INTRODUCTION:

Blockchain technology is a digitally synchronized era which has not arrived at its destination! It’s better to call it a work in progress. The unique thing about blockchain technology is the distributed web tools this translates into the distribution of ownership among creators and users as opposed to centralized entities.

The Decentralized Autonomous Organizations (DAO) are one of the most amazing ideas to be effectively implemented through blockchain technology. Decentralized Autonomous Organizations (DAOs) are blockchain technologies where traditional concepts of decision-making and governance are turned upside down. If you’re a beginner in the crypto and blockchain space, the term ‘DAO’ might sound a bit complex, however, the article tends to demystify the concept and provide more clarity.

This is the first article in my DAO series, and it will educate you about the concept of DOA, how it works, type of DAO membership, and how it may be implemented in real-world situations. Without any further delay, let’s get started.

THE CONCEPT OF DAO

One may say that DAO is associated with DAC- an idea that first surfaced in the blockchain technology industry a few years ago. Decentralized autonomous company (DAC) is the term used to describe a governance model that employs tokenized shares to produce returns for shareholders.

In May 2016 The DAO was introduced and emerged in the Ethereum community. This was built by Slock.It open source coding team and is a decentralized organization built as a smart contract on the Ethereum blockchain and this endeavor was made possible by it team.

By definition, DAO is a community-led, totally autonomous, and transparent organization with no central authority that establishes rules and executes decisions through smart contracts where smart contracts are basically programs put on a blockchain that run when certain criteria are met.

The DAO was, in fact, a decentralized venture capital fund or a crowdfunding platform that allowed entrepreneurs to pitch their business plans to the community in exchange for start-up funding, and investors could send ETH to a designated Ethereum address for DAO tokens.Impressive?

DAO smashed an unanticipated success target during its inception, collecting 12.7M Ether valued at roughly $150M at the time. In essence, the platform has succeeded in distinguishing itself as a crowdsourcing platform, allowing anyone with a project or product to pitch/nominate their concept to the community and potentially get money from The DAO blockchain community. In this situation, anyone with DAO tokens may vote on ideas and get rewards if the initiatives are profitable.

Although no one knows what DAOs will become in the not-too-distant future, they have received a lot of attention within the Web3 community, and certain blockchain communities are embracing them to become fully autonomous organizations where members actively participate in decision making and their opinions can count.

HOW DAOs WORK

Decentralized Autonomous Organization (DAO), like sizable organizations such as Google and Facebook, has their own manner of operation. A DAO is best described as a digital club in which decisions are made collectively by its members utilizing blockchain technology. Consider the following scenario: you and your friends want to start a club, and all decisions are determined by vote. This vote can are done using tokens/coins which is a form of ownership and governance. Members of the DAO communities hold these tokens, which represent their stake and influence within the organization. The more tokens/coins a member has, the more weight their vote carries which in return makes their vote matter in decision-making processes which takes place online in a DAO using unique digital tokens.

What distinguishes a DAO is that its voting process is fair, and its choices are transparent, democratic, and controlled by its members thereby building trust. This is made possible by blockchain technology known as smart contracts, which describe the club’s rules, such as how votes operate and what decisions can be made. When a choice is voted on and agreed upon, the smart contract implements it automatically without the need for a central authority.

DAOs can be improved or modified over time. Proposed changes to the DAO’s code can be presented as proposals, allowing the organization to adapt to new conditions or improve its functioning depending on the consensus of its members.

TYPEs OF DAO MEMBERSHIP

Decentralized Autonomous Organizations (DAOs) can have a variety of membership categories, with each designed to cater to the community’s distinct governance needs and also influence the voting system and other essential components of the DAO. In this article, I will highlight the 3 types of DAO membership:

The Token-Based Memebership: In this type of membership, The number of tokens held in the DAO determines membership, the more tokens frequently imply more voting power and decision-making influence and these governance tokens are typically traded on a decentralized exchange without the need for authorization. Ultimately, MKR, MakerDAO’s token, is available on a number of decentralized exchanges. As a result, every token-based members can invest in the Maker protocol’s future.
Proof of Stake (PoS) membership: In the PoS memebership, membership in the DAO is decided by the number of tokens staked, with stakers receiving membership benefits and voting rights commensurate to the number of tokens staked. Stakers’ influence grows in proportion to the number of tokens they pledge to the DAO.
Proof of Contribution (PoC) membership: Here, members of the DAO are those who actively contribute, whether through coding, writing/creating other forms of content, or participation in the community. Based on the impact of their participation, their contributions are evaluated and memberships are granted.

HOW DAOs CAN BE IMPLEMENTED IN REAL WORLD SITUATIONS

In my next article of the DAO series, I will demystify the core of Decentralized Autonomous Organizations (DAOs) by revealing the underlying code that enables these unique organizations, as well as explaining the functionalities in detail by walking you through practical instances. This section explains how DAOs can be employed in real-time.

In the business and other enterprise, DAOs revolutionize how shareholders engage in voting. Instead of complex procedures, each share may become a voting token/coin. This empowers shareholders to influence crucial company choices, such as appointing executives or setting strategic directions based on their share value fostering direct participation and accountability, simplifying the entire process.This process may be biased but right privileges will be given to higher share holders.

In the world of content creation, DAOs empower artists and creators in a remarkable way. Imagine a media DAO where users can suggest content ideas. People who hold tokens then vote for the best proposals. Once a project gets the green light, it receives funding directly from the DAO’s funds. This transparent process not only encourages creativity but also guarantees fair compensation for creators, eliminating the need for intermediaries.

As a plus, DAOs bring a boost to charitable organizations! Picture this: a philanthropic DAO where members suggest social projects. Together, they vote on the best ideas, and the DAO funds initiatives tackling societal problems. This setup ensures community-powered, clear-cut philanthropy, amplifying the impact of charitable endeavors.

With their direct, secure, and transparent approach, DAOs are changing the game. They’re not just tech; they’re a shift in how communities find effective, community-led solutions in all sorts of fields

CONCLUSION

You undoubtedly learned about the DAO concept, its operation, different forms of membership, and practical applications in this article. I will go into more detail and offer helpful insights into the technological foundation of DAOs in my subsequent articles in this series. This series will help you further your understanding of DAOs, whether you’re a budding enthusiast attempting to enter into this fascinating business, an expert Blockchain developer, or just curious to learn more about Blockchain and its underlying ideas like DAO, Defi, or smart Contracts.

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