All You Need to Know about Decentralized Autonomous Organization (DAO)

All you need to know about Decentralized Autonomous Organization (DAO). Keep reading to find out!
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What is a A decentralized autonomous organization (DAO)?
A decentralized autonomous organization (DAO) is an organization with a group of people who gather together to share a common goal without a centralized leadership structure. DAO operates through smart contracts on the blockchain, allowing it to be decentralized and autonomous.
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Why might DAO become crucial in the future?
It’s difficult to trust someone that you’ve never met before on the internet and yet need to interact with them. A DAO structure covers the lack of trust needed between two parties by generating the DAO’s code for a specific set of rules enforced on a blockchain. Therefore, it is completely transparent and verifiable by anyone.

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3 steps to build DAO
Traditional organization compose with a group of people with common purpose. They use traditional hierarchies to arrange individuals within the organization according to power. At the very top level, the organization has a board of directors followed by the chief executive officer.
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While DAOs have no physical structure, and they are different from traditional hierarchies with flat management structures as they are governed by token holders using smart contracts, and are built on rules that are all automatically recorded on a blockchain. Here are three steps required to build and maintain a functioning DAO.
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Smart contract creation: a core group of community members use smart contracts to set the DAO rules. These smart contracts provide support for the DAO’s operations. They are extremely clear, verifiable, and open to public audit, allowing any potential member to understand how the protocol works.
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Funding: after these rules have been formally translated onto the blockchain, the DAO must figure out funding and assign governance. This is usually achieved through token issuance, where the protocol sells tokens to raise funds and replenish the DAO’s treasury. Token holders typically receive voting rights proportional to their holdings.
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Deployment: Once the code has been deployed, it cannot be changed unless a consensus is reached through member voting. This means that only the DAO’s token holders have the ability to change its rules; no other entity has this ability.

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4 use cases of DAO
Crowdfunding
Crowdfunding is one main area where DAOs can play a crucial role and also provide real world value. Whichever project needs investment, the project owner will ask a number of people to contribute money. The DAO tokens will be offered to investors in order to allow them to participate in making decisions in project direction and execution. If the project is successful, the price of the token will increase and investors also get good returns.
In addition, the funds can be used for sponsoring decentralized applications (dApps) and crypto-related projects. MetaCartel Ventures is an example of a DAO raising funds to invest in dApps, as well as Moloch DAO and LAO, which are other popular DAO examples showcasing their use in raising funds to sponsor new projects.
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Decentralized Application (dApp) Governance
Another significant area where DAO is showing its ability to change the way of corporate governance in the future and provide complete decentralization as dApp governance.
Depending on rapid growth and scalability of the DeFi ecosystem, developers want to extend the decentralization aspect beyond the network level. DAOs can help app developers make users trust the platform rather than just the developers. DAO with dApps can support users in proposing changes to decentralized applications alongside allowing voting rights to token holders and serve all values of autonomy, transparency, security, immutability, within a trustless interface.
There is another famous DAO example, Curve DAO, which has leveraged the Automated Market Maker model for offering rewards to token holders.
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NFT-based Investing
DAO is also used for NFT-based investing to create shared ownership, which has started increasing momentum with the growth of the NFT market. DAOs are playing a significant role in connecting NFTs with common people. They are leveraging support for investors to trade in NFTs. Most NFT holders can stake their NFTs for voting and earning tokens as a representation of a single fraction of the group’s assets.
Moreover, there is a popular NFT-supported DAO for NFT-based investing called HeadDAO, where members have collective ownership of blue-chip NFTs. DAO provides transparency and free of trust compromises which can give a fair chance to group members to decide collectively on matters regarding their own NFTs.
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Metaverse Decentralization
Metaverse is one of the most active worlds where DAO development is revolutionizing the core working model. Most metaverse platforms have used DAO to facilitate decentralization by allowing members to vote on changes in the game and the overall ecosystem as well as it making it possible for users to enjoy ownership over their digital assets within the Metaverse.
For example, Decentraland DAO helps the members of the virtual world vote on different changes in the platform and its ecosystem.

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How does DAO benefit you as a token holder?
The organization, or community members who are eligible, can create proposals about the future operations of the ecosystem, and then come together to vote on them. Proposals that achieve a predefined level of consensus are then accepted, and enforced by the rules described within the smart contract.
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Simply put, both YOU, and the community will determine the direction of your ecosystem. The community can vote on distributing a portion of the governance token which reflects the levels, and voting counts they have. This means, the more tokens you hold, the more power you have!

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