A Thorough Understanding of What DAO is.

The world of Blockchain is so wide that one cannot imagine how many new technologies can emerge. With the evolution of the digital world and blockchain technology, something new has emerged that can benefit us, and that is DAO. DAO is something that gives people decision-making power, is transparent, and has many other benefits. Let’s dig deeper and understand more about DAO.

What is DAO?

A Decentralized Autonomous Organization is made with blockchain technology that doesn’t have any central authority. It is an organization created by rules encoded as a computer program. DAOs typically run with everyone’s votes and smart contracts and are transparent. DAOs are also known as “crypto-cooperatives” and “financial flashmobs”. They are typically used by Cryptocurrency, NFTs, and Blockchain-based businesses.

In simple words, DAOs are not governed by one entity; rather, they give their token holder a benefit to make decisions. As it operates with organizations, all the decisions are transparent and made with majority approval. For all these reasons, it has proven to be more reliable.

It seems difficult to understand, but let’s make it simple and learn how DAO works.

The difficult task always becomes simple when we learn about their mechanics. The same scenario is with DAO. DAO is run by smart contracts, self-executing codes on Blockchain. Here are ways in which DAO typically works.

1. Proposal Creation: As the words suggest, the token holders can propose change, or form a proposal that goes as per the rules and regulations. This right is given to them by governance token.
2. Voting Mechanism: The voting mechanism is easy to understand. In simple words, one can make a decision, and then token holders can approve it. It gets approved only if the majority approves.
3. Automated Execution: As a proposal is made with everyone’s votes, the smart contract works on it and executes it. At the same time, it takes care that all things are executed as per the pre-defined rules.

These are the methods or processes by which DAO works.

There are many organizations working, but DAO has its own spot. Let’s find out why DAOs are more important than others.

Everyone is always finding things that make the future easy and DAOs are one of them. They make things run smoothly in an ethical way without much human involvement.

1. Decentralization: In DAOs, decisions are made with everyone’s approval. It doesn’t give one person authority; instead, it works with the community.
2. Transparency: DAOs are made with blockchain technology, which is why they are fully transparent regarding decisions. Transparency makes it easy to trust and work with.
3. Enhanced technologies: DAOs are fully coded and don’t need any manager or anyone to run them. The enhanced technology without human presence offers the utmost trust without the fear of breach or bias.

With the above points, one can feel the need for DAOs and why they are important.

After reading all this about how it works and why it is important, let’s read the benefits of DAOs.

1. Community-driven decision-making: DAOs establish the community of token holders. This community makes decisions for everything, and hence the feeling of working as one entity fosters the community among different businesses.
2. Global participation: The DAO community is not bound by borders. One can be a community member from all around the world.
3. Cost efficiency: It is a pocket-friendly way for a business. As it streamlines processes, removing the need for intermediaries and reducing the financial stress.
4. Immutable rules: As DAOs are made with code and technology, it is difficult to breach them. That is why they follow the same rules, and it is hard to impossible to change the rules or decisions.

By offering these benefits, DAO offers change in many industries.

Now, we will understand how DAO is useful in the real-life world.

1. MakerDAO: The force behind DAI stablecoin is DAO. Whoever has the MKR token can vote on key decisions, protocol updates, and monetary policies.
2. UniswapDAO: This one is also governed by UNI token holders. It is a decentralized exchange that gives token holders the benefit of voting on proposals.
3. PleasrDAO: Instead of traditional finances, this is a collective that pools funds to acquire digital art and NFTs.
4. ConstitutionDAO: It was formed in November 2021 to purchase an original copy of the United States Constitution.

These four and many others show the importance of DAOs in the real world and push people to choose them.

One may wonder what will be the future of DAO. So, here it is.

Nowadays, DAOs are used for cryptocurrency and blockchain only. But in the future, they can rule corporations, nonprofits, governments, and many other sectors. As it is more transparent than human work and offers more reliability, it can be chosen by many to remove the threat of misconduct.

Now, after reading all these, you may have got an idea of how useful it is to integrate DAO. It offers the utmost transparency, with community decision-making power. So, the future is all about upgraded technologies, and DAO is one of them to adapt.