Cointelegraph breaks down DAOs, explaining why this increasingly popular governance structure is relevant and transformative.
In the last episode of Cryptopedia, viewers can get a succinct and informative look at decentralized autonomous organizations, or DAOs. Cointelegraph’s Jackson DuMont believes that DAOs have the power to “completely transform the way work and social collaboration are organized.”
What is it that makes this type of organization both decentralized and autonomous? The answer is smart contracts on the blockchain. Fundamentally, A DAO runs on lines of computer code written in smart contracts that anyone can interact with in the same way.
DuMont outlined the three main steps required to get a DAO up and running.. The first step is to create that smart contract. The second step is to determine how to receive funding and enact governance, which is usually done by creating a token. Lastly, the DAO is deployed on the blockchain.
The most popular use case of a DAO is crowdfunding. The collected money is put into a smart contract which, in return, issues tokens to DAO members. Token holders, who own shares in the DAO, can then vote on how to spend the money and vote to appoint delegates.
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In the case of ConstitutionDAO, members raised just over $49 million to buy an original copy of the United States Constitution, but were outbid at auction.. Another example is Blockbuster DAO, which aims to raise enough money to buy Dish Network’s video rental brand and turn it into a streaming movie studio.
DAOs aim to reduce the risk of poor leadership through horizontal leadership, or flat hierarchies that level the playing field of power. The scope is infinite and no matter where a member is, they are all subject to the same smart contract rules. Trust is placed in the code and not in people.
Of course, there are still risks and concerns about legality and safety. A notable example of a DAO gone wrong is The DAO, which was hacked for $50 million in 2016. A recent report claims to reveal the identity of the alleged hacker.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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