{"id":2016,"date":"2022-01-17T13:36:57","date_gmt":"2022-01-17T05:36:57","guid":{"rendered":"https:\/\/www.fio.one\/?p=2016"},"modified":"2022-01-17T13:36:58","modified_gmt":"2022-01-17T05:36:58","slug":"what-are-daos-the-future-of-organizations","status":"publish","type":"post","link":"https:\/\/www.fio.one\/zh-hant\/2022\/01\/17\/what-are-daos-the-future-of-organizations\/","title":{"rendered":"What are DAOs?: The Future of Organizations"},"content":{"rendered":"\n

For the past two decades, centralized organizations have led the path in the development and growth of the internet. Now, as the internet transitions into Web 3.0<\/a>, decentralization has become a trending topic in the tech world. In the midst of these discussions arises the question: in the future, what do organizations look like within the framework of a decentralized internet? Decentralized autonomous organizations, or more commonly known as DAOs, could be the future of organizations.<\/p>\n\n\n\n

Introduction to DAOs<\/h2>\n\n\n\n

So, what are DAOs? Think of them basically as a digitally native group owned and managed by like\u2013minded individuals collaborating and coordinating together, through a mutual set of rules enforced on a blockchain, for a specific purpose. Before we learn more about how DAOs are the future of organizations, let\u2019s first look at the numbers.<\/p>\n\n\n\n

In 2021, interest in DAOs and the overall DAO ecosystem have significantly flourished. According to data from DeepDAO<\/a>, assets under management in DAOs\u2019 treasuries had a 40x increase from USD$400 million to a whopping USD$16 billion. Additionally, participating members of DAOs increased 130x from 13,000 to 1.6 million. These numbers are expected to further increase in 2022.<\/p>\n\n\n\n

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Image taken from DeepDao<\/figcaption><\/figure><\/div>\n\n\n\n

Characteristics of a DAO<\/h3>\n\n\n\n

What differentiates DAOs from traditional organizations is their technological foundation: smart contracts<\/a>. More specifically, the programming code and data of smart contracts define the rules of governance for the organization. Moreover, a collective proposal and a subsequent voting process determine decisions within the organization.<\/p>\n\n\n\n

In the table below, you can see additional characteristics of a DAO that differentiates it from traditional organizations.<\/p>\n\n\n\n

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Differences between a DAO and traditional organization (image taken from ethereum.org)<\/figcaption><\/figure><\/div>\n\n\n\n

How do DAOs function?<\/h3>\n\n\n\n

Because smart contracts essentially govern DAOs, a central authority like CEOs are not necessary to run the organization. Therefore, in democratic fashion, group voting decides the course of action within DAOs\u2013from authorization of payments to strategic decisions. These unique aspects show how DAOs can be the future of organizations.<\/p>\n\n\n\n

Once a smart contract is written on the blockchain, the rules of the contract. can only be changed via voting. Furthermore, any actions that go against the rules of the contract will fail.<\/p>\n\n\n\n

Smart contracts not only define the rules of the organization, but also regulate the treasury holding governance cryptocurrency tokens. Governance tokens are created at the inception of a DAO. The amount of tokens equal to the amount of votes a member has. Votes give tokens a price, which in turn give tokens an utility. For example, members can use tokens to vote on important issues such as salary for any employees or even use tokens as incentives for voting rights. <\/p>\n\n\n\n

Lastly, it is in every member\u2019s best interest to work diligently for the DAO because an increase in the token\u2019s value translates to an increase in profits for the DAO.<\/p>\n\n\n\n

DAO memberships<\/h3>\n\n\n\n

There are two primary types of memberships for DAOs: token-based membership and share-based membership. The type of membership is important because it determines the voting system used to govern the DAO.<\/p>\n\n\n\n

Token-based membership<\/h4>\n\n\n\n

As the name suggests, token-based membership is based on cryptocurrency tokens. A member holding tokens also holds voting rights. Depending on the token used, a token-based membership is completely permissionless, meaning the DAO is open for anyone to join as long as they possess the DAO\u2019s token. Members can earn governance tokens in exchange for cash or Proof of Work, then held or traded on decentralized exchanges (DEX). Ultimately, a token-based membership is useful to govern either decentralized systems or the tokens.<\/p>\n\n\n\n

One of the most prominent DAOs with token-based membership is MakerDAO<\/a>, whose governance token is MKR. Holders of MKR token can vote on decisions pertaining to MakerDAO\u2019s future course of actions.<\/p>\n\n\n\n

Share-based membership<\/h4>\n\n\n\n

Share-based memberships are slightly different from token-based memberships. To join a DAO based on shares, one must submit a proposal that outlines their contribution\u2013either in the form of tokens or a skill. Additionally, existing members may also vote on the acceptance of prospective members. In this sense, share-based memberships are more permissioned than token-based memberships. <\/p>\n\n\n\n

By offering something of value, a prospective member earns shares, which directly represent their ownership of assets in the treasury and voting power. At any time, members are also allowed to revoke their membership and leave with their assets. Therefore, share-based memberships are useful for close, small-scale groups like charities or venture capitalist investment groups; however, this type of membership can also govern systems and tokens.<\/p>\n\n\n\n

One example of a DAO with share-based membership is MolochDAO<\/a>, created on the Ethereum blockchain. The purpose of MolochDAO is to improve and support infrastructure projects pertaining to Ethereum via funding, ultimately to further promote the use of Ethereum. Therefore, prospective members can only be accepted if they write a proposal demonstrating the knowledge and expertise regarding Ethereum to make informed judgments.<\/p>\n\n\n\n

Different types of DAOs<\/h2>\n\n\n\n

The aforementioned MakerDAO and MolochDAO are considered a protocol DAO and grant DAO, respectively. <\/p>\n\n\n\n

Protocol DAO<\/strong>s are often the backbone of decentralized finance (DeFi) protocols like MakerDAO. Lending platforms may utilize protocol DAOs as a tool for ownership and governance to promote decentralization.<\/p>\n\n\n\n

Grant DAOs<\/strong>\u2013like MolochDAO\u2013are used to fund the development of blockchain-based projects such as Ethereum or DeFi protocols with grants.<\/p>\n\n\n\n

Other types of DAOs include but not limited to:<\/h3>\n\n\n\n