Introduction to DAO

DAO is the short spelling of Decentralized Autonomous Organization, its main task is to solve those problems that require human intervention in the operation of smart contracts.

Let's take a company analogy: in a company, the board of directors is responsible for decision making and the CEO is responsible for execution; while in the decentralized blockchain world, DAO organizations are responsible for decision making and smart contracts are responsible for execution. Because the smart contract code is open-source, what's going to happen next are known before they happen and there are no variables (In theory). Compared to the way of companies operate, DAO organizations will have a stronger sense of trust between strangers, and will operate more transparently and fairly.

DAO organizations can initiate resolutions and vote on events just like a board of directors. The rights are also similar to the board of directors and can cover almost all matters: including but not limited to fund raising and usage, benefit splitting scheme, modification of smart contract code, and even dissolution of the DAO organization. Anyone who holds DAO tokens can initiate resolutions, and the more tokens held, the greater the percentage of votes, and the greater the control over the DAO organization.

The governance of DAO organizations has very positive implications for the management of a decentralized world. However, DAO organization management inevitably requires open-source projects, which can lead to certain leakage of trade secrets. Competing products are more likely to be copied, as well as exposing themselves to risks, and also more likely to be hacked to find vulnerabilities for attacks and other problems.

Notable DAO Organizations

The DAO, which led to a hard fork of ETH in 2016, raises funds by issuing DAO tokens. Owning DAO tokens means gaining voting rights to collectively find valuable projects and vote on them. The funds raised are used to invest and find quality assets through collective wisdom. Ultimately, all participants will see their assets increase in value. The DAO project also failed due to hackers taking advantage of the bugs in The DAO smart contract to steal tokens.

Maker DAO, Maker is currently the largest financial platform in the DEFI domain, with the main loaning function. Users can obtain stablecoins DAI by staking. MKR governance and equity tokens for Maker DAO can be understood as equity in the Maker platform, enjoying governance rights such as voting, and splits platform earnings.

PEOPLE (ConstitutionDAO), born from the auction of a copy of the U.S. Constitution by Sotheby's in 2021. That aims to auction off copies of the U.S. Constitution through crowdfunding. Participants could participate in the crowdfunding by exchanging ETH for PEOPLE tokens at a ratio of 100,000 PEOPLE: 1 ETH.ConstitutionDAO was planned to raise $20 million and eventually raised $40 million, exceeding its goal but ultimately losing out in the bidding process. ConstitutionDAO was the first time Sotheby's partnered with a DAO organization and broke the record for the most crowdfunding funds in 72 hours.After losing the bid, ConstitutionDAO announced the end of the project and users could redeem ETH at a ratio of 100,000:1. But the campaign greatly promoted ETH, WEB 3.0, and blockchain, concepts that are relatively new to the traditional world. the token,PEOPLE although no longer of practical use and ConstitutionDAO announced no further planning, but there are still a large number of holders who choose to keep PEOPLE tokens to deposit their faith in the new world.

APE, the governance token issued by the parent company of Bored Ape, currently the largest NFT by market cap, allows holders to participate in the ecological governance of APE DAO through APE tokens, as well as use them in the relevant ecology. For example, the hot Monkey Land NFT (Otherside) in May required users to hold 305 APEs (then priced above $6,000) after completing KYC in order to mint a piece of land (1 NFT), triggering a spike in APE prices.

In summary, DAO provides a solution idea for the management of blockchain as a decentralized management way. However, the industry common problems still exist and blockchain is still in the early exploration stage. Whether the product of this stage is feasible, all need time to verify. Additional attention should also be paid to the fact that group intelligence may not exceed that of individuals, and the book "The Ubiquitous" also mentions the idea that groups are always intellectually inferior to solitary individuals.Taking the current more successful companies as an example: Apple or Tencent, if they adopted the management style of DAO, they might have been eliminated in the fierce market competition long ago.

At present, the use of DAO for fundraising, investment and benefit distribution through smart contracts is a relatively reliable solution.