What is a DAO in crypto?

If you have been actively following the narrative of NFTs, Gaming and the Metaverses in general, you would have heard of Decentralized Autonomous Organization (DAO). Or perhaps you may already be participating in a DAO (or multiple DAOs) by now; given the fast rising of the decentralized autonomous organization. 

Before we move on, it is important to understand that DAOs exist solely in the digital world.

Disclaimer: Our content is intended to be used and must be used for informational purposes only. It is very important to do your own research and analysis before making any investment based on your personal circumstances.

How does a DAO work?

In a nutshell, DAOs are essentially entities with no centralized leadership. Instead, they are collectively managed and owned by their community members and function based on the  organization of a specific set of rules enforced on a blockchain. 

DAOs function without hierarchical management. They operate using smart contracts – codes that are automatically executed whenever a set of criterias are met. To participate in a DAO, members usually get involved through the ownership of a native token. In return, they get voting rights that could potentially influence how the organization operates – either to decide on governance or create new proposals, thereby shaping the framework of how things operate and run within the DAO.

Are DAOs the future? In codes we trust!

DAOs are fully transparent and totally autonomous. They are built on open-source blockchain. This means that not only can everyone view the code, they can also audit their built-in treasuries; given that the blockchain records all financial transactions. 

Unlike traditional organizations that operate based on trust in the people behind it, DAOs operate based on codes. These codes are publicly available and can be rigorously tested prior to launch. With every action that a DAO takes, it has to be approved by the community and it is completely transparent and verifiable. 

Given this framework, members can put forward innovative ideas, internal disputes can be solved through a voting system and provide investors with the opportunity to participate in the early stage of start-ups, sharing profits and losses.

Interesting DAOs across different sectors

The Bitcoin network is the earliest example of DAO but it doesn’t stop there. These days, many interesting projects built around DAOs have sprung up and it is just the tip of the iceberg – there is no stopping how DAOs can be deployed.

In the world of blockchain, the innovations are fast and furious. After NFTs, the next big trend to watch is DAO and these projects are some of the many who have gotten into the DAO foray.

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Red DAO

Luxury fashion brands have been innovating and evolving fast to rise up to the world of crypto and blockchain. The rise of NFTs has given birth to DAOs. Unlike NFTs which are digital assets, DAOs are ways to govern organizations by issuing or selling cryptocurrency tokens that track individual ownership.

One well-known DAO is the Red DAO. It recently purchased Dolce & Gabbana’s inaugural NFTs, the Doge Crown, for almost $1.3 million in Ethereum. Red DAO currently has about $15 million of Ethereum in its treasury.

Neon DAO

Together with RTFKT, Tribute Labs launched a Metaverse DAO – to purchase virtual world items such as avatar fashion pieces, virtual lands and more. Neon DAO currently controls about $20 million of Ethereum.

Krause House DAO

Naming itself after the late Chicago Bulls general manager, Jerry Krause, Krause House comprises a group of 2,000 members and they have raised approximately $4 million in Ethereum in six days; with its eye on the NBA franchise.

CityDAO

After Wyoming has officially passed the law to recognise Decentralized Autonomous Organization (provided they are registered as a legal company), CityDAO is officially the first DAO to own land under the Wyoming DAO LLC law.

CityDAO is an experiment that pitches itself as “building a city on the Ethereum blockchain.” It offers a basic form of citizenship through the purchase of one of 10,000 NFTs for .25 ETH (~$1000) that also confers access to a Discord, voting rights, and the ability to settle land after the “First & Founding Citizens.”

Big Green DAO

Hot on the heels of DAOs, Kimbal Musk, Tesla board member and brother of tech mogul, Elon Musk, is announcing the opening of a membership application for Big Green DAO, a Web4 charity focusing on food justice. Its primary goal is to overhaul the philanthropy  industry and address food inequality. Read more about the project from the white paper here.

Conclusion - should you participate in DAOs?

DAOs may be exciting and potentially get even bigger than we could ever imagine. Nonetheless, it is important to do thorough research on DAOs before getting involved. Some of the important considerations include: finding out what the structure is, what the voting rights are and is it deployed in an industry with growth potential? Participating in a DAO because of hype would be, of course, foolish. 

Given the numerous ways that investors could benefit from the world of crypto and blockchain, it could help to diversify your portfolio and cushion risk. Always remember this mantra – high rewards equate to high risk. 

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