Decentralised Autonomous Organisations (DAOs) are one of the most revolutionary blockchains inventions. A DAO is an organisation designed to be automated and decentralised. The organisation is represented by a code of rules presented as a computer program for transparency and to allow all members control while avoiding external influences like from the central government.
Compared to traditional enterprises, DAOs looks to offer greater transparency. DAOs eliminate human error and manipulation of investor funds which is common. All members have access to the organisation’s actions, funds and are involved in the decision making processes.
At the same time, DAOs come with ease of global access and a lower barrier to entry. The DAOs are designed for access for anyone from anywhere in the world and it supports anonymous operations.
So far, one of the biggest DAO applications has been through the DAO, which was launched in April 2016 through crowdfunding. Participants contributed ETH to the organisation and in return received voting rights to decide the projects the DAO would fund. It raised $150M, however, $60M got lost through hacking. While the project might have failed, the members can see all transactions by following the recordings on the blockchain.
Still, DAO has unique use cases it can accomplish when fully developed. Some of these include;
Executing a proposal
One of the leading use cases of DAOs is to help members hold “shares”, which they use as voting rights and get rewarded for it. An example is Curve DAO which has been established as an automated market maker (AMM) for rewarding token holders. The longer a member locks the Curve Token (CRV) the more voting rights and rewards they receive.
With voting rights, the members can determine what happens in the organisation. They can participate in activities like hiring and rewarding employees.
Funding investments
Some DAOs have been created for the specific function of raising funds for investments or grants. An example is MetaCartel Ventures, a for-profit company that invests in decentralised applications (Dapps) and other crypto-related projects. LAO and Moloch DAO are also DAOs that were created to raise investment funds for projects.
These DAOs allow members to contribute funds, then decide on the best project for investment. The members then hold shares in these companies hence getting a piece of profits.
Crowdfunding
The other revolutionary DAO use is to crowdsource funds for specific endeavours. An example of such was the constitutional DAO that raised $47 million to purchase a copy of the US constitution. While the DAO failed in its bid to buy the constitution, it demonstrated the power of blockchain in bringing users together to contribute funds for a given project.
Future use cases
DAOs, like the blockchain network, are still a work in progress. The platform is still exploring other use cases for the future. Some of these include testing governance systems to understand the best governance models. DAOs will also introduce more anonymity to allow for level ground participation for members’ contributions and rewards.
Another future use case is to “share non-fungible tokens (NFTs)”, where members directly contribute to the different features of a tokenised artwork and model it to their liking.
Bottom Line
So far, DAOs have proven to be the ideal future of organisations. They provide the ideal platform for executing proposals, funding investments and crowdfunding. However, they face challenges like security concerns and imbalanced voting rights. Given its a work in progress, these can be solved in future developments.