DAOs
A comprehensive overview of the trends, technologies, important sectors, key players, important tools, problems and potential of DAOs. (Note: Data in this section last updated July 3rd, 2022)
This article is intended to provide a somewhat thorough introduction to DAOs for beginners. It’s over almost 18K words (~1 hour to read) and is organized into 8 parts, which are summarized below for the tl;dr crowd:
1. What is a DAO? A DAO – or decentralized autonomous organization – is a blockchain-based organization that may replace the modern corporation. Unlike a traditional corporation, no single person or group owns or controls a DAO and they rarely have executives or managers. Instead, they are owned and operated by members who make decisions democratically (much like a modern-day cooperative).
2. The Problems with Traditional Corporations: While they have greatly benefited society in several ways, corporations are relatively inefficient – multiple layers of management make them slow, bureaucratic, unimaginative, opaque and wasteful. In addition, they are generally constrained with a myriad of financial and legal regulations.
3. The Benefits of a DAO: Proponents argue that DAOs will retain all of the benefits of a traditional corporation – namely trust, security and growth – while being much more open, efficient, flexible, transparent and democratic (in fact, Mark Cuban called them the “ultimate combination of capitalism and progressivism”).
4. How Does a DAO Work? DAOs use blockchain technology to store their own funds and smart contracts to enforce their own laws – meaning that they don’t have to rely on traditional intermediaries such as banks or courts. As such, DAOs largely operate outside of the purview of the existing financial and legal ecosystem, allowing them to eliminate many of the costs, restrictions and regulations imposed on conventional organizations.
5. DAO Ecosystem: There are nearly 5,000 DAOs today representing almost 4 million members. In aggregate, these organizations hold nearly $8B in their treasuries and span a wide variety of use cases including investments, charity, entertainment, worker collectives and social clubs.
6. DAO Tooling: DAOs rely on a variety of communication, fundraising, governance, treasury management and compensation tools to operate efficiently.
7. Problems with DAOs: Critics argue that DAOs will be inefficient, expensive, prone to crime and represent a legal and regulatory nightmare.
8. Why DAOs will Eat Corporations: DAOs are a truly disruptive innovation that have the potential to grow 10,000x.
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