Decentralized Autonomous Organization (DAO): Introduction, Benefits and Drawbacks

Everything is feasible, and new technologies are emerging. Blockchain is a technology that has the potential to alter the way we exchange.

A Decentralized Autonomous Organization (DAO) is what, exactly?

A new kind of LLC called a decentralized autonomous organization (DAO) lacks a dominant member with majority control. The members make the major business decisions in a typical LLC. A DAO, on the other hand, is modelled after decentralised cryptocurrencies and runs autonomously thanks to several “smart contracts” that work without human input. This implies that the company can function without a conventional organisational structure. All “members” of the DAO have an equal voice in the organisation’s decisions, as opposed to a hierarchy in the form of a food chain.

How is a DAO put to use?

Through the use of smart contracts, the rules of the DAO are determined by a core group of community members. These smart contracts lay out the basic rules of operation for the DAO. They are straightforward, easy to verify, and open to public auditing so potential members can fully comprehend how the protocol works at every stage.

The DAO will need to determine how to receive funding and provide governance once these rules have been formally recorded on the blockchain.

This is typically accomplished through the sale of tokens, which the protocol uses to raise money and fund the DAO treasury.

Holders of tokens receive specific voting rights in exchange for their fiat, typically based on their holdings. The DAO can be deployed once funding is complete.

At this point, the only way to change the code is to reach a consensus among the voting members after it has been pushed into production. This means that the community of token holders alone has the authority to change the DAO’s rules; no other party is allowed to do so.

Benefits of Decentralized Autonomous Organizations

It’s essential to be aware of the benefits and drawbacks that come along with the opportunities and growth that DAO offers.

Transparency

Unlike DAOs, which are run on a decentralised blockchain network where processes and transactions are transparent, permanently stored, and open to the public, traditional organisations typically keep a large portion of their operations internal.

Democratisation

A DAO’s ability for all members to vote on decisions encourages members to be responsible and deliberate. This eliminates hierarchy barriers and creates a flat, just, and equal organisation. Instead of electing members to make decisions on their behalf, DAO members vote directly to make decisions that affect the organisation’s direction, developments, and actions.

Automation

Blockchain has embedded codes that contain the DAO rules. The rules are applied as the program runs without human intervention’s work, manipulation, discrimination, or mistakes.

Elimination of Third-party Organizations

Members can conduct transactions without the assistance and expense of external institutions like regulatory bodies, attorneys, and other middlemen.

DAOs can directly carry out these plans through voting and do away with the need for banks, legal counsel, and other middlemen, For example if a member wants to invest in a startup or change the code of a program they run.

Meritocracy

While DAO is virtual, members can work anywhere. Since DAO is virtual, members can work wherever they want, including on the beach. Anyone with a crypto token for DAO can vote. Members are judged on the quality of their work, not on their appearance or credentials. This eliminates bias and promotes everyone in the DAO’s right to make decisions.

Drawbacks of DAOs?

1. Can Not Guarantee Security

Decentralised autonomous organisation developers may make coding errors that result in significant losses. Hackers compromised the decentralised autonomous organisation (DAO) for the Ethereum project in 2016 and planned a hard fork to fix the issue. Ethereum and Ethereum Classic were created as separate chains on the project’s blockchain (the original blockchain).

A phony project can also be hidden as a decentralized autonomous organization. You should investigate the platform before deciding to enter the DAO.

2. Organizational members are required to abide by the consensus of the group.

Although public collusion with projects is less likely when they are organised decentralizedly, some risks are still involved.

3. Deciding project development can take some time.

Votes are not always quickly tallied by the system.

Many users also blame the shortcomings of decentralised autonomous organisations for their “dehumanisation.” Automated systems lack critical thinking, so they cannot always manage the project effectively in times of crisis or unusual circumstances.

What kind of Organization falls under the category of Decentralized Autonomy?

A no-code platform for creating and managing DAOs is called DAOhaus. The neighbourhood owns and runs it. If you want to start your own DAO or explore a diverse environment, look no further.

Maker DAO

By voting on modifications to the Maker protocol, you can participate in the governance of the protocol that introduced the first impartial stablecoin in the world, DAI.

RaidGuild

RaidGuild, a Web3 Marketplace Development company, is a service-based DAO with a solid Web3 presence and was born out of the MetaCartel network. The guild is looking for top talent to keep slaying product demons, so if you’re looking to offer up your developer, marketing, or design skills, they would appreciate it.

Proof Of Humanity

To distribute Universal Basic Income (UBI) tokens to verified humans on-chain, this Sybil-resistant registry of humans uses social verification and Kleros’ courts. Start with this democratic DAO if you want to join the justice revolution.

Opolis

This member-owned digital employment cooperative provides benefits and shared services for the independent worker. Join here if you are passionate about the future of work and want to influence how it will be structured.

Bankless DAO

Interested in educating the public about Web3 through content creation? You might be interested in this DAO that focuses on the media. Here, you can find out more.

Final Conclusion

Right now, RisingMax is the only DAO Development Company where it makes sense to establish a DAO as a separate legal entity that enjoys the same protections as an LLC. Once your rules and funding are set, the next logical step for anyone involved in DAO formation is to begin creating your DAO LLC. The LLC will defend you and all other stakeholders if the DAO is the subject of a lawsuit or other legal dispute.