2022 is knocking at the door, and the hype around cryptocurrencies, blockchain, and NFTs is at its peak. While the finance hype may be natural, the most important thing to note is that blockchain technology is not just associated with cryptocurrencies.
There’s been an increasing number of use cases for blockchain technology every passing year. And, one of the most exciting and potentially game-changing use cases, though, is the Decentralized Autonomous Organization or DAO.
But, before we jump into the bookish definition of a Decentralized Autonomous Organization, let’s understand what all the acronyms and jargon mean. A decentralized organization does not have a central point of failure. It is managed not by a single person but by a collective of people and computers that follow a predetermined set of rules.
Thus, while working in a DAO, people get part of the organization’s ownership, unlike the old-school traditional organizations.
What is a DAO?
A decentralized Autonomous Organisation (DAO) is an organization that uses computer-embedded code to replace the traditional organization and management structures. This organization is ruled by the people who are a part of it, rather than a single leader.
In other words, it means that there is no single point of failure, as the power to change the organization’s direction lies with the people who are a part of it. Thus, a DAO is owned by everyone who purchases its tokens. Still, instead of each token equating to equity shares & ownership, tokens act as contributions that give people voting rights.
In a DAO, decisions are made electronically by predetermined rules encoded as computer programs called smart contracts.
Why will DAOs drive the Most innovation in crypto?
Powered by smart contracts, DAOs offer transparency in transactions and equal voice to their members. But, they aren’t a new concept. It all started with The DAO in 2016, a venture capital fund.
Fast-forward to today, DAOs are being widely used for investments, fundraising, charities, buying NFTs, and borrowing money.
Tapping into the latest hype, what comes to mind is, will DAOs work as promised?
DAOs are non-hierarchical.
DAO—a community of people on the internet with a shared capital account—is not managed by a single person but all. The rules are unchangeable once written on the smart contract unless the whole group agrees. This gives equal rights to every community member, unlike the traditional organizations where authority lies in a single hand.
But how can a flat, non-hierarchical organization benefit? The simplest answer would be preventing the misuse of power. The members of a DAO have the right to vote, and each vote will be tallied equally before any decision is made.
DAOs can increase capital efficiency
DAO is changing the finance space. They eliminate intermediaries as much as possible and let people have total control over their PII. By facilitating smooth and easeless supply and verifying the authenticity of the paying and receiving party, DAOs increase financial efficiency, higher security, higher transparency, and enhanced traceability. DAOs with good infrastructure facilitate efficient use of the community capital.
DAO Landscape in 2021
In May 2016, a few Ethereum community members announced the establishment of The DAO, also known as Genesis DAO, the first internet-based decentralized community. It was proposed as a venture capital fund, and during its creation period, anyone could send ETH to any unique wallet address in exchange for DAO tokens. This period raised 12.7 Million Ether (worth $150 Million in 2016) and thus became the biggest crowdfund ever. It was so successful that when ETH was trading at $20, the value of ETH from The DAO was over $250 Million. However, due to a loophole in its protocol, a hacker in 2017 exploited The DAO and drained funds worth around $70 Million.
Since then, DAOs have been growing competently, and now we have over 100 DAOs that manage assets worth over $10 Billion.
The DeFi movement is giving a whole new look to the world’s financial structure. What it promises is simple—permissionless, transparent financial service. How decentralized finance improves financial inclusion, liquidity and reduces costs is huge. Unlike the traditional finance structure, the dApps or decentralized applications do not require any central authority. But then, who governs these applications?
Almost all major dApps are governed by DAOs including Uniswap, and Aave. These communities look over the fund tied to a project and are responsible for ensuring the project’s success they support. But, DAOs are not of a single kind. Different types of DAOs serve different purposes.
Some prominent types of DAOs include:
NFTs are insanely expensive assets and are tough for a single person to afford. This gave rise to the collector DAOs. The members of these DAOs collectively share the costs of such assets.
Some DAOs give the whale investors the power to operate as hedge funds, while other DAOs let the community members pool their funds and purchase NFTs. Since all these are carried on the blockchain, transactions are transparent, and the value of the NFTs is distributed among the whole community.
Remember when CryptoPunk #2890 was sold for a whopping $761,889 and how outsiders gave suspicious looks. Any individual didn’t buy the collectible but a DAO who collectively invested their money.
One of the biggest problems in online gaming is the issue of trust. How can you trust a game developer when he says he will pay you for your in-game achievements?
Game DAO is looking to fix that problem; the solution isn’t to eliminate game developers but rather create a fully transparent system that lets users earn tokens from playing games, watching videos, and communicating with other players.
The Gaming DAO blockchain is a platform where gamers can be rewarded (basically in the form of NFTs) for their time and efforts and share resources they might not use to help others. It is a platform that is designed to attract gamers to blockchain technology. Of course, it is not only for gamers but also for developers looking for a way to monetize their game or solve their game issues.
Yield Guild, a Gaming DAO, provides a platform for game developers to crowdfund and develop their games. With the use of Ethereum blockchain and smart contracts, Yield Guild will store ownerships and keep track of the players ranking and inventory.
DAOs are changing the internet-based social platforms. The web2 world’s apps like Facebook and Instagram have full control over the users and their data. With Social DAOs, the users have full freedom to write the rules of engagement in a way that benefits them and their community.
Feiyu, a social media platform built On NEAR, enables people to share memes and GIFs with others on the metaverse. It offers an inbuilt meme generator to make memes within the platform. The users can get rewards like tokens or NFT items. It is an NFT marketplace that aims at inspiring its users to create their own unique NFT pieces.
Top 10 DAOs to join in 2022
#1 IBC DAO
Play-to-earn gaming will be the biggest trend in the coming years in crypto. Coupling that with the metaverse craze, we expect digital forms of DAOs to play a huge role in growing the blockchain gaming ecosystem. IBC DAO is one such community that is striving to reduce entry barriers for players and provide a consistent income.
By following a sub DAO approach, IBC gaming guilds empower the P2E economy by supporting early-stage projects. In addition, the community members gain exposure to some of the best-performing assets, such as yield generating NFTs, PFP NFTs, virtual lands, and in-game assets. Considering where the crypto market is headed in 2022 with sectoral gaming rotation, market participants will greatly benefit by joining a gaming guild like IBC DAO.
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#2 Flamingo DAO
Flamingo DAO is an NFT-focused DAO exploring emerging investment opportunities for ownable, blockchain-based assets. Flamingo acts as a real-time curated list of the best NFTs that investors can buy, sell, and trade.
Flamingo enables each artist and creator to set the rules regarding how their assets can be used and traded. For example, an artist can create a rule stating that their painting can only be sold at auction to a collector living in Russia.
#3 Friends with Benefits DAO
Friends with Benefits is a new DAO that was started with the vision of empowering a decentralized incubator for Web 3.0 applications. It provides a set of tools for Web 3.0 entrepreneurs to develop and grow their business by providing them with a community, resources, and shared incentives.
It also includes a marketplace for peer-to-peer trading of resources, services, and products and a governance protocol for voting and decision-making.
#4 Curve DAO
CURVE DAO is the governance token for CURVE Finance, which helps exchanges as an Automated Market Maker (AMM) by providing liquidity. It is also one of the top 5 liquidity providers in the crypto world.
Unlike other players in the market, CURVE Finance is a decentralized exchange for stablecoins, and since the assets are less volatile, it offers low slippage and low fee swaps amongst assets of the same value. Since it allows permissionless, easy, and automated change of assets, Curve DAO is useful for different purposes.
- For cryptocurrency users, it allows easy swap of stablecoins.
- It is a good option for liquidity providers to earn interest fees while trading and for traders looking to invest in specific opportunities.
Curve Finance is a fully collateralized, peer-to-peer network of fiat currencies built on the Ethereum blockchain. This network is governed by the DAO token holders who can vote on proposals and receive rewards.
#5 Merit Circle
Merit Circle is a decentralized autonomous organization that invests in the best play-to-earn games and provides them with the support they need to grow. Play-to-earn games are games that you can play to earn rewards in the form of NFTs.
The community constantly looks for potential gaming projects to help and fund in the Merit Circle ecosystem. The games that can get the most votes from the Merit Circle community receive ETH and ERC20 tokens from the Merit Circle DAO. This funding is further used to get the games off the ground.
Once the game is successful, the holders receive staking rewards. As MC is a community-first focused DAO and has a diverse community, it arranged a Balancer liquidity program that focuses on the flaws of fundraising for DeFi protocols. Unlike regular pools, in the Balancer pool, the weight of both the assets will be flexible.
#6 Yield Guild Games
In a world of games like Fortnite and PUBG, it’s no surprise that some game devs are looking for a new way to make their mark. And, the Yield Guild is exactly what they need. It specializes in providing a platform for game publishers, developers, and gamers. It also serves as a hub for V.R. games.
The Yield Guild helps such developers by providing capital and consultancy to help in the development and publish it on the platform. The team behind the project is also creating a V.R. game called the “Yield” — that will allow players to form Guilds and battle against other players to climb the leaderboards, gain rewards, and earn passive income.
#7 Gnosis DAO
Gnosis is a decentralized platform built using Ethereum smart contracts, allowing anyone to create prediction markets. Gnosis is built upon blockchain technology’s decentralized, transparent, and immutable nature to create a forecasting tool that is open and accessible to anyone. The Gnostic platform will enable anyone to participate in the markets and create new markets and allow anyone to create and participate in prediction campaigns.
The Gnosis DAO is a decentralized platform that allows people to make predictions on specific events in both the virtual and real-world, which can be anything from the price of Ether to the outcome of a football game to the next U.S. president.
#8 Maker DAO
MakerDAO is an Ethereum-based protocol that issues the Dai stablecoin. Dai acts as a decentralized stable coin, which is pegged to the value of the U.S. dollar, 1 Dai = $1. Through a system of Collateralized Debt Positions (CDP) and autonomous feedback mechanisms, the Dai stablecoin system aims to provide a viable alternative to fiat currencies issued by central banks.
CDPs are debt positions denominated in Dai whose value is backed by Ethereum collateral. To ensure a well-functioning market, users of Dai must maintain a minimum amount of collateral in their CDP to prevent liquidation. If the collateral value falls below a certain threshold, the CDP is liquidated, and the debt owed by the user is paid off in full by the Maker system.
#9 Aragon DAO
Aragon DAO is a company that provides all the functionality needed to run a Decentralized Autonomous Organization (DAO) on the Ethereum Blockchain. They believe that the tools provided by Aragon will help increase the adoption of DAOs as an alternative form of governance.
They offer the Aragon Platform that provides the foundational tools to bring DAOs to life and make them work. These include the governance, voting, accounting, and fundraising tools required to easily and securely run an organization without the need to trust anyone else with custody over your funds.
The Aragon Network is the first decentralized jurisdiction, allowing Aragon Network organizations to operate on their terms.
The first community-driven crypto incubator, DuckDAO’s main focus is to break the early stages of investment in projects with high potential. DuckDAO involves projects in three tiers—Incubation level, Strategic Contribution level, General Contribution level. DuckDAO has a range of products, including DuckFarm, DuckDAO Hunters, and Duckstarter.
DuckDAO Hunters is an NFT collection game. Season 1 of the game completed with over $200,000 in rewards, including a $100,000 grand prize. Season 2 will implement what was learned in season 1 and make the game more exciting and rewarding.
DuckDAO has shown that the DAO model for investing works flawlessly when correctly executed.
While a lot promised by DAOs is yet to be proved, the changes it has already brought are remarkable. One thing that has been made clear is that the DAO movement is here to stay!
From developing the network architecture to building the biggest gaming economy, DAOs are impacting all over the crypto ecosystem. The rising interest in micro-economies and true ownership given to contributors will help many people realize the true potential of DAOs. And in my opinion, 2022 is the year for DAOs to go fully mainstream. Join now to witness an epic revolution.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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