Decentralize Everything – What Is a DAO
The power of cryptocurrencies and blockchains today is largely due to decentralization. Decentralization is when the control, or decision-making process, is spread out across multiple entities. Different people, with different ideas and goals, have to work together in the decision-making process. This increases participation in decision making and gives greater power to the users.
The opposite of decentralization is centralization. Centralization is when one entity controls the decision-making process. An example of this would be Amazon. In order to sell products on Amazon, you must play by Amazon’s rules, and you do not get a say in what those rules are. Amazon alone is the decision-maker, and it makes those decisions based on what is best for Amazon.
Bitcoin was the first blockchain and is decentralized. The majority of public blockchains are decentralized, and this feature was part of what makes it revolutionary. Today there are also centralized blockchains, but they are mostly private blockchains used internally by companies.
Enter the DAO
DAO stands for decentralized autonomous organization. DAO’s are organizations that are run on the blockchain. The bylaws and rules of the organization live on the blockchain as smart-contracts. Since DAO’s are decentralized structures, this creates an organization that has no owner and is instead controlled by various stakeholders.
DAO’s integrate with the rest of the blockchain infrastructure. Many times we will see DAO’s issue a token that is used to incentivize participation in the decision-making process. Ethereum is the largest platform for DAO’s, with the most projects and participants.
This is a new type of organizational structure and the laws of various governments have not caught up to it yet. However, that has not stopped pioneering individuals from setting up DAO’s in a variety of sectors. In the future, we will see more DAO’s emerge, and you might even be interested in joining one.
What is DeFI? It stands for Decentralized Finance and its mission is to decentralize all existing financial services and put them on the blockchain. The goal is to take all types of financial services, from basic to advanced, and create them on the blockchain as dapps and smart-contracts.
Decentralized Finance projects are often managed from a DAO – decentralized autonomous organization. By being a member of the DAO, you can have a voice in the direction and decision making of the project. If you have a background in finance, this can be an incredible way to get involved and contribute to the crypto ecosystem.
The future is bright
In the future, look to see more projects organized as DAO’s, especially as blockchain technology advances. In 2020 we saw a trend towards bringing to light inequalities that exist in society. DAO’s have the potential to decentralize and empower the stakeholders, which can reduce inequalities in equity.