Know what is DAO, Decentralized Autonomous Organization (acronym in English for Decentralized Autonomous Organization). It is not a new concept for the cryptocurrency community, as it has been part of the market since 2015, when it was created by… Software Tester of Ethereum, Christoph Jentzsch.
In order to be a shared investment fund, where all contributors would have the right to vote on which actions would be taken, DAO continued to gain strength until the moment they opened the sale of their Governance Tokens to new investors and the model became a reference of transparency and corporate management.
Since then, Decentralized Autonomous Organizations have received increasing prominence and are already considered one of the main trends to transform the management model of large companies in the crypto market.
Want to know in depth what DAO is and how this innovative technology works? Check out this complete content that we have prepared to answer all your questions.
What is DAO, Decentralized Autonomous Organization?
To understand what a DAO is, we need to understand, first of all, how traditional collective organizations work.
Currently, the most common way of managing an organization is through hierarchy, where the highest positions define what actions will be taken in the company and, only then, is it passed on to the rest of the employees – following a pre-established organizational chart.
In turn, the DAOs or decentralized Autonomous Organizations do not depend on this hierarchy. This is because its governance is done by the owners of the governance tokens of a given platform, and each person belonging to this group has voting rights in decision making.
This autonomy ensures that the organization can function independently, without the need for the existence of positions and even the structures of companies as we know them today.
The purpose of DAOs is precisely to guarantee the management of the company through smart contracts (known as smart contracts) and algorithms, which thus allow the decentralization of operations.
To ensure that decisions are in the common interest, DAOs have their rules based on blockchain and built into their code.
In other words, this means that no one can take action based on their own wishes, giving the assurance that no important measures will be taken without the group’s consent.
How do DAOs work in the cryptocurrency market?
As we said earlier, DAOs use rules based on the blockchain network to create the structure of their digital organization that is 100% transparent, as anyone in the group can verify the programmed code.
In its creation process, the group meets to establish what the rules of the decentralized autonomous organization will be, in addition to the platform that the structure will be made and hosted – being a structure that mandatorily supports smart contracts.
What started to be done only on Ethereum, now has several options such as Kanna itself, which still aims to bring an environmental impact by recovering soils contaminated with the use of hemp.
After the creation of the DAO and the rules that will determine its mission and principles, blockchain assets, known as governance tokens, are generated, which will be made available to its investors and taxpayers.
Everyone who has their Token will be able to vote, with equal weight, in the DAO’s decision-making, helping to direct what their next steps will be in the cryptocurrency market. This principle is what we call decentralized shared governance.
Basically, the most important decisions will be made together, following the automation rules defined in the DAO code.
What is DAO in the crypto market and why is it important?
Usually the DAO is created by a community that sets its rules in the code that is applied to its blockchain structure, but that doesn’t mean those rules can’t be changed.
Most of the time a change needs to be made, it must be voted on and agreed upon by all group members.
However, each group can establish the rules of its organization and, in some cases, some “leading leaders” can be elected who have greater decision-making power to carry out day-to-day actions of lesser impact and that can be resolved quickly.
Therefore, one of the most important points of decentralized autonomous organizations is transparency in business operations. Everyone knows what will be done and what the DAO rules are.
Another positive point for this new organizational model is its independence from the bureaucracies of countries or governments, since people from different parts of the world can contribute.
These aspects of DAO not only optimize complex processes that demand a lot of time and resources from the company, but also create greater security for working on financial actions with people you don’t know.
With this, it is now clear how DAOs impact the crypto asset market and why they are considered one of the most important. s major trends in the reformulation of organizational governance for the coming years. But how does it work in practice?
Examples of what DAO is.
As I said at the beginning of the text when I talked about what DAO is, this Organization model is not something new in the market and there are already autonomous groups working based on this structure.
According to a survey by DeepDAO, the number of active DAOs grew by 660% in just one year, from 10 to 76 organizations in 2020. According to the website of the same analysis company, today this number already adds up to 4,830 active DAOs in companies from the most varied segments.
Some examples of DAOs applications are:
- Charities: By creating an autonomous decentralized organization for a social project or NGO, it is possible to allow everyone to see the actions that are on the agenda and to be able to vote on those that should be funded.
- Collective ownership: In addition to voting on which physical or digital assets should be purchased, it is also possible to create a vote to define how they should later use them.
- Ventures and investments: As soon as they accumulate a certain amount in funds, it is possible to define with the group which venture they will invest. The profits from the shares can be divided among the taxpayers.
- Network of self-employed professionals: Although rare, some DAOs may want to invest in physical spaces for employees to meet. This decision can be taken through a vote that will define the relevance of this investment.
Autonomous organizations such as MolochDAO, a group focused on funding projects on the Ethereum network, are already operating and allow the association of interested parties who have experience in the market.
But she is not the only one. Many DAOs are yet to come, and one of them is Kanna: a socio-environmental impact company that uses Blockchain and Hemp technology to recover the environment.
Want to know how you can invest in the crypto market and make an impact on the planet through cannabis applications? Check out our website and secure your KNN Token.
Decentralized Organizations vs. Traditional Organizations
Now that you understand what DAO is, I want to highlight its main differences from traditional organizations that, in most cases, follow a hierarchical management system.
And by the way, this is the main differentiator of DAOs, because because they are decentralized, they tend to be flat, allowing everyone to contribute with their votes and define the direction of the organization.
Votes are automatically counted and do not run any risk of being altered, ensuring the security and democracy of the group.
Traditional organizations, in turn, carry out changes according to what is decided by the highest positions in the company. In addition to being a less democratic practice, it limits the action and power of choice of other parties involved in the company.
In this case, the risk of approval of changes that displease some of the people involved is great, since some determinations that favor only investors or even individual interests may be prioritized. core/heading
How to invest in a DAO?
Currently, there are several active DAOs on the market and you can find the one that makes the most sense for your investment.
However, a point of attention that must be considered are the rules that each one determines for its group of contributors. In some cases, you must fulfill a series of prerequisites to be able to participate in the DAO, such as having experience in the financial market, NFT trading, among others.
What can we expect from DAOs?
As we discussed in the text, the creation and use of DAOs in the cryptocurrency market is growing every year.
With the increase in interest and constant improvements made in technologies, it is expected that many companies will find in the decentralized organization system a new form of management for their businesses – especially those linked to the financial market.
Therefore, trends such as Metaverse, NTFs and even Web3 are already targets of DAOs for risky investments in innovative projects that should impact the market in the coming years.
But that’s not just how decentralized organizations are being used. Companies like Kanna are creating their own ESG Token called KNN, which will promote asset appreciation while generating social and environmental impact through land reclamation using cannabis.
In addition, the project still aims to improve the local economy with the use of CBD in medicine and other industrial applications of hemp.
To learn more about Kanna Coin and how to pre-order your KNN token, visit our website at this link.
