Decentralized Autonomous Organizations (DAOs) are one of the most exciting developments to emerge in the crypto world. DAOs, which are rapidly becoming a vital part of the blockchain and crypto ecosystem, have many uses. In this newsletter, we will take a closer look at DAOs.
What is DAO?
DAO is an abbreviation that stands for Decentralized Autonomous Organization. The DAO is a collectively owned, blockchain-driven organization working towards a common mission. It can also be defined as an online community with a shared crypto wallet.
DAO is basically a Web3 structure that enables communities, companies or any type of organization to be managed without central leadership, thanks to what blockchain technology provides.
The second newsletter in which we examine the development of the web. You can review it again and remember the concepts of Web1, Web2 and Web3 from here.
Ethereum is used for most blockchain-based decentralized applications (DApps), but there are also DAOs on blockchain networks such as Solana and Cardano.
Etherum.org defined DAOs as follows:
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Member-owned communities without central leadership.
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A safe way to collaborate with strangers online.
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A safe place to contribute money to a specific cause.
DAOs are an effective and safe way to work with like-minded people around the world. In a DAO, which can be thought of as an internet-based business that is collectively owned and managed by its members, decisions are governed by bidding and voting to ensure that everyone in the organization has a say. Rules regarding expenses are also placed within the DAO through a code called smart contract.
How Do DAOs Work?
The backbone of a DAO is the DAO’s smart contract. The contract establishes the rules of the organization and holds the treasury of the group. Once the contract is published on Ethereum, no one can change the rules without a vote. If someone tries to do something that doesn’t follow the rules or logic in the code, they won’t succeed, and the treasury is also determined by the smart contract, meaning no one can spend the money in the treasury without the approval of the group. This eliminates the need for a central authority for DAOs. Instead, group decisions are made collectively, and payments are automatically authorized once votes are completed.
Why do we need DAOs?
Starting an organization that involves financing and money requires a high level of trust with the people you work with. But it’s hard to trust someone you’ve only interacted with online.
With DAOs you don’t have to trust anyone else in the group, just the DAO’s 100% transparent and publicly verifiable code. This situation offers many new opportunities for global cooperation and coordination.
In DAOs:
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There is generally a non-hierarchical and completely democratized order.
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A vote by members is required for any changes to be implemented.
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Votes are tallied and the result is implemented automatically, without the need for a trusted intermediary.
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All events are transparent and fully open to the public.
Strengths of DAOs:
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Convenience to join/leave
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Speed
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Rapport
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Transparency
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Decentralized governance
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Smart contract automation
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Flexibility to create experimental space
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Token-based incentives
Developmental aspects of DAOs:
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Legal uncertainty
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Possible vulnerabilities
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Free-riding (to shirk, to be ready)
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Tax uncertainty
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Lack of clearly defined roles
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Difficult informal coordination
DAO Use Examples
DAOs can serve many different purposes. For example:
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Charity: You can accept memberships and donations from anyone in the world, and the group can decide how they want to spend the donations.
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Freelancer network : A network of contractors can be created that pools their funds for office space and software subscriptions.
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Startups and grants : A startup fund can be created that pools investment capital and votes on which startups to support. The refunded money can then be redistributed among DAO members.
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Social DAOs : Social DAOs, one of the most privileged DAO groups, can be thought of as private clubs where membership is gained by purchasing a certain amount of DAO tokens.
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Social Impact DAO’s : Focus on social impact and can lead to the creation of new building blocks, economies and organizations to meet unmet needs.
Although DAOs are still in their infancy, they have already accomplished a lot and have unlimited potential for impact. The nature of DAOs as open, decentralized, community-based organizations places greater emphasis on the importance of grassroots and community-level decision-making, as opposed to the traditional hierarchical structures of nonprofit organizations. That’s why they can contribute perfectly to the social impact sector.
DAOs could become a vital part of the social impact ecosystem in the not-too-distant future!
Impact DAO Examples
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KlimaDAO: Takes an innovative approach to climate change by creating a “carbon-backed, algorithmic digital currency” where each token is backed by a ton of verified, tokenized carbon reductions.
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SeedClub: It is a social token incubator that helps developers create successful social tokens.
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ReFi DAO: A startup community on a mission to accelerate impact on people and the planet.
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HerStory DAO: Acts as a collective that helps incubate the work of marginalized crypto creators, especially in the NFT space, and helps bring equality to the arts space.
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Climate DAO: Like many social impact DAOs, ClimateDAO focuses on combating climate change. However, they take a much different approach, focusing on activist investment as a means of achieving social change.
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Protein DAO: A collaborative community for the culturally curious that helps people and ideas grow.
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Earthist DAO: A community that believes in the power of regenerative, non-toxic agriculture and production.
Further Reading
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The white paper titled ‘Decentralized Autonomous Organizations: Beyond the Hype’ published by the World Economic Forum in June 2022. You can read from here.
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The article ‘Blockchain and the emergence of Decentralized Autonomous Organizations (DAOs): An integrative model and research agenda. You can read from here.
ReFi Türkiye Podcast 🎧️
🌱 New episodes of our podcast series, which we conducted with the pioneers who think and build on Web3, within the scope of the ReFi Turkey program, are coming soon!
You can listen to the episodes about the intersection of web technologies and the impact ecosystem on Spotify, Apple Podcasts, Soundcloud and Spreaker. You can also buy NFTs that we prepared specifically for podcast episodes with the code you will hear in the episodes!
Movie Recommendation
Warner Bros Discovery (WBD) recently announced that its home entertainment division is releasing its first NFT movie, Lord of Rings: The Fellowship of The Ring, in collaboration with content blockchain pioneer Eluvio.