While the cryptocurrency market as a whole has been in a slump, one area has outperformed the rest of the market: decentralized autonomous organizations, or DAOs for short. DAOs are a natural evolution of DeFi, and if the idea appeals to investors the way DeFi did a year ago, it’s a compelling investment opportunity for those early movers.
DAO is a revolutionary new governance model made possible by the power of the blockchain. In a traditional governance system, as seen in public companies, there is an advisory board and a team of executives who act as the central authority figures of the company. Shareholders have the right to vote on the actions of the company, but the items they vote on come from this leadership team, so individuals cannot propose changes. In addition, traditional companies are created as a single entity and exist in the current business world through traditional methods such as hiring employees and signing contracts.
The DAO operates in a completely different way than the current system. Unlike a corporation, a DAO does not have centralized authority. There are many different people who own tokens representing shares of the DAO (called governance tokens), and anyone can vote or suggest changes to the DAO. the DAO is also bound by smart contracts and code, rather than contracts written by lawyers. This means that no fraud, theft, or other suspicious activity can occur in a DAO because all code is transparent and public. It also means that conditions and operations can be implemented without the need for a middleman, thereby increasing efficiency by reducing costs.
An example of a DAO can be seen in the decentralized exchange Uniswap. In September 2020, they offered UNI tokens as governance tokens for platform users and transitioned from the Uniswap Labs owned and operated protocol to the DAO. now any UNI holder can vote on changes to the protocol, such as fee changes and grant approvals. If someone wants to add something to the platform that no one has voted for, they can create it themselves and have other UNI holders discuss and vote on it. This is why Uniswap is one of the most decentralized and democratized DeFi products to date, and is entirely in the hands of token holders who believe in the project.
Currently, DAOs are not very popular in the cryptocurrency space. Only about 2.5% of the entire cryptocurrency market cap is made up of DAO-related projects, and this number could increase significantly in the future as DAO technology and awareness grows.
It is inevitable that DAO will one day take over many current operations. For example, DAOs have helped spread the odd-labor economy on a larger scale, which was pioneered by companies like Uber. Now, these companies play the role of middlemen, taking a cut of users’ profits to keep their businesses running. In fact, Uber takes anywhere from 25% to 47% of the fare paid by passengers. With DAO, this fee can be significantly reduced, thus providing a cheaper service to users and increasing profits for drivers. In addition, if the Uber DAO follows Uniswap’s lead and issues tokens to platform users and distributes them to drivers, those who work for the DAO will have a direct impact on the company’s future and will be incentivized to provide better service to increase the value of the DAO.
Like DeFi in the summer of 2020, DAOs could become a very promising investment opportunity for investors in the cryptocurrency space. A year ago, the DeFi industry was only worth about $10 billion, but now it has soared to over $72 billion. This is due not only to the increase in available technology and opportunities, but also to the increased interest of mainstream investors who see the potential for DeFi to generate safe returns on stablecoins and other assets. The DAO industry is now worth $26 billion, with nearly half of that coming from Uniswap.
If institutional investors realize the efficiency of DAO solutions and begin to understand why they are a revolutionary model, the value of DAO-based projects and solutions could soar.
When DAO will become mainstream remains to be seen. However, just like DeFi or NFT, DAO has great potential to catch the public eye and it may only be a matter of time before there is a DAO revolution in the business world.
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Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/can-decentralized-autonomous-organizations-dao-become-the-next-financial-revolution-after-defi/
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