As cryptocurrency becomes more and more popular each day, there is no way of stopping people from using it as a means of transaction with others. Arguably more decentralized and direct than the typical payment methods, many people begin using cryptocurrency as an alternative that is more advanced and practical. In its rise, the term decentralized autonomous organization (DAO) also entered the popular discourse about cryptocurrency.
In recent years, people are starting to question the role of major institutions when it comes to managing internet freedom. With censorship becoming an increasingly serious issue in the context of internet freedom and human rights for free information, people began to think that a highly decentralized authority will only restrict such freedom.
As such, people begin looking for alternatives that allow the users within an internet forum to do things as they please without excessive authority. However, this has to be done with the participation of all of its members so that the forum can be a safe place.
Cryptocurrency is one of the places in which a certain level of authority is exercised by its members without the need for formal authorities to do all of the management. In this case, DAOs emerge as an alternative to implementing governance in this field.
To put it simply, a DAO is an internet organization without centralized leadership. It doesn't need any form of hierarchy or formal authority, as the stakeholders are the community members.
Furthermore, compared to formal organizations, all decisions are made from the ground up without any form of hierarchical management. Although decentralized institutions are not exactly new, the internet-native DAO gains popularity as cryptocurrency has become the trending payment method in recent years.
Now that we've defined what a DAO is, it's time to understand how it works as a whole. Thanks to its decentralized nature, this kind of organization is proven to be popular for NFT and cryptocurrency users who do most of the process themselves.
Since a DAO is still essentially an organization, there is a "structure" that it needs to abide by in order to run the whole thing. Although, unlike conventional organizations, DAO runs on "smart contracts," which are agreements that can be executed like a computer program if certain parameters are met.
To work on these contracts, a team of community members will take the role of stakeholders to get voting rights and decide governance proposals. In this way, stakeholders can prevent an excess of proposals in the blockchain. Since DAO is decentralized and open-sourced, anyone in the blockchain can view the codes in case they need to audit the built-in treasuries to ensure transparency.
To create a DAO, there are three steps that we can take to do so. These are the steps:
The first step that the developers have to do is make the smart contract. As a DAO relies heavily on smart contracts, they need to think about the rules properly and carefully. The reason is that the rules in the contract can only be changed through the governance system, which means that they can't change the contract's rules on a whim.
Once the contracts have been made, the stakeholders have to determine the source of the funding and the implementation of the governance. To have funding, tokens are sold at a price in which the users can buy them. By buying them, the buyers can have their voting rights in the blockchain.
After the funding is secured, it's time to deploy the DAO on the blockchain to get things to work. Upon this point, stakeholders will be the ones who are responsible for managing the DAO's implementation. By doing so, the creators will not have any role in determining the DAO's governance, and only the stakeholders can do that.
If you're familiar with NFTs of any kind, then you know that they give a chance for people to freely own their own assets without having to abide by a formal institution at all. In so many ways, a decentralized autonomous organization can help NFT creators and users to usher in their hobby in more ways than one.
As we've mentioned, a DAO consists of the collective cooperation of stakeholders in a non-hierarchical manner. In this way, the NFT industry can get some help in the form of decentralized and collective ownership of assets.
The reason behind this help is that to buy an NFT, a significant amount of money is needed. To counter this, a DAO can provide a platform in which NFT owners can collectively own an NFT without having to spend any money.
PleasrDAO, for example, states that its members collectively own and share the cost of each artwork in their collection. In this way, members can have their share of NFTs without excessive spending. On another note, best NFT community governance can be greatly strengthened through DAO. In such a platform, creators and buyers alike can promote, share, and broadcast their ideas regarding the community as a whole.
Even better, a stronger community through DAO means that NFT creators can find a place in which they can raise their funds and increase their marketing, especially for newcomers.
Related Article: Want to Build NFT Community? Here’s What You Need to Know
In the same topic of decentralized community, decentralized finance (DeFi) also takes stage along with DAO. With DeFi, cryptocurrency users and NFT collectors won't have to rely on conventional payment anymore.
In fact, DeFi requires DAO to actually work. To ensure that the transactions are secured and transparent, DAO manages DeFi based on the individual decisions of the validator nodes. By doing so, the agency of the users can be increased dramatically.
Plus, with DeFi and blockchain now prioritizing the principle of transparency in all transaction activities, anyone can ensure that no illegal party uses the blockchain to carry out illegal transactions. Accordingly, compared to conventional payments, DAO-assisted DeFi can drastically reduce overall transaction times. As a result, the time required for transactions in general can also be significantly reduced.
Compared to conventional organizational structures that seem too rigid and inflexible, DAO-assisted DeFi is now showing its potential as an unconventional form of payment in the future. Financial auditing in DeFi has also become easier, since anyone can see who recently made transactions and at what scale.
If you are interested in DeFi for your personal needs, then you need to look at DAO Investments (Venture DAO). This is great if you want to invest in an NFT, but you are not sure whether it will be worth it and whether the artwork is worth investing in. In the same way, Grant DAO is also a great alternative if you need to get a supply of funds for your NFT creations or when you want to fund your favorite creators.
With all its decentralized structures, it's no wonder the concept of decentralized autonomous organization is becoming increasingly popular among NFT enthusiasts and active cryptocurrency users. Now, all that's left is to find or create a DAO that fits your own needs.
Related Article: Decentralized vs Centralized Blockchain: Learn the Difference!
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