There is little to no doubt that the Web3/Blockchain space has brought about several implementations, and not just limiting it to the digital space, but also intertwining into our own physical space. One of those several implementations is the concept of Decentralized Autonomous Organization, popularly known as DAO.
What is a DAO?
A Decentralized Autonomous Organization (DAO) can best be defined as an organizational entity, or company that has no central authority. The rules governing such organizations are constructed by computer programs. These rules can only be influenced or controlled solely by the members of such an organization and no outside body or person(s).
To exemplify, if Twitter were to be a DAO, whatever update is being done to the platform won't be decided by its owners or managers, such updates would be decided by the users of the platforms.
Little bit of history
The first ever DAO was created in April 2016, called the DAO, by Christoph Jentzsch as a token sale. It was built on the Ethereum blockchain network and. was classified as a business model for commercial and non-profit enterprises
Then by June, users had found a bug in the code and used that chance to carry home a substantial amount of their funds, which later led to a hard-fork of the ethereum blockchain.
How does a DAO work / function?
Well, as most things run on the blockchain space, DAOs are also run by nothing but several programs also known as smart contracts, each modified to serve whatever purpose the creator chooses.
To give a typical example on how it works, in a DAO platform, if one of the users think it would be a good idea to give off a sum of their funds to charity, this idea is introduced and submitted as a proposal where each user has a right to vote for or against the idea. And as it is in the normal view of democratic elections, those with the major counts would be the ones whose choices are accepted, that easy.
Are DAOs safe?
To speak on a personalized view in regards to experience, the idea of DAOs are safe, but it has been showcased from the first ever created DAO, that any vulnerability in the source code of such a project can lead to massive fallouts. So, technically, a DAO can only be as safe as the developer that creates it and as thorough as the team that tests it.
Benefits of a DAO
The creation of DAOs has been one of the major highlights of the Web3 space, it has introduced governance into a system without a point of authority, herein providing a different kind of order to a kind of chaos. Here are some benefits of a DAO that make them awesome:
- No single person or entity has control over it, hence there is no central point of failure.
- The Automated structure of DAOs make the rules always enforced without any human interference or input.
- Unlike the usual organizations with a top-down structure that makes management difficult, DAOs are community based, hence having no issue with management
- DAOs provide a valid sense of trust and transparency to its users, there is no need for familiarity amongst the creators or possible investors, as far as one understands the source code, and also believes in the project, strangers would always be at ease.
Headaches of a DAO
As we have all possibly guessed by now, every creation with a good side always has its headaches that one needs to deal with, here are a few points that make DAOs a not so awesome creation:
- The first issue would definitely be the code vulnerability, even though DAOs provide a trustless and transparent environment, this still heavily depends on the source code of such DAO, so if the code has a weakness, then it can be exploited and put the company in a real pinch.
- Another issue which people would not believe to be one, is the transaction time it takes for DAO to enforce decisions. As stated earlier that proposals are submitted and then voted upon in order to make changes, this may become a very major setback in terms of actions that need to be taken immediately such as detection of a security threat. The voting period could take a considerable amount of time, hereby causing slow and ineffective decision making
- Although having a voting system in place seems cool, this may also prove to be rather dangerous, if majority of the holders can choose to use the DAO to their own advantage, the concentration of voting power would fall in their favor.
Examples of a DAO
Over the creation of the first DAO in 2016, there are now thousands of existing DAOs around, here are some of them.
- Uniswap
- Aave
- Gitcoin
- Aragon
- Flamingo and so on.
Summary
DAOs (Decentralized Autonomous Organizations) are community based organizations that have no central point of authority. The first ever DAO was called The DAO, and was created by a great guy known as Christoph Jentzsh in April 2016. DAOs are created and run through smart contracts, while using a voting system to enforce its decision making. They can only be as safe as those involved with the initial creation and public release. It has several benefits such as decentralization, trustless environment and so on. Although it also comes with its own disadvantages such as slow decision making and code vulnerability. There are several thousands of available DAO available on the internet, such as Uniswap and Aave.
So, there you have it, i hope you have learnt a thing or two about DAOs (hopefully more), my name is Lawwee and thank you for reading my post, you can connect with me via the information below, and send a DM if there is anything you’d like to talk about or ask.
Have a good day.
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Top comments (1)
This article was my time well spent. Thanks for the article, Lawee.