#009 DAOs

Hash Notes

What is a DAO?

Decentralized Autonomous Organizations are basically social organizations embodied by rules integrated into a transparent computer program, under the control of organization members. The DAOs are under the control of organization members without any centralized intervention. You can assume DAOs as internet communities of individuals with shared interests. The members come together to build the organization, establish the objectives, and set the rules for funding the DAO mission.

• Community members create proposals about the future operations of the protocol and then come together to vote on each proposal. Proposals that achieve some predefined level of consensus are then accepted and enforced by the rules instantiated within the smart contract.

• In return for their fiat, token holders are given certain voting rights, usually proportional to their holdings. Once funding is completed, the DAO is ready for deployment.

• At this point, once the code is pushed into production, it can no longer be changed by any other means other than a consensus reached through member voting. That is, no special authority can modify the rules of the DAO; it is entirely up to the community of token holders to decide.

DAO Models

Token-based membership - Usually fully permissionless, depending on the token used. Mostly these governance tokens can be traded permissionless on a decentralized exchange. Others must be earned through providing liquidity or some other ‘proof-of-work’. Either way, simply holding the token grants access to voting.

Share-based membership - Share-based DAOs are more permissioned, but still quite open. Any prospective members can submit a proposal to join the DAO, usually offering tribute of some value in the form of tokens or work. Shares represent direct voting power and ownership. Members can exit at anytime with their proportionate share of the treasury.

DAO Vs. Traditional Organization

DAOs can be nimbler and more faster moving than traditional companies, because they're often project-specific and you can set them up and wind them down quickly, with significantly less red tape than forming a traditional start-up.

DAOs can be more transparent than traditional organizations, because the group's important decisions get made "on-chain," using governance tokens and votes that appear on the permanent blockchain ledger.

DAOs can be more democratic than traditional organizations because every participant can vote on group decisions, not just boards or executives.

Real World Application

• DAOs are being used for many purposes such as investment, charity, fundraising, borrowing, or buying NFTs, all without intermediaries. For example, a DAO can accept donations from anyone around the world and the members can decide how to spend donations.

• DAOs will give people more freedom to choose projects whose mission and vision truly resonate with them, jobs that align with their strengths, and values-aligned people to work with.

• A freelancer network - create a network of contractors who pool their funds for office spaces and software subscriptions.

• Ventures and grants - create a venture fund that pools investment capital and votes on ventures to back. Repaid money could later be redistributed amongst DAO-members.