What are DAOs?

2 min read

If you’ve spent any time on the internet the past few years, chances are you’ve
heard of cryptocurrency, that mysterious “internet money” that’s taken the world
by storm. And if you’ve looked into it at all, you probably know that baked into
the ethos of most cryptocurrencies is the concept of decentralization — the
distribution of power such that no one person or entity has total control over
these digital assets or the networks through which they travel.

What are DAO's?

Decentralization in cryptocurrency is enabled through a technology called
blockchain, a public digital ledger where transactions are recorded and stored
over time. A network of computers (called “nodes”) collectively maintain the
blockchain by verifying transactions independently before broadcasting that
information to the wider network to achieve consensus. This system removes
the need for any third party to be involved in transactions.

Although Bitcoin was the project that brought decentralization and blockchain
into the mainstream, these concepts have since been applied to other areas.
Today we’ll discuss a new kind of internet-based organization that could
drastically change the way we organize, collaborate, and cooperate with one
another to work towards common goals — DAOs.

What’s a DAO?

DAO stands for Decentralized Autonomous Organization — a type of online
organization that has no central authority.
Rather, it is self-governing,
collectively owned and managed by the distributed network of its users.

What are the benefits of DAOs?

DAOs are characterized by several bene ts that di erentiate them from
centralized organizations.

The rules are immutable. The rules of a newly-created DAO are programmed
into a smart contract, a type of digital contract that self-executes if and when
certain conditions are met. Once implemented, these rules cannot be changed
(except with the approval of the collective group).

Because smart contracts execute autonomously based on external inputs, there
is no need for a higher authority to enforce their rules — any action that
attempts to break them will fail automatically.

DAOs are entirely democratic. Once a DAO is established, members interact
with each other on a regular basis to engage in discussion and make decisions
about spending and other actions that will a ect the future of the organization.

These decisions are made via a voting process, the outcome of which is
enforced by the rules set out in the smart contract. Unlike organizations with
structured power hierarchies, there are no members with the authority to make
decisions on behalf of the wider group.

DAOs are transparent. All activity that takes place within a DAO is published on
the blockchain, where it is publicy viewable and can be audited at any time. This
kind of transparency is vastly di erent from centralized organizations, whose
activity and decisions are often hidden behind closed doors.

Governance Tokens

Most often, newly-created DAOs raise funding by issuing governance tokens to
its members, which bestow voting rights usually proportional to a member’s
token holdings. These governance tokens are cryptocurrencies themselves,
tracked on the blockchain, and can be traded (for at or other cryptocurrencies)
at any time.

Tokens can be purchased directly, rewarded to members who serve the DAO
directly in some way (like acting as a member of a committee within the
organization), and are sometimes issued to existing members based on a vote.
As tokens represent nancial investment in a DAO, members are incentivized to
work towards the growth of the network to increase the value of their holdings.

The Future of DAOs

Although DAOs are already creeping into the mainstream,
there is tremendous potential for this model to spread further into a variety of
spaces. Today, there are DAOS for DeFi protocols, investment funds, and NFT
communities. But really, the possibilities are endless.

DAOs offer a new way for people to interact and coordinate around projects and
work towards common goals, one that removes the potential for corruption and
exploitative practices that are all too common within large organizations today.

With this new model of virtual organization, people around the world can
collaborate virtually in environments that automate trust, that offer the opportunity
not just for participation, but for ownership, and that guarantee the
voices of all are not only heard — but listened to.

How to Create Your Own DAO

DAOs offer a promising new way to organize and collaborate for any project in any industry.
At the moment, however, they’re still somewhat inaccessible. The technology that enables
decentralization has characteristics that can make it difficult to manage, especially for those
who are not familiar with blockchain, cryptocurrencies, and other elements of the space.

We believe that the potential of DAOs should be available to everyone — that’s why we created Associate.

Associate offers a platform for anybody to create and manage decentralized organizations
without the use of blockchain. In fact, you can create your own DAO in just a few minutes.
Whether it’s for a business, an investment fund, or a passion project, Associate will give you
all the benefits of decentralization without the complexity and limitations of blockchain.

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