DAOs and their Influence on DeFi, Governance and Investment
You’ve probably heard the term upon browsing crypto forums, news sites, and even in various protocols you use in your day-to-day life. You may have heard of a DAO collectively purchasing various assets, or making and voting on proposals that affect certain Dapps they’re connected to; but what exactly are DAOs, and what are their implications on DeFi and various other aspects of life?
DAOs are just one of the many possibilities realized and brought to life thanks to blockchain technology and blockchain-based protocols. Like other aspects of this newly emerging and innovative tech, each DAO is different; be it in terms of size, purpose, function… etc.
What exactly is a DAO?
The acronym stands for Decentralized Autonomous Organization, and they are — as the name implies — organizations that are self-governed in a decentralized fashion. To understand them further, we can pick apart each word and view them as one of 3 aspects that make up a DAO:
Decentralized: Decentralization is a popular aspect of many blockchain-based ideas, and DAOs are no exception. Governance in DAOs is decentralized, meaning decisions are made from the bottom up. In conventional DAOs, said decisions are first proposed and then voted on by token holders.
Autonomous: The other vital aspect of DAOs is autonomy, meaning the self-governance and independence of the said organization. The autonomy, like proposals and voting, is secured by smart contracts, which minimize human error and eliminate the need for trust.
Organization: Lastly, there is the organization, i.e. the community, the people… the entire purpose of the DAO’s existence. Without this aspect, a DAO wouldn’t have any goals to achieve, and it would lack a reason for existence. A DAO’s fundamental purpose is often determined at its earliest stages, and less essential aspects are often voted on afterward.
What Can DAOs Do?
Theoretically speaking, DAOs should be flexible enough to — with sufficient resources and competence — accomplish anything. In practice, complications may arise due to multiple interconnected factors including the inexperience of governors and the overall young and infantile state of DAOs as well as that of the underlying technology and protocols.
For instance, a DAO centered around the purpose of collecting and selling art NFTs may vote to pool their resources from the treasury to purchase a particular artwork. If the majority of the voting party is knowledgeable enough to understand the potential value of said art piece, the resulting decision is likely to bear fruit in the future.
DAOs can also exist to govern projects. For example, a DAO that owns a blockchain-based game may vote on tweaking certain changes in the hopes of balancing the game’s mechanics. Depending on the circumstances such as the newly-proposed values, the chosen developers, the timing, underlying network capabilities… the proposed changes may improve, or downright break the game.
But DAOs don’t necessarily have to have their purpose based around blockchain just because they are powered by it. You could form a DAO for reforestation, urban planning, competitions and tournaments, festivals, events… the possibilities are vast, and they’re only recently being realized.
DAOs allow for a group to pool their resources together without having to trust one another, in the hopes that their collective efforts will yield results and achieve the goals set by the members. The result may not always be perfect, but the principle is sound; and like everything blockchain-related, is only going to improve every step of the way.
Does Precog Finance Have a DAO?
Although not exactly a DAO, Precog Finance’s PCOG token will provide governance rights to stakers, allowing them to vote on proposals and thus contribute to the evolution of the platform by participating in the various decision-making procedures. In this sense, the protocol will progressively reach decentralization, and the ecosystem will be genuinely governed by the community.
Would you like to be the first to learn about PCOG? You can find more of Precog Finance below:
Website: https://precog.finance
Twitter: https://twitter.com/PrecogFinance
LinkedIn: https://www.linkedin.com/company/precog-finance
Facebook: https://www.facebook.com/precog.finance/
Instagram: https://www.instagram.com/precog.finance/
Telegram: https://t.me/Precog_Finance
Whitepaper: https://precog.finance/pdf/whitepaper.pdf
