What is DAO? Why has it become the new target of the capital market?


DAO is not a traditional company with a designated management structure. It operates through collective voting, and holding the DAO organization token is its “shareholder”. A DAO is an organization dominated by rules written by computer programs, not people. On top of this structure, there is a group of “guardians” who are elected by DAO token holders and can of course be eliminated.

Part of the content of the article comes from the Internet, and only provides chain game strategy, and does not constitute any specific advice on trading and investment. 

Associating spiders with starfish

The traditional organization is like a spider, its intelligence is concentrated in the brain, as long as you remove the head of the spider, the spider will die; while the decentralized organization is like the starfish, the starfish has no head at all, its intelligence is distributed all over the body, Once you knock off part of its body, that part may even grow into another starfish.

When the Spaniards invaded South America, they conquered the Aztec Empire and the Inca Empire very easily. This is because these two empires were spider-like organizational structures. Power was concentrated in the hands of the rulers. Once the central government fell, the country immediately collapsed. .

But when the Spaniards hit North America and faced the more backward Apaches, they couldn’t go on. The Apache is a starfish-style organization with no unified leader. Politically, the tribes are a very loose alliance. The Apache heroes do not directly command and mobilize any army. They only serve as role models to inspire others spiritually. In this way, even if a few tribes were defeated, the remaining clansmen could still continue to fight, and there was no such thing as catching the thief first, and as a result, the Apaches fought against the white people for hundreds of years.

Definition of DAO Organization

DAO is an organizational form derived from the core idea of ​​blockchain (co-creation, co-construction, co-governance, and sharing of collaborative behaviors spontaneously generated by groups that reach the same consensus). It is a subsidiary product after the blockchain solves the trust problem between people.

DAO is an evolutionary version of the organizational form of the company, a revolutionary evolution in the history of human collaboration. Its essence is a form of blockchain technology application.

The birth conditions of the DAO organization

The birth of a DAO must have three basic elements:

1. Have organizational goals and organizational culture (organization’s mission, vision, values) that can reach consensus with strangers.

2. It has a rule system including creation, governance, incentives, etc. that can reach consensus with strangers, and this rule is placed on the chain through blockchain technology.

3. There are Tokens that can form interest associations with all participants to achieve full incentives.

How DAOs work

1. Write smart contracts: Smart contracts are written on the blockchain and are a set of computer programs used to execute various commands. Smart contracts are open and transparent, and anyone can see every line of code.

2. Fundraising: An organization naturally needs funds. Unlike the traditional corporate system, investors will not get shares, but tokens. Tokens are representatives of rights and interests, and holders of tokens can have the following rights and interests: voting rights, proposal rights, income rights, and the right to use various services provided by DAO.

3. Proposal and voting: When the smart contract is released, the operation of the DAO is not under the control of the initiator, and all decisions will be implemented after consensus. Anyone who holds this DAO token can initiate a proposal and vote. After reaching a certain percentage of consensus, the DAO will automatically execute the corresponding instructions.

4. Circulation of tokens: In the traditional company system, equity transfer needs to sign a contract, submit various documents, and wait for the review to be successful. But the circulation of the token is as convenient as the transfer, which can be completed in minutes or even seconds.

Advantages of DAO Organizations

1. Eliminate fraud for personal gain: DAO’s funds are obtained and used in an open and transparent manner. The source and destination of each fund are very clear, and there is no underground transaction.

2. Reduce communication costs: There is no room for negotiation to implement a certain decision, and it only needs to be run according to the contract and the proposal obtained by voting.

3. Reduce management costs: DAO has no hierarchical structure, no CEO, no manager, and no management costs are required.

4. Equality: DAO has no hierarchical structure, and everyone is equal.

5. There is no dictatorship: everyone can propose solutions for the organization and may be used.

6. Unity: All participants hold the DAO token, and the better the DAO runs, the more valuable the token will be. All participants will have the same goal, which is to make the DAO work better. At the same time, proposals and voting require a certain amount of tokens. Therefore, voters will start from the DAO’s perspective and sincerely benefit from the DAO.

The nature of the DAO organization

1. Distributed and decentralized: There is no central node and hierarchical management structure in DAO. It achieves organizational goals through the interaction, competition and cooperation between bottom-up network nodes. Therefore, the business transactions between nodes and between nodes and organizations in DAO are no longer determined by administrative affiliation, but follow the principles of equality, voluntariness, reciprocity, and mutual benefit, and are determined by each other’s resource endowments, complementary advantages and interests Driven by win-win. Each organizational node will cooperate effectively under the incentive mechanism of the token according to its own resource advantages and talents, thereby generating a strong synergistic effect.

2. Autonomy and automation: In an ideal DAO, management is coded, programmatic, and automated. “Code is law”, organization is no longer a pyramid but distributed, power is no longer centralized but decentralized, management is no longer bureaucratic but community autonomy, organization operation no longer requires a company but is managed by Replaced by highly autonomous communities. In addition, since DAO operates under the operating standards and collaboration mode jointly determined by stakeholders, consensus and trust within the organization are easier to achieve, which can minimize the organization’s trust cost, communication cost and transaction cost.

3. Organization and orderliness: Relying on smart contracts, the operation rules in DAO, the responsibilities and rights of participants, and the reward and punishment mechanism are all open and transparent. In addition, through a series of efficient autonomy principles, the rights and interests of relevant participants are precisely differentiated and dimensionally reduced, that is, those individuals who work, make contributions, and assume responsibilities are matched with corresponding rights and benefits to promote industrial division of labor and rights, Responsibilities and interests are equal, making the organization more coordinated and orderly.

4. Intelligence and tokenization: The bottom layer of DAO encapsulates all the infrastructure that supports DAO (and its derivative applications – Internet basic protocols, blockchain technology, artificial intelligence, big data, Internet of Things, etc.) Digitalization, intelligence, and on-chain and off-chain collaborative governance are the means of governance, which has changed the traditional bureaucratic system and man-made management methods and realized the intelligent management of the organization. Tokens are used as a key part of the DAO (island) governance process. An important incentive means to digitize and tokenize various elements in the organization (such as people, organizations, knowledge, events, products, etc.), so as to fully integrate monetary capital, human capital and other element capital to better stimulate the effectiveness of the organization and realize value transfer.

Demand Advantages of DAO Organizations

1. Fast, borderless business decisions: If someone in country A wants to start a business with the founders of countries such as country B and country C, the current process of doing something is very complicated. Different jurisdictions have different requirements. The time frame required for a decision also varies. For example, let’s say someone in country A can officially set up a business in just one day, while someone in country B takes 3 months to start. Obviously, the person in country B does not have the same resources as the person in country A.

DAOs provide a solution that allows everyone to work under the same conditions, regardless of their geographic location, by following a standard set of rules. Essentially, one of the main reasons for creating a DAO is to provide an equal system for the formation and operation of an organization.

2. Organization-wide voting: Many companies have boards that make important decisions. The problem with this is that these organizations typically vote on only a few selected issues and do not necessarily represent the majority of the organization. DAOs can change this by allowing anyone in the organization to vote on issues they care about. For example, A might care about problems A and C, but not so much about problem B.

Through DAO, A can vote on the proposal with a corresponding proportion of tokens according to the degree of his concern. The DAO (Island) does not use a system that ignores or does not count input to members within the organization, but ensures that all votes are counted and shown to everyone.

3. Rules cannot be tampered with: Within any organization, policies and rules determine what can and cannot be done. For example, in a company, employees who do not follow the rules may be punished. If someone is late for work, this may or may not result in a corresponding deduction of wages. This decision can be automated through timestamps, but not enforced by all organizations.

For example, if the boss is late, it might change the rule by setting exceptions. In a DAO, it makes sure that the rules apply to everyone through code. An established set of rules within an organization cannot be tampered with unless the voter community agrees to do so.

A meeting is an opportunity to form ideas and discuss them. DAOs can make it easier for remote organizations to assess member interests and take ideas from idea to reality.

DAO Value and Prospect

The emergence of DAO means that people can choose organizational collaboration more freely and autonomously, and it can maximize the efficiency and value transfer of the organization, which may promote human creativity and creativity to achieve higher efficiency, thus forming a new business revolution . At the same time, DAO is also expected to become a new type of effective organization to deal with uncertain, diverse and complex environments.

What is DAO? Why has it become the new target of the capital market?

In the past few centuries, the mass production of machines brought about by the Industrial Revolution has made people’s quality of life improve by leaps and bounds, while also allowing the capitalists who master the means of production to control the vast majority of wealth. Later, as machines replaced most of the coolies, people began to create value by mastering machines, and gradually realized that mastering the information of the work was more valuable than the work itself.

In the beginning, you knew how to generate electricity and how to make machines, then you were a capitalist, or the “father” of the capitalist.

Then came the computer, so information about work and production began to be controlled by the very few capitalists who had computers.

Later, the emergence of personal computers and the Internet broke the pattern of this information monopoly, allowing everyone to “roam freely” in the ocean of the Internet.

But is this really freedom?

In essence, the Internet is still in the hands of a very small number of capitalists, who have central control over computers. They want to shut down the central server, human beings will no longer be able to access the Internet, and the constant redistribution and circulation of wealth is only to maintain their central company mechanism.

What is DAO? Why has it become the new target of the capital market?

We work hard, and the capitalists only need to pay a little bit as a reward. Judgment of contribution is too subjective in traditional company mechanisms, and the fruits of your labor do not belong to you. And you work day after day on things that you may not like, and the individual value of human beings is infinitely reduced in the increasingly perfect company mechanism.

The emergence of DAO allows us to freely combine and establish a DAO organization. This organization is only based on interest, and the smart contract automatically distributes your income according to your contribution to the DAO. The greater the contribution, the more income.

This DAO organization does not belong to any one person, even the founders of this DAO organization, they cannot provide outstanding contributions to DAO nor gain wealth, and they are anonymous in DAO, the other party does not know who you are, your Education, experience, and resume will become irrelevant. The only thing that matters is your contribution to the DAO.

And if this DAO organization loses its original ideal, you can also leave this DAO at any time, with all the wealth, to find the next ideal DAO.

The future trend of DAO organization

1. Intelligent management. From the perspective of the development of artificial intelligence, distributed artificial intelligence not only represents the future development direction, but also further provides a foundation for the intelligent management of DAO. This not only improves the flexibility of the system and reduces the cost of solving the problem, but also provides a means to realize intelligent management. Facing the future, DAO must be combined with artificial intelligence to move from automation to intelligence.

2. The inherent incentive mechanism of DAO may trigger the rapid development of the token economy. With the rapid increase in the number of organizations of this type, DAOs with tokens may become a new target for the capital market. The transaction of token-based digital assets may usher in a new development opportunity.

3. The collaborative governance needs of on-chain and off-chain may bring about the rapid development of blockchain applications. In the development process of DAO, in order to solve the problem of decision-making efficiency, some forms of DAO may also evolve. It may only be a matter of time before the collaborative efficiency problem that needs to be solved in the collaborative process triggers the explosion of blockchain commercial applications.

4. Through the application of blockchain technology, DAO realizes the separation of “three rights” (ownership, governance rights, and dividend rights) and unlimited division of “three rights” through the use of tokens, thus making all employees a kind of possible.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-is-dao-why-has-it-become-the-new-target-of-the-capital-market/
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.

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