate in the decision-making process and earn token rewards.
The ‘Identity’ protocol is at the center of Phoenix’s ecosystem.
By helping users create and link digital identities across various dApps and APIs, people can share data, interact with various protocols with a single ID, and manage information through decentralized on/off-chain ID management.
How DAOs Continue To Change The Online World
Many understand the revolutionary nature of DAOs and grasp some of their key advantages. But there’s a few ways DAOs continue to push the envelope even further in the digital asset world.
Jenny’s Metaverse DAO allows users to become exposed to the NFT market through fractional ownership and foster the democratization of NFT ownership.
As the NFT world is traditionally very illiquid, collectivizing NFT ownership is a big step to thwart the influence of whales.
Others continue to work on advancing artificial intelligence to enhance the autonomous nature of DAOs.
Instead of having people vote on proposals, some hope an AI-based DAO could be programmed to seamlessly consider and evaluate the preferences of countless stakeholders and make voting decisions.
There’s also a variety of new tools to help DAOs run more efficiently.
Examples include Kleros, harnessing an arbitration layer to decentralize the governance process and Gnosis Safe, with multi-sig vaults and treasury management suite.
Overall, the number of DAOs only looks to increase as the DeFi world expands and people become more comfortable utilizing smart contracts to foster decentralized governance.
DAOs look to be a vital trend setter in the financial and tech sectors to spur on future growth and innovation, while solving many of the issues related to transparency, security, accountability, and participation that traditional business structures often wrestle with.