With the ever-changing crypto world giving us new technologies and concepts, DAOs and governance tokens step in and promise to keep crypto investors engaged. But what are DAOs? Why are they catching a lot of attention lately?
Blockchain technology puts forward new projects and ideas, with DAOs gearing up to be the latest craze. There are communities solely created around DAOs, even going as far as creating investment communities. For example PleasrDAO, that bought the sole copy of an album for $4 million and gathered a portfolio of several valuable NFTs.
Keep reading to learn what DAOs are all about. See how DAOs and governance tokens have the potential to revolutionize our lives, from work to leadership.
What are DAOs: A Quick Introduction
Corporate decisions are the domain of C-suite executives. They’re responsible for significant management decisions to promote growth and sustainability. With the majority out of the equation, DAOs can change that and distribute the choosing power to anyone involved in a company.
The concept behind DAOs and governance tokens is to allow all members who own tokens to participate in a voting system. With DAOs, everyone can manifest their opinion on a potential change.
Anyone who owns a token can participate in voting. DAOs and governance tokens aren’t just aiming to decentralize an organization, but to redistribute the power to the people rather than a small group of executives (that can decide based on self-interest).
How do DAOs and Governance Tokens Work?
To understand what DAOs and governance tokens are and how they function, smart contracts — the backbone of a DAO — need some explanation. Smart contracts are computer code that runs when all the conditions specified within the contract are met.
For example, a smart contract deployed by an employer will automatically pay you when you complete work.
For DAOs and governance tokens, the smart contracts take care of the voting system and deploy the changes to the organization when all parties complete all the conditions. To change the contract — the code to implement changes in the company — voting must happen. Voting is available to all the members owning DAO tokens.
Examples of DAO Tokens
Although the concept is still in its infancy, some DAO tokens already exist. Let’s see what DAO tokens are in circulation:
- Maker DAO: Maker DAO is a decentralized autonomous organization where token holders can vote on policy changes, governance, and more in the Maker ecosystem. This smart contract also handles liquidity for their native token (MKR) and stablecoin (DAI). It does this by minting tokens when the demand is high or burning when there are too many.
- Aragon: Another decentralized autonomous organization that allows users to create their own DAOs. Aragon token holders (ANT) can manifest their opinions about the operations and decisions on the platform by voting on new proposals for the platform.
- Curve Finance: As a DeFi trading platform, Curve users can trade stablecoins and use them with their native token (CRV) to provide liquidity. Curve uses smart contracts to implement the work as market makers to create liquidity pools.
- UniSwap: One of the most famous DeFi exchanges, with tons of altcoins to trade. UniSwap promotes a heavy focus on voting on proposals through its token holders. The concept of a community-driven, decentralized exchange made their token (UNI) gain considerable value in 2021.
Will DAOs and Governance Token Change Our Way of Life?
DAOs are still an unknown technology, but their ambitious goals have kept investors curious and engaged with their ongoing development. With blockchain technology bringing new possibilities, we can see DAOs leaving a mark on our way of life in the future.
Not only can everyone have a say on a company’s decisions, but it might allow people to have more available time for other tasks. DAOs can allow people to contribute more meaningful work to several DAOs.
Smart contracts handle the repetitive and monotonous work administration (like getting you paid for your services). The possibility of simultaneously working for several DAOs also means more ways of generating income.
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