Hello NODO family, this is the first edition of an educational series focused solely on Decentralized Autonomous Communities, their governance, proposals, voting mechanisms, and decision-making, and how these influence the blockchain ecosystem. It promises to be an exciting journey…

… Here, we’ll have fun, interact and learn together.

At the mention of the term “Blockchain”, the first thing that comes to the mind of a newbie or someone who is not in the space is “crypto”. This misconception is mainly because its application in the financial sector is popular and often overshadows other sectors. This said it is important to note that its application goes beyond this sector.

Image source: iStock

In this piece, we’ll delve into how Decentralized Autonomous Organizations are redefining organizational framework and dynamics by leveraging blockchain technology to create a transparent, trustless, and democratic structure. We’ll also take a look at a few industry verticals where this concept is applied and what they seek to achieve.

What is a DAO?

A Decentralized Autonomous Organization is an organization that is not influenced by a central authority. It resides on the blockchain and is governed by rules that are set by a smart contract. Unlike traditional organizational structures, DAOs enable members to actively participate in governance, and decision-making processes, allocate resources, and shape the direction of the organization collectively. This shift from a hierarchical approach to a community-driven model fosters inclusivity and accountability and opens up new avenues for innovation and collaboration.

Image source: Cointelegraph.

Key Components of a DAO

Smart Contracts: At the heart of a DAO are smart contracts. These are self-executing contracts with the terms of the agreement written directly into code. They run on a blockchain and automatically execute actions when predefined conditions are met. In the context of a DAO, smart contracts handle tasks like membership management, voting, and fund disbursement.

Decentralized: One of the primary features of a DAO is its decentralized nature. Unlike traditional organizations where decisions are made by a central authority (like a CEO or board of directors), DAOs rely on consensus mechanisms and collective decision-making processes.

Token-based Governance: DAO members often hold tokens representing their stake in the organization, for example, UNI for Uniswap. These tokens are used for voting on proposals and decisions within the DAO. The more tokens a member holds, the more influence they have in the decision-making process.

Voting Mechanisms: DAOs utilize on-chain voting mechanisms where members can cast their votes directly on the blockchain. There are various voting systems that can be employed depending on the specific rules of the DAO.

Proposals and Decision-making: Members of a DAO can submit proposals for consideration. These proposals could involve changes to the organization’s rules, allocation of funds, or any other action that requires collective approval. Members then vote on these proposals, and if a certain threshold is reached (according to the DAO’s rules), the proposal is executed automatically. An example of these proposals is the Ethereum Improvement Proposals (EIPs) in the Ethereum community.

Transparent and Immutable: All actions within a DAO are recorded on the blockchain, making them transparent and immutable. This means that once a transaction or decision is recorded, it cannot be altered or erased, providing a high level of trust in the system.

Image source: Pixabay

So far, we have established the concept of a DAO and its core characteristics. It is important to note that they exist in different DAOS across all industry verticals categorized according to the goals, and objectives they seek to achieve—a few of these are;

Media: Creation and management of media content such as news articles, podcasts, and videos. Examples of these DAOs are BanklessDAO, Global Coin Research, and Decrypt.

Blockchain Protocols: These DAOs are designed to govern a decentralized protocol such as a borrow/lending application, decentralized exchange, or another type of dApp. These include Uniswap, Lido, Curve, MangoDAO, dydx, etc.
Infrastructure: Focused mainly on building and maintaining infrastructure for the blockchain ecosystem, these DAOs are responsible for developing and maintaining the tools, protocols, and other infrastructure that enable blockchain technology to function. Among these are GnosisDAO, Abitrum, Aragon, and Phala.
Gaming: Most DAOs are designed to coordinate gaming communities with different goals ranging from investing in games, building communities, and even developing new games. Examples include Decentraland games, Yield Guild games (YGG), and Merit Circle.
Arts & NFT Collection: Collectors form organizations where the common goal is collecting and managing digital assets such as art, music, and other collectibles.

Investment & Venture Capital: Here, funding for startups is provided by a community of venture capitalists and individuals who are interested in investing in innovative and promising business ventures. Examples of these DAOs are; Mantle (formerly bitDAO), OrangeDAO, Metacartel Ventures, and Global Coin Research.
Grants: Nonprofit donations and strategic deployment of capital assets have been facilitated by DAOs in recent times. Examples of grant DAOs are Gitcoin, AaveGrants, and Metacartel.
Philanthropy: The main aim of these DAOs is to help charitable organizations and causes. They provide a transparent platform for charitable donations. Example, UkraineDAO,
SubDAOs: These types of DAOs provide a decentralized platform for creating sub-communities within larger communities. For example, Seed Club is a Social DAO that creates sub-communities around specific interests such as gaming or art.

In conclusion, Decentralized Autonomous Organizations are a transformative shift from the traditional hierarchical organizational structures to a more collaborative and decentralized approach. This fosters inclusivity, and accountability, and drives innovation. They offer a glimpse into a future where community-driven decision-making reigns, showcasing the potential of blockchain to revolutionize organization and governance.