A recent survey by FTX revealed how few people know of and understand what DAOs are in the crypto world. Most crypto investors are not members of DAOs, and only 10% of respondents took full advantage of multiple DAOs. As the crypto world continues to innovate and grow, more DAO projects will continue to be created to offer investors a decentralized community in which they can influence the future of cryptocurrency. Here’s what you need to know about DAOs and how they impact the crypto world.
DAO Basics
What is a DAO in the world of crypto? Since the beginning of the internet, users have turned to online platforms to create digital communities. Digital bulletin boards, forums, and social media platforms are just a few of these platforms that allow for digital communities. These platforms, however, are all governed by a centralized entity and often have hierarchical structures regarding who’s ideas are heard and how decisions are made. DAOs attempt to create a more equitable, democratic, and beneficial digital community where all community members have a stake in the organization’s success and a say in the governance of that organization. Rather than being governed by a group of individuals with all the decision-making power, DAOs are set up through a series of encrypted code run on a blockchain network. Smart contracts are encrypted with the organization’s rules, such as dispute resolution mechanisms and financial management. By automating the group structure, DAOs ensure that no few members of the organization are placed in a decision-making hierarchy over others. Instead, everyone who purchases the DAO token will get a vote in the organization’s governance, and all members will benefit from the group’s overall success.
Key Characteristics
There are three key characteristics of DAOs: decentralized structure, token-based membership, and transparent governance. The crypto world has always been at the forefront of the decentralized finance movement, seeking ways to make economic markets more accessible and secure through digital means. DAOs are an important tool in the DeFi space because they create a digital community ruled by code rather than a central entity.
As mentioned, digital communities are typically governed by a leadership group, and some people within the community may have more influence because of their status. However, within a DAO, all community members are treated equitably, and all ideas can be heard. Because the code automates decision and conflict resolution, no single person or group will make any executive decision for the group. Instead, the majority of members must vote for a specific decision. This democratization is paired with the transparent nature of blockchain networks, so all decisions made by the group will be accessible and viewable within the network. Transparent governance offers another level of security and can create confidence between investors and their DAOs as a larger community.
Finally, joining a DAO requires members to invest in and hold the underlying token of the network. As a token holder, you get access to the DAOs resources and voting power for every decision made within the network. This means investors will not only have greater control over their investments, but they will also influence the future of the coin and the DAO as a whole.
Join a DAO Today
Besides getting influence over your cryptocurrency and the blockchain network it runs through, members of DAOs can also get special perks depending on the group they join. Members of the new FTX DAO, for example, not only gain access to the DAO and its community members, but they will also receive other incentives like token airdrops and discounts on trading fees. You can learn more about DAOs by visiting FTX.
