What is DAO? How to pay social security?

The history of DAO

The DAO Hack: The first narrow DAO

DAO is a decentralized autonomous organization, a collective name for a class of projects, and a new form of cooperative organization discussed in this article. The DAO is a project, one of the earliest and most well-known projects in the DAO category. The DAO was established in 2016 with the vision at the time as a decentralized investment organization. That is, everyone can provide funds in The DAO, and then jointly invest in the project and finally share the investment income together. In the fund-raising stage, users provide funds to The DAO in exchange for DAO Token. DAO Token will enjoy The DAO’s governance rights, voting rights, and the right to receive investment returns in the future. As the first venture capital type DAO fund, The DAO has received great attention and welcome after its launch.

The DAO’s fund-raising process was designed to last 28 days. In less than 28 days, more than 11,000 investors provided ETH to The DAO’s smart contract to participate in the project, totaling more than 12.7 million ETH (at the time The value is about 150 million U.S. dollars, and the current price is about 57 billion U.S. dollars), accounting for 14% of the total ETH circulation at that time. Unfortunately, The DAO’s smart contract for storing user ETH has a loophole. After being attacked, the ETH in the smart contract was stolen by the attacker. In order to solve this problem, the Ethereum developer community led by Vitalik proposed a variety of solutions and communicated with the attackers to solve the problem. In the end, the problem was solved in the form of a hard fork, which of course also formed the division of the Ethereum community at that time. Two Ethereum networks appeared after the fork. The Ethereum network we know today is the post-fork network, and the first Ethereum network is Ethereum Classic.

At this point, the huge The DAO incident has come to an end.

As the first real project in the blockchain network to try the DAO form, The DAO is undoubtedly a feat. The participation of 14% of circulating Ethereum also confirms its great influence. In the early stage, there were no projects on Ethereum, and the ERC20 standard was officially recognized in September 2017 (proposed in 2015). Incubation? The project is the most feasible form. As the first Venture DAO, if it goes on smoothly, it is difficult to imagine what impact it will have on the future Ethereum blockchain. It is possible that the leading venture capital organization will incubate countless high-quality projects, but it is also possible that, like some public chain foundations, there is not much support except for some money and reputation.

What is DAO? How to pay social security?

Moloch DAO: The ultimate Ethereum DAO

After The DAO was stolen, users seemed to have lost confidence in DAO. After a few years, there was no decent DAO project that attracted the attention of the community again. Moloch DAO was launched in February 2019. It is also a DAO that provides financial assistance similar to The DAO. The original purpose was to provide funding and assistance for infrastructure projects related to Eth2.0. One of the more well-known projects funded is Tornado Cash. But Moloch DAO does not focus on investment income. According to Moloch’s philosophy, it has no investors, is not a company, and does not care about prices. It is an extreme decentralized autonomous organization that only serves Ethereum itself.

In contrast, Molach DAO is more geeky, more like an upper-level organization that only helps some projects from the perspective of the development of the Ethereum network. In order to avoid the theft of The DAO, Molach DAO uses less code and simpler code logic. Molach also has an innovation in funding (Ragequit), that is, even after a certain proposal/project is approved, other individuals can still raise objections, and then refuse to participate with their own funds from the project, and the funding gap is caused by Other people involved bear it.

Moloch DAO may be a DAO that was truly successful in the early days. More importantly, Moloch DAO has become a template for many DAOs that will appear later. There are many projects that Fork Moloch DAO both in form and actual code. Created possibilities and brought more inspiration and inspiration to DAO.

Aragon & DAOstack: DAO’s infrastructure

Aragon belongs to another type of DAO project. Unlike the above two projects that focus on funding, Aragon provides a series of infrastructure for the project and helps other agreements for DAO management. Aragon was established very early too. It was established in 2016 and raised US$25 million through crowdfunding at that time.

Aragon emphasizes the infrastructure and provides a series of functions/components for other people or projects to use. In addition, not only the agreement in the DeFi agreement, any organization including traditional companies, non-profit organizations can use the infrastructure provided by Aragon to manage their own organizations/funds. The core of the Aragon platform is that it provides smart contracts that are managed in a decentralized manner. At the same time, it also provides openness, which means that it can be developed on the basis of the functions provided by Aragon.

DAOstack, similar to Aragon, is also designed to provide the project with the infrastructure for DAO management. Described in a more professional language, the purpose of both is to build an efficient and flexible engine suitable for large-scale collective decision-making, and enable thousands of people to make joint decisions quickly and wisely. Different from Aragon, DAOstack can be understood as not so universal or “close to the people”. DAOstack does not advocate putting everything in the DAO for everyone to make decisions, but prefers fast and efficient “elite decision-making”. . It is called “holographic consensus” in DAOstack, Holographic Consensus.

The Lao: VC DAO

The Lao is purely a DAO of an economic organization, or directly a VC DAO. Interestingly, The Lao is a limited liability company registered in Delaware, and The Lao also hopes to be able to comply with regulations in the United States. In addition to The Lao, Flamingo, Neptune, and MetaCartel are also well-known VC DAOs.

In addition, there are too many DAOs that emphasize and invest in this category, and they are even messy. A lot of so-called VCs will go bankrupt in the past. The core reason is that the valuation of the project is too high when financing, and many projects will fall below the VC cost line. The bull market seems to be easy to invest, but it’s all Paper Money, and you lose money accidentally. Just like a few years ago, the primary market did not exist in the market for a long time, and it will be similar after this time.

What is DAO? How to pay social security?


MakerDAO: DeFi 议 DAO

MakerDAO is the issuer of one of the most mainstream stablecoins in the market, DAI , with a market value of approximately US$2.7 billion. At the same time, MakerDAO is also a DAO. In fact, the history of MakerDAO can be traced back to 2015, when its founder Rune Christensen first put forward his idea of ​​eDollar (the predecessor of DAI) on Reddit. Since its development, MakerDAO has gone from the first few participants to the later foundation, and then the official dissolution of the foundation in July this year. MakerDAO has become a completely decentralized DAO that can promote the development of the protocol through community governance.

MakerDAO is a model of protocol DAO. On Maker, the holder of the agreement token ( MKR ) is responsible for the governance of the agreement, including the adjustment of the DAI mechanism, the development of the agreement, and the improvement of the governance mechanism itself.

The Maker governance process includes proposal voting and execution voting. The purpose of the proposed voting is to form a general consensus in the community before the implementation of the voting.

From a technical perspective, each type of voting is managed by smart contracts. Proposal Contract is a smart contract that writes one or more effective governance behaviors programmatically. The proposed contract can only be executed once. Once executed, it will immediately make changes to the internal governance variables of the Maker agreement. After execution, the proposed contract can no longer be used.

There is Social DAO, community DAO. Such as FWB, Bankless, Forefront, Rally, Carbin DAO, etc. Now there are too many DAO projects to introduce them one by one.

What exactly is DAO?

The core of DAO is that it is a new form of organizational productivity, it just stipulates the collaboration standards and common goals between different participants. The DAO organization does not give anyone mandatory requirements or deterministic returns. The most important thing is to give participants ownership in the form of DAO in exchange for their contributions. A good DAO is able to run the exchange process well, and always maintain a high degree of transparency and autonomy in this process.

From the perspective of consensus, blockchain technology, or more clearly, different consensus mechanisms (PoW, PoS) achieve consensus on value, and what DAO wants to achieve is to achieve more responsible decision-making on the basis of value consensus consensus.

From this perspective, Bitcoin is actually the first DAO to operate on a large scale.

The most important carrier of DAO is the Internet, and peer-to-peer communication is the biggest foundation. We may never really realize that at any time, anywhere, the Internet can allow you to communicate with anyone who has access to the Internet. Before the advent of the blockchain, this communication process was only limited to the exchange of information, but after the advent of the blockchain, the process of information exchange became a process of realizing value exchange. The so-called value is only because a series of regulations on the uniqueness and verifiability of data have been uniformly recognized.

In terms of characteristics, referring to the definition of “Results and Experiences from Developing DAOs with Aragon: A case study, Maria-Cruz Valiente, Samer Hassan, Juan Pavon”, DAO generally has the following characteristics:

  1. No individual or organization can own or control
  2. Can operate normally without human intervention (rules are established)
  3. The operation process is not changed and recorded on the blockchain
  4. Transparent and credible, and open to anyone to enter
  5. Not only solve the economic aspects, but also solve various other aspects

From the development history of the DAO project (DAO in a narrow sense, excluding Bitcoin and Ethereum), it can be clearly seen that the early DAO governance is an economic DAO. In fact, many of them now also exist in the economic aspect. In addition to VC-type DAOs, there are also a lot of projects that jointly control a treasury asset. And this category is more emphasized on NFT assets, such as Whales and so on.

The concept of DeFi 2.0, which was relatively popular some time ago, also emphasizes the concept of the project’s own vault, but these are used for different purposes. In essence, this type of DAO can only be said to be a type of DAO that jointly manages the use of funds. The real governance richness is insufficient, and most people do not need to participate in the governance process, nor do they need to make too much contribution.

The NFT type only needs to save the NFT, most of the wait is slowly depreciated, then the community’s confidence is lost, and then it collapses. The treasury type is to manage the funds of the data agreement and earn more income for the agreement.

The DAO of the DeFi protocol (basically every DeFi protocol has a DAO, or a DAO) focuses on the governance of the protocol, making it seem to have some effect. The better-developed ones are of course the more well-known MakerDAO, Uniswap, and Compound. Unfortunately, this type of DAO generally has voting rights in the hands of a few people, and the few people are basically organizations or the team themselves. Therefore, these governances are basically irrelevant to users. Ordinary users themselves cannot provide value through their own contribution to the agreement as a value. Therefore, most DeFi DAOs are just a right granted by holding Token, which does not meet many characteristics in the definition.

Social DAO looks much more interesting. Specific projects include Bankless, FWB. In fact, I saw some articles that also took out Media DAO separately (Bankless, and DAO made by Decrypt). This part is relatively more “DAO”. The organization of these projects appears to be looser and easier to enter, and the barriers to direct participation are lower.

Why can the organization of DAO develop?

Why can the organization of DAO develop? Or why do we need the organizational form of DAO? Before talking about this issue, we can actually talk about the company, a hundred-year-old organizational form, and it is also the main organizational form of human social and economic activities from the past to the present. Economist Coase mentioned it in “The Essence of Enterprise”, and I still remember some understanding. In essence, the choice of any organizational model, or contract model, is a cost consideration. The scope of a company has a boundary, and this boundary is when the cost of the company’s organizational form is consistent with the cost of other organizational forms. (It is called transaction cost in economics. The enterprise is actually allocating resources in different markets. The efficiency of this allocation depends heavily on transaction costs).

To give a simple example: the company wants to develop an APP, whether to recruit people into the company’s development or to look for outsourcing. Obviously, in most cases, many companies hire people for development. The cost of the company’s organizational form is lower. If the company wants to provide drinking water to its employees, should it buy it directly or produce it? Most companies definitely choose to buy directly, because the production cost of their own company is higher.

The purpose I want to express here is actually that the existence of DAO is actually due to cost reasons. The change or increase in this cost is due to changes in the industry and economic activities. Blockchain projects often involve people from many countries and regions all over the world, and the management cost of setting up a company is too high. Just imagine, you have set up a company with many employees all over the world and hired an HR. The first question she asks you is: How do you get social security for your colleagues in the United States, Europe and Africa? How to pay five social insurances and one housing fund?

Therefore, the use of a centralized company management model is obviously not suitable for projects on the blockchain, whether it is the form of activity organization or economic management will cause inefficiency. There are physical reasons for this: time difference, communication inconvenience caused by distributed office, and remote communication problems; there are also problems caused by economic activities themselves: goals are clear but different countries and regions play differently. The DAO model came into being, which only stipulates the code of conduct for cooperation, does not require human monitoring, and controls everyone involved.

Therefore, DAO is just a new type of collaboration model spontaneously generated from within in order to reduce the cost of economic and political cooperation between people after the Internet and blockchain have developed to a certain historical stage. This collaborative model can bring higher efficiency based on the characteristics of physical and economic activities.


Proposal on the establishment of a DAO legal framework – by Anon


Considering legality, security, taxation and other issues, there are currently five main options for building a DAO organization:

  1. Do not set up any legal entities at all
  2. Consider the DAO legal framework in Wyoming, USA, or a registered company in Delaware
  3. Foundations established onshore (e.g. in Switzerland, Singapore)
  4. Set up offshore foundations (such as in Panama, Cayman, etc.), taxation is more neutral
  5. Combine the above, such as the Cayman Foundation + the main body of Singapore

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-is-dao-how-to-pay-social-security/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.