Every era has its popular terms. These terms give a cool look to people who use them. DAO, which consists of the first letters of Decentralized Autonomous Organization, is one of the popular words nowadays.
Dao is also the fandumental concept of Taoism. It is a word with many meanings in Chinese, such as path, direction, method, main principle, and flow. I encountered this concept in Lao Tzu's book Thao The Ching. This book, in which the author gives wise advice in a poetic style, also included comments by the science fiction writer Ursula K. LeGuin. Although there is only a name similarity between the DAO of crypto and the DAO of Taoism, the word creates rich connotations in my mind.
DAOs, Companies, and National Assemblies
DAO refers to people managing an entity with the help of a smart contract without the need for a central authority.
We know that the main agenda of the first national assemblies was the budget. The most critical task of the governing bodies is to allocate resources based on efficiency. The DAOs essentially approve of the budget allocation. In this context, DAOs can be compared to companies' boards of directors. Voting rights in DAOs are proportional to the coins held. And unlike the board of directors, hundreds of people can vote.
The management practices of the DAO evoke direct democracy. As everyone votes proportionally to the coins they hold, it is not an appropriate comparison. Plutocracy is more relevant when comparing the DAO to political order. While plutocracy is not a word with positive connotations, it seems reasonable that people should have a say in government to the extent of the risk they take. In DPoS networks like Hive, technocrats have more weight in management.
Theory and Practice
DAOs appeared on the Ethereum network, like many other important innovations. The first attempt in 2016 failed due to a security issue. Security issues were overcome in further trials. A significant problem with DOAs was getting investors to participate. The financial incentives that emerged under DEFI encouraged people to join in DAO voting. As a matter of fact, according to DeepDAO data, 38 of the 100 largest DAOs operate in the DEFI field.
Bitcoin has a structure where all critical decisions are made at the code level. Rules on coin issuance and distribution are predictable. What if we were to issue a second coin on the Bitcoin network? As long as there is demand for such a coin, this would be a desirable action because Bitcoin's stakeholders would benefit from this situation.
As the number of digital assets produced or invested in an ecosystem increases, DAO becomes almost compulsory. Collective asset management and asset curation are among the main events that should be submitted to coin owners' approval. Investors should be consulted whenever a vital move is made on any subject that is not written in the white paper.
DAO Stats
The DeepDAO site provides important statistical information about DAOs.
Today, DAOs have $6.9 billion in funds in their treasury. Uniswap, BitDAO, and ENS share the top three places, with their size exceeding 1 billion dollars. The number of DAOs with more than $10,000 in funds is 162.
The main networks DAOs operate on are Ethereum, Solana, Polygon, and Polkadot. The major categories are DEFI, NFTs, Infrastructure, and Games.
Last month, 22.6 thousand people voted in DAOs. Parallel to the bear market, we see that the activity in DAOs has also decreased. Some voters voted on over 70 DAOs. It seems that they have made DAO voting a profession.
DAOs of Hive
Hive is at the forefront with readable account names, near-zero transaction fees, community spirit, and DAOs. The crypto media is unaware of what's happening in Hive.
A proverb in Turkish says, "bad neighbors make people a homeowner." When Justin Sun took over Steem, prominent community members created Hive. The coins of this newly created network were distributed to Steem owners via airdrop. The coins that fell to the share of Justin Sun and his supporters were transferred to the Hive Decentralized Fund (HDF). Thus, the budget for the development work was created. Currently, HDF has a budget of 18 million HBD. This budget is spent on marketing, blockchain infrastructure development, and Hive applications. DHF funds are allocated based on the votes of the Hive community. The duration of the work is usually one year, and the payments are made in hourly periods. We use the Peakd proposal menu to view and vote on the projects funded under HDF.
Although the votes of the Hive power holders are used to allocate Hive funds, the witnesses are authorized in technical matters concerning the blockchain. Witnesses, the validators of the Hive network, are also selected by the Hive power owners.
In the Hive ecosystem, many DAO practices have been activated recently. Splinterlands is gradually evolving into a DAO managed via the SPS governance token. Splinterlands' new project Genesis League Sports will also be organized in the DAO format. Similarly, the SPK Network, which is still under development, will be organized as a DAO.
In Polycub, one of the essential projects of @leofinance, critical decisions are taken due to governance votes.
Conclusion
DAO is extremely important in making networks independent of those who set them up. Projects developed as DAOs from the beginning, such as SPK Network and Genesis League Sports, comply with fair launch principles. If there is solidarity within the communities, the harmonious flow pointed out by the DAO in Theoism can be achieved.
DAOs will not eliminate the need for talented people to run the business. On the other hand, blockchains and applications will hopefully become independent of the people who develop them. In projects that start as DAOs, the problem of VCs and early-stage investors dumping coins onto other investors is also eliminated.
One of the most exciting experiments in the crypto ecosystem, DAOs are gaining more and more acceptance. Over time, we may have more confidence in the flow of DAOs.
Thank you for reading.
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DAOs are becoming a need in the life of any crypto project, just need some more transparent ways to submit proposals. These should come from the community and not from centralized entities (like it happens in Splinterlands), so I see them being used but not in a truly organic way.
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The proposal submission process also drew my attention. I believe Splinterlands' intention is towards decentralization.
HIVE is actually one of the DAO-esque entity.
I will never forget how the community come together to fork Justin Sun out, it was a display of how a decentralized community form an autonomous movement to protect their community from capitalists.
Splinterlands moving to DAO very soon, everything in HIVE seems to move in the same spirit.
Hive is DAO-esque, I agree. Collective ownership is in Hive's genes.
Yes, it's within the community's DNA.
I've encountered the term DAO multiple times now but I don't have a solid understanding what it is and what does it do.
Thanks for writing this article that my understanding about it is now clearer.
!1UP
I am glad to hear that.
Maybe someone will list Hive on the DeepDao site?
I sent an e-mail message to DeepDAO with relevant information to ask if they can list Hive.
Thankyou!
Hive DAO is the standard for me because of it’s truly decentralized nature. I’m glad to participate in its governance.
To my regret, very few people know about the Hive.
Thank you very interesting article !!
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