Blockchain technology has successfully attracted people to its ecosystem by creating a fair digital environment. Conversely, developers introduced DAO, to encourage crypto users to actively participate in decision making processes within the blockchain industry. Members of the DAO ensure all blockchain activities are transparent, eliminating fund mismanagement or fraudulent actions.
DAO (Decentralized Autonomous Organization) consists of individuals who collectively decide to contribute to the growth of a cryptocurrency. It’s a crypto governance approach where members deliberate on critical activities before implementation, including financial decisions.
How does DAO work, and who is eligible to join the organization? Read on to learn more about DAO operations and its impact in expanding crypto communities.
Using DAO to Expand Web3 Ecosystem
Creating a web3 community requires critical thinking ability. Meanwhile, Decentralized Autonomous Organization is one of the popular ways to expand the web3 ecosystem. However, You must identify the goals you intend to achieve before establishing a global digital community. Follow the processes highlighted below for effective result:
- Communicate the DAO goals and vision: Since operations are focused on decision-making, strategy implementations, and co-collaborators recruitment, you need people with like minds on board. Thus, clearly state the organization’s vision, and the role of every member. This will help in developing a well-orchestrated governance structure, and also encourage investors to partake in the governance process.
to invest in a DAO is in a way to bet on the wisdom of the crowd and not just the wisdom, but on the collective capacity of the crowd to work togetherFinancial advisor and Professor at Harvard Law, Noah Feldman
- Creating a governance structure: Every effective governance structure should focus on decentralization. This gives members of the community equal rights to decision-making and ownership. Meanwhile, members can earn ownership either by reward or airdrop system. Some organizations reward members with tokens after achieving certain set goals, while others follow the airdrop process by sharing tokens according to members’ contributions.
The picture below describes some vital decisions to make when setting up a governance structure.
- Marketing approach: Since the web2 ecosystem is broad, you need an effective marketing strategy to attract the right audience to your community. You can set an incentive structure to reward active members. The rewards could be cryptocurrencies such as Tether (USDT), Ethereum (ETH), and USD Coin (USDC). Members may also get native governance token for using the Decentralized Finance (DeFi) protocol.
Examples of DAO
Bear in mind that the governance rules of DAO are usually recorded on blockchain technology, which further improves its transparency and security level. Thereby, encouraging developers to set up several examples within the web3 ecosystem, such as:
- MakerDAO: The MakerDAO was built on the Ethereum blockchain, and it’s responsible for creating the long-existing stablecoin, DAI. Recently, the MakerDAO community agreed to invest in traditional financial assets like Treasure bills, in order to boost its revenue. The voting members further concluded that a maximum of $500M USDC stablecoins can be in Coinbase custody, with a possible 2.6% ROI.
- MolochDAO: The MolochDAO community is focused on building Ethereum-based projects. Thus, members donate ETH or funds to enhance the Ethereum network. Investors within this community often target projects that will yield huge profit in the future.
- DAOstack: This is an innovative approach, which is often referred to as a “no-code” organization. DAOstack was built as a platform that provides the needed resources in building and sustaining a DAO. More interestingly, organizations will have access to forecasting reports, predictions, and crypto trends on the DAOstack platform.
DAO’s Impact on NFTs Communities
DAO serves as a platform where critical decisions are made in support of NFTs’ growth. Thus, creators can look forward to organizing NFT communities through DAO platforms. This is particularly important for newbies with little or no social media followers.
One popular way in which DAO impacts NFTs users is through collector DAOs. Collector DAOs like Bored Ape Yacht Club, help creators to generate funds, and also allow smaller traders to own tiny portions of NFTs. Interestingly, platforms keep expanding, as new NFTs are launched. As reported by Binance, Bored Ape Yacht Club made an incredible sales of $3.4 million (USD) from the NFT in the picture below.
How to Join a Crypto DAO
Every organization has its goals and vision, so you must ensure they align with your investment purpose. After deciding on a niche of your interest, you should read the DAO whitepaper. This will provide you with better insight on what the organization offers.
It’s important to Do Your Own Research by maximizing the available information on the internet, including social media platforms. Since there are several crypto influencers on Twitter, you may begin your search via the social media platform.
- Use the Twitter search bar to look for DAO communities that may interest you. You may also use specific keywords for upcoming events. Meanwhile, some of these tweets may lead you to a Discord or Telegram page, where you can communicate effectively with other members of the community. The tweet below is an example of a community directing Twitter users to its Discord event.
MolochDAO is rising amongst the shadows and discussing a v2 upgrade! We want to hear from members before the launch. 👹— 👹 MolochDAO (@MolochDAO) August 21, 2021
Join our Discord to share your voice on the matter! Details in thread. ⬇️ https://t.co/DlGhC0zRnX
- Ask questions on the platform before proceeding to minting the DAO NFT.
- You may choose to purchase a DAO token, in place of NFT mints.
- The community will design a voting procedure, where every member’s contributions are recorded.
- The proposal or suggestion with the highest voting number will then be implemented.
Is Joining DAO Worthwhile?
To become a successful investor within the crypto industry, you need to grow from being a spectator to actively participating in web3 communities. Thus, here are reasons why joining DAO is considered a worthwhile community.
- Gives every crypto user an opportunity to contribute to critical crypto-related plans and strategy implementation.
- Empowers members to collaborate with other crypto traders of like-minds.
- Since the voting processes are transparent, it confers a sense of responsibility on its members.
- DAO communities contribute to crypto sustainability, by carefully monitoring the financial activities within the blockchain industry.
- Assist crypto projects in fundraising, especially in creating awareness for critical events such as presales.
The DAO Major Challenge
When the first organization was launched on the 30th of April, 2016, it gained investors attention from all over cryptocurrency platforms. In fact, the DAO was able to raise a huge sum of $100m one month after the project was launched. Despite the organization’s rapid popularity and overwhelming adoption, it was prone to security attacks. On the 12th of June, one of the DAO creators announced the organization was in jeopardy, while also assuring members the generated funds were safe.
No DAO fund is at risk following the Ethereum smart contract ‘recursive call’ bug discoveryA DAO creator, Stephan Tual.
Despite Stephen Tual’s assurance, it was reported that $50 million worth ETH was stolen in June 2016. This is why it’s vital to confirm the safety measures in a DAO community before joining them.
Overcoming Possible DAO Challenges
Fortunately, DAO keeps growing in numbers, even though the first platform was attacked in 2016. From Forbes’ published news, the number of existing organizations was about 4,000 as at February, 2022. It’s safe to say developers and crypto enthusiasts have contributed to the DAO growth over the years.
Foremost, developers keep introducing better tools to ensure a quality voting system. If these tools are implemented across DAO platforms, users can expect excellent results. Some of these tools include Aragon, Open Law, Snapshot, Coordinape, Discord, and Gnosis Safe. Also, DAO can be pretty complex, so it requires patience and time before implementing strategies. You should endeavor to draft strategies based on your organization’s needs, and not of other organizations’.
DAO provides a wide range of opportunities for every crypto user, including beginners. However, governance issues are a great concern on some platforms. Nevertheless, more DAO platforms contribute to the expansion of the crypto community by creating a fair and transparent digital environment.