What do most centralized enterprises have in common? We are speaking of the likes of Amazon, Facebook, and Twitter. These enterprises are worth billions of dollars a large chunk of which is value that comes from the work put in by others. Yet those that contribute do not get to be part of the rewards. If you dare to question these centralized entities, they have the power to censor your content, or ban you. In spite of your content bringing value to their platform.
A DAO is a community with decentralized governance. If you take an online community and ensure that no individual has no power to make or enforce rules without community agreement, the result is a DAO. No single moderator could wield his power and overrule decisions of the community.
In most centralized institutions, users give the platform its value. Yet they have no say in the direction it is headed. Through programs on the blockchain known as smart contracts, DAOs automate out these centralized powers. Take a power-hungry moderator and replace him with a program that automatically enforces rules decided by the community. The rules should be transparent to every community member and they vote on agreed rules which are reflected in the smart contract.
If there are some controversial issues or disagreements, there is recourse. Put the issue to vote and if enough people agree, new rules are enforced.
Why are DAO’s so famous now?
The concept of the DAO is not totally new. It was reference the Ethereum white paper in 2012. The idea is not novel. However, nothing beats an idea whose time has come. The developments in blockchain technology are critical to the success of DAOs. Think of the blockchain as a database that every node has to agree to make changes, and no rogue actor can manipulate.
If anyone decided to change the guidelines, he needs to persuade everyone else involved. It is not likely to succeed if he doesn’t know how to persuade others. So even though DAOs have existed for a while, the era to lead them has just started.
The Human Characteristic that makes DAOs work
Let’s be real. Supposing you had the privilege of being in a powerful position where your word was law. Would you make decisions that would not be in your favor? I guess the answer is no. We are human and that means we are selfish. This is one reason why DAOs are successful. Through voting, you can ensure decisions are in the interest of everyone involve.
How do I create a DAO?
Setting up a DAO involves different parts: An online community of people and Ensuring regulation is decentralize. An existing community can be transformed into a DAO by putting in place guidelines for decentralized participation. There are some tools that make it easier to manage DAOs.
Let’s assume we wanted to set up a DAO to fund a social cause. When forming such a DAO, there are key ingredients that enable automation of actions. These include:
- Communique Joining the DAO
- Proposals for rule adjustments within the DAO
- Voting infrastructure, and
- Treasury control
DAOs have been famous for championing useful causes for humanity. Before Constitution DAO, no one would have imagined of a DAO purchasing the United States constitution.They were so close to achieving their aim and gave others hope for the future. Anything is possible when people rally round a cause with dedication.