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What are DAOs, and Why Are They Important?

Yayın RAIN EDITORIAL TEAM - May 30, 8:00 PM

Decentralized networks also need some sort of governance, but it cannot be one that comes from the conventional, centralized space. Enter DAOs (Decentralized Autonomous Organizations) that fill this need like nothing else, and allow crypto ecosystems to thrive without the faintest chances of biased decision-making—read on to see how that’s possible. 

What is a DAO, and Why is it Important?

A DAO is a Decentralized Autonomous Organization that is usually used to govern a certain blockchain network or ecosystem in a distributed manner. This means that all decisions are made by the community, and none are based on a central authority’s will.

The DAO of an ecosystem is usually responsible not only for creating the rules and agreements, but also for enforcing them, thereby ensuring the integrity of its governed space. To do so, a DAO normally has exclusive access to certain functions that help execute the orders of the community, as well as control over some level of pooled capital that can be used for funding new ventures, upgrades, or anything in between.

How Does a DAO Work?

Generally speaking, a DAO is a body that solely listens to the votes of governance token holders. Imagine a DAO as a forum of proposals, polls, and discussions, where only holders can participate and raise their voices. To ensure that the chances of bribing, biased decisions, and prejudice are minimized, DAOs tend to implement fully anonymous proposals and voting.

A DAO’s decision-making process usually follows the steps below:

  1. A shortcoming is identified by the community

  2. A formal proposal following certain guidelines is submitted by members

  3. The community of token owners vote proportionally to their holdings

  4. Once the polls are closed, and the minimum votes are reached, the DAO implements the proposed changes

How Can You Become Part of a DAO?

To become part of your chosen DAO, you will likely need to purchase the governance tokens that act as a gateway to the organization. Remember, the more tokens you secure, the more weight your votes tend to have, thus the more your opinion counts in decision-making.  

The Top DAOs of the Crypto World

There are many DAOs within the crypto space, as these revolutionary bodies act as unmatched governance solutions. The most popular projects that are governed by DAOs include Uniswap with UNI governance tokens, 0x with ZRX, Maker protocol with MKR, Aave with AAVE, and Dash with DASH tokens.

DAOs are also popular forms of governance in virtual realities: Decentraland, one of the most popular blockchain-based spaces, is also directed by one using its own MANA crypto tokens.

Summary

Decentralized Autonomous Organizations (DAOs) are vital parts of crypto ecosystems, as they play indispensable roles in governing and regulating such spaces in a distributed manner. Leveraging the powerful features of governance tokens and blockchain technology, DAOs are paving the way towards a future where decision-making will become truly democratic, direct, integral, and anonymous at the same time, while being inclusive for all who wish to have their voices heard.

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