The original text is a report on DAO, and this article is a summary of the report by the author. It is similar to scattered key points. Those who are interested can read the full report of the original text.
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Over the years, the main characteristic of changing organizations has been: lowering transaction costs for coordination. This is reflected in Coase's theory of the firm. You can implement trivial improvements, such as applying a decision support system within an organization, but sometimes a large systemic change occurs that at first seems like a trivial improvement, but can actually lead to the birth of an entirely new type of organization.
DAOs not only reduce transaction costs, but also create new organizational forms and compositions.
In order to have a functional DAO, members must:
Equal access to the same information for decision making
There should be the same fee when making preference transactions
Their decisions are based on the DAO's self-interest and best interests (not based on coercion or fear)
DAOs attempt to solve problems associated with collective action by aligning individual incentives with globally optimal outcomes (for individuals or firms), thus solving the coordination problem. By pooling funds and voting on their allocation, stakeholders can share costs and incentivize coordination to benefit the entire ecosystem.
DAOs are conducting the biggest experiment with new forms of alternative governance. These experiments were conducted not in the form of large nation-states, but at the grassroots level of local communities. This is at a time when the peak of globalization is in the rearview window, and the world is focusing on a more localized model.
Notably, Bitcoin was the first type of DAO. It is run with no central authority by a team of core developers who primarily propose decisions about the project's future direction through Bitcoin Improvement Proposals (BIPs), which require all network participants (albeit primarily miners and exchanges) to make recommendations about project changes. The code to make.
There will be a growing number of DSaaS (DAO Software as a Service) providers such as OpenLaw, Aragon, and DAOstack aiming to accelerate the growth of DAOs as a category. They will provide on-demand professional resources such as legal, accounting and third-party audits to provide compliance services.
In a DAO, there is a tradeoff triangle, and these conditions must be weighed to find the best outcome for the DAO to accomplish its mission:
exit (personal)
Voice (Governance)
Loyalty (decentralization)
DAOs challenge the traditional hierarchical and exclusive organizational structures seen in many parts of the world today. Through the "wisdom of the crowd", better collective decision-making can lead to better organization.
The intersection of DAOs and decentralized finance (DeFi) is spawning new products. As the extent to which DAOs use DeFi products as payment/distribution methods becomes more decentralized and digital, DAOs will increase and lead to the formation of more and more DeFi products interacting with DAOs. It will be most powerful if DeFi implementations allow token holders to use governance to customize and optimize the design of application parameters, thereby creating a better, tailored user experience. It can also be used for time locking and creating different types of fee structures.
DAOs allow pooling capital, distributing the allocated capital and creating assets backed by that capital. They also allow for the allocation of non-financial resources.
Using DeFi allows DAOs to bypass traditional banking and its inefficiencies. This is very important because it creates a company that is trustless, borderless, transparent, accessible, interoperable and composable.
DAO community and governance are complex and difficult to get right, but are critical to a DAO's success. There needs to be a balance of coordination processes and incentives so that all community members feel that their contributions matter.
Most DAOs want to wrap a legal structure with underlying smart contract code around entities to comply with regulations, provide legal protection and limited liability to their participants, and allow for easier deployment of funds.
Today's DAOs are not fully decentralized, nor are they fully autonomous, and in some cases, they may never want to be fully decentralized. Most DAOs will start with centralization and then start to employ smart contracts to automate simple internal processes and limit centralized governance. With aligned goals, good design, and luck, they could in time become a true version of The DAO. Of course, the title of decentralized autonomous organization, which does not fully reflect reality, has brought a lot of heat and attention.
DAOs are not fundamental or unique to blockchain technology. DAOs have a long history of improving governance structures, decentralizing decision-making, increasing and enhancing transparency, and enabling members to vote and actively participate in decision-making.
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