What is a DAO?
DAO stands for Decentralized Autonomous Organization and is an algorithmic and decentralized approach to decision making.
DAOs are built up from a community of token holders that have voting rights to the DAO depending on how many tokens they have or how valuable their tokens are. DAOs can be used as a mechanism within a blockchain protocol, or simply as a vehicle in of themselves, as is the case with the application Kalipo.
What is the Purpose of a DAO?
DAOs are implemented into blockchain platforms to make them more democratic. Seeing that blockchain is a decentralized system but also a technology that requires updating and occasional fixes, a system needs to be in place to make these changes.
This is where DAOs come in.
DAOs can be used for many things including decision making, upgrading and fixing functions on the chain, raising and allotting capital, philanthropy, building towards goals, among others. Ultimately, DAOs are a vehicle for organizing communities and generating consensus.
Why do DAOs Matter?
As we have already mentioned, blockchain is based on democratic processes and insists on decentralization. This requires a method for voting, and it needs to be effective and secure.
So DAOs are important because:
- They make chains more democratic;
- They incentivize greater involvement in the system;
- They attract more users;
- They allow for improvements to be made;
- They allow financial decisions to be made.
DAOs are becoming a necessary part of Web3 technology as blockchain is brought into the internet’s development. The aim of Web3 is to give greater autonomy to users of the internet, among other things, and the reasoning behind DAOs in this case is to give the Web3 community a voice.
DAO Projects - Examples
- MakerDAO: One of the original examples of a fully functional DAO. It was essential for this DeFi project to maintain a sense of community decision making as the idea of a community run platform was central to the project.
- Gitcoin DAO: This DAO project focuses on giving new dev teams the opportunity to gain funding so they can develop their ideas through community input. New platforms can access grants from the Gitcoin DAO treasury after presenting their idea to the community.
- KalipoDAO: Kalipo is a project built with the Lisk SDK. Its purpose is solely to give users the chance to make decisions together. Anyone can access the platform and create a forum for discussion of any size decision.