Phrase “dao» (DAO) Or “Decentralized self-governing organization(Decentralized Autonomous Organization) is a familiar term in digital currency literature that you have surely heard many times; But it is possible that your familiarity with this important concept is limited and you don't know anything more than that. If so, we suggest you read this article; Because if you know What is Dao?Your look at the world Cryptocurrency it will change.
What is DAO?
dao (Decentralized Autonomous Organization) or for short DAO Means Decentralized self-governing organization Is. This concept refers to an organization, organization or entity that is not controlled by a single institution, person or entity. In fact, the Dao organization is an organization that control it Fully responsible All members Not a specific member or members. This autonomy is due to technology Blockchain And Web 3 it will be obtained.
As the name suggests, Dao is an organization that is not under the rule of a specific person or group self-governing And Decentralized Managed. Dao is not a physical organization, but an Internet organization whose members can be users from different parts of the world.
A kind of Dao Approach At Administration of the organization in which every member of the group, regardless of position and position, has a right the same in making changes.
An example to better understand DAO
To better understand the Dao, consider a bank that is run in a decentralized manner. This bank is similar to traditional banks in many ways; But with two major differences:
- It does not have a physical nature and works online;
- It does not have centralized governance and all its customers can play the role of the bank president.
Now imagine that this bank wants to increase the profit it receives from its customers. In such a situation, all users have the right to express their opinion and the proposal that has the most agreement will be chosen. Since the users themselves are interested in this issue, they certainly consider their own interests, and in this way, a person cannot make any decision only considering his own profit and at the expense of trampling on the rights of others.
What are the uses of Dao?
Just like the companies we deal with in the real world, daoes can operate in many different areas. From decentralized exchanges, to decentralized lending platforms, to the gaming industry, to video and music streaming platforms, and any other group that provides services in a decentralized, blockchain-based manner, they can all be considered a Dao.
One of the most famous Daos in the world was born in 2016. This decentralized self-governing organization The DAO It was called and cleverly used the word Dao in its brand name. Of course The DAO Due to a flaw in its smart contract code, it was eventually targeted by hackers and a large amount of money was stolen from it; The story that is known in the world of digital currencies as “Hack Dao”.
What is The DAO?
per month May 2016 (May 1395) were three developers named Stephan Tual, Simon Jentzsch And Christoph Jentzsch They decided to establish a decentralized investment company. They wrote their company code, naming it The DAO introduced and started attracting public capital. The DAO has managed to raise more than three weeks since its fundraising start 150 million dollars attract capital and make one of the biggest public capitals in history.
The DAO hack
Before the end of the fundraising process, there are many experts about the existence bug They had warned in the code of The DAO. While the developers were trying to fix the bugs, a hacker took advantage of the opportunity and removed assets from The DAO code.
This happened not only to the detriment of the developers and investors of The DAO, but also caused great damage to the reputation of Ethereum; So much so that Ethereum decided to implement a hard fork to compensate investors. Since not all members of the Ethereum community agreed with this hard fork, the Ethereum blockchain was divided into two independent chains named Ethereum And Ethereum Classic Became.
Read more: The seven biggest hacks in the history of digital currencies
Of course, even though the Dao hack caused a big shock to the entire Ethereum and blockchain ecosystem, it does not mean that the Dao innovation has become obsolete or lost its popularity. The Dao concept has continued to exist since then and has witnessed many successful projects.
The best features of Dao
before we see How does the Dao work? First, the concept of Governance Token or Governance Token should be defined Proposal get to know In order to be considered a DAO, any decentralized network must have three basic characteristics:
- Benefit from smart contract technology
- Having a sovereign token
- The possibility of registering a proposal
What is a governance token?
The right of users to vote in DAOs is a token called “Sovereign token(Governance Token) Specifies. Each Dao project has a governance token that its holders can invest in decisions This Dao participation Have. The more governance tokens a user has, the more Voting right will have more.
For example, the Makedao lending platform has two tokens called DAI and Maker. The Maker Token is the Makerdao governance token, whose holders can vote on the changes of this platform.
Read more: DAI and MakerDAO; A decentralized approach to stablecoins
Proposal or plan in DAO
Another essential part of the Dao ecosystem are plans or “Proposals(Proposal) are. Any user who has a proposal to improve the performance of a DAO can register his proposal in its network and put it to the vote of others. Other members of the network then vote on the proposal using their governance tokens. If the proposal is approved by the majority of members, it will be implemented and if it does not receive the necessary votes, it will be canceled.
What percentage of members' consent is required for a proposal to be approved is an issue that can vary from one Dao to another and depends on the rules that are coded into its smart contract from the start.
Smart contracts
For a long time, many people thought of the Bitcoin network as a Dao. They believed that since Bitcoin is decentralized and based on the blockchain and the governance of its network is in the hands of its users, it is considered the oldest Dao in the world; But now and according to the newer definitions of Dao, we realize that Bitcoin is not a Dao.
Bitcoin does not support smart contract technology and does not have a special governance token; Therefore, it is not included in the category of Daos.
Types of Dao or Decentralized Self-Governing Organization
1- DAO Protocol Decentralized organizations are said to provide lending, borrowing, and similar capabilities in the form of a Dao organization. maker, Uni swap And Yen Finance Among the most famous protocols are DAOs.
2- Grant DAO or decentralized self-governing organization to attract capital, they help businesses that use the infrastructure Blockchain And Web 3attract capital and make significant changes in the world by receiving the amount.
Read more: What is Web 3? The future Internet codenamed Web 3.0
3- Social DAO Or decentralized social self-governing organizations are daoes that have created a community for people with similar interests. There are not many projects in this field, but they are gradually increasing.
4- SubDAOs They are created within core DAOs, each with a specific purpose or focus that aligns with the core set. In fact, each subdao allows for finer governance and decision-making in a large decentralized organization. The SubDAO platform is an example of this model of decentralized organizations where sub-DAOs can be created to manage assets and make other decisions.
5- Decentralized Media Organization or Media DAO It is an innovative approach to organizing and managing media processes. These DAOs make it possible to run a media organization transparently and democratically. Thanks to blockchain technology, media daoes will enable greater ownership, control and participation for both producers and viewers of media content.
6- DAOs related to investment or capita daos of Members' capital poolhimself to invest in the early stages Startups, Protocols or other high-risk investment opportunities leveraged by the inherent capabilities of a Dao.
7- Collector DAOs In fact, collectively owning and managing one portfolio of assets valuable such as NFTs, real estate or Physical collections and entrust their members to make decisions about them through governance tokens.
8- Decentralized Charities (Philanthropy DAO) In fact, there are charities that Capital pool Its members use for charitable purposes, which are generally related to Environmental Protection, Social programs or helping to grow philanthropic innovations are.
The best daos
Uni swap
Uniswap It is the largest existing decentralized exchange that operates on the Ethereum blockchain. In September 2020, this platform released its sovereign token called UNI (UNI). Uni Token holders can express their opinion regarding issues such as fees, roadmap and rules of Uni Swap exchange.
The price of UniSwap has grown significantly since its launch and many exchanges have listed it.
Read more: What is Uniswap?
did it
MakerDAO It is a digital currency lending platform that is highly popular among all lending platforms. As we have already mentioned, Madeo has two special tokens: Die token, which is a stable coin, and Maker token, which is the governance token of this platform.
Holders of Token Maker can participate in important decisions of Meekdao regarding important matters such as fees, maintaining network stability, profit rates and even emergency shutdown of the platform.
Avi
Aave Hame is a decentralized lending platform that allows users to lend or borrow their digital assets without having to trust intermediaries. The governance token of the Avi platform is called AAVE. Holders of this token can express their opinion regarding important matters such as adding new assets, managing platform parameters and the required collateral rate.
shower
Dash (DASH) It is a digital currency network and online payment system that was created as a fork of Bitcoin, and its goal from the beginning was to increase the speed of transactions and increase scalability (Dash was actually a fork of Litecoin, which itself is a fork of Bitcoin).
This network in 2014 It was launched and many consider it the first real Dao; Because, unlike Bitcoin, it has a governance mechanism and allows its shareholders to comment on how Dash reserves are used.
Read more: What is dash?
The LAO
Lao (The LAO) is one of the attractive DAOs these days, which operates as a venture capital company in America. Of course, the main difference between The LAO and the DAOs we mentioned earlier is that this DAO was set up in America and follows the laws of this country; But it has implemented its functions in the form of smart contracts and decentralized applications.
Read more: What is a decentralized application or Dapp?
Gitcoin
Gitcoin is an independent and decentralized platform that provides financial support to developers who are building open source applications. Gitcoin users can view all the projects that have joined the platform and then select the project they wish to invest in.
The Dow Stack
DAO stack with a sovereign token GEN It is another interesting DAO that some people use descriptions like “Aggregate Intelligence Operating System” or “WordPress of DAOs” to refer to it. Dao Stack is actually an open source software stack designed to support a global and interactive network. This stack can be used to build various DAOs that require group and interactive activities. The dao stack also provides tools to communicate all the daoes running on it.
Aragon
Aragon with token ANT It is a platform that is designed as a Dao and its purpose is to provide the tools needed by Dao. The platform actually supports the creation of DAOs on the Ethereum blockchain and then helps maintain and continue their operation.
You can see a list of the most popular Dao tokens on Coinmarketcap.com.
Frequently asked questions
Dao is a type of organization that is not controlled by a specific person or entity. The DAO hack refers to a project called The DAO
The first thing you need to do is to code your Dao smart contract. The next stage is the initial sale of government tokens to attract capital. Those who buy your Sovereign Tokens will become shareholders of your Dao. The third and final step is to actually launch the Dao on the blockchain. From this point on, you as a developer do not have any special advantage over other shareholders.
No, bitcoin is not a dao. Bitcoin is not based on smart contracts and does not have a sovereign token.
Conclusion
In this article, we tried to examine the decentralized self-governing organizations or Daos in simple language and explain how they work. By reading this article, you must have noticed that DAOs use smart contracts like decentralized applications; But every decentralized application is not necessarily a Dao.
Any network must benefit from the feature of “decentralized governance” in order to be included in the category of DAOs. Basically, the concept of decentralized governance is extremely key in the Dao, and that is why governance tokens are so important to these organizations.
The decentralized world is progressing day by day, and the tendency to decentralize is evident in many areas that were previously managed centrally. The domain of governance was perhaps one of the domains that we could hardly imagine in a decentralized manner; But the rise and popularity of Dao proved us wrong.
With these interpretations, we may see today's centralized organizations replaced by daos in the not-too-distant future. Of course, it is natural that the prerequisite for the realization of such an event is the preparation of the daoes for this widespread use and the maximum resolution of the problems that they may be facing now.
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