Selling shovels in the DAO rush

DAO is a concept

in which a group of individuals with a common interest operate a community-led organization on the blockchain without the need for centralized leadership.

A Decentralized Autonomous Organization (DAO) operates independently of traditional administration and can exist for various reasons. For example, a group of art enthusiasts may form a DAO and pool funds to flip digital arts, create an art metaverse, and earn from their collective success.

Similarly, a football club DAO may grant access to a significant number of club supporters who have purchased all season tickets to make crucial choices during the season, such as new coach hires, project development, and even player replacement.

DAOs have limitless possibilities, including providing a transparent and rapid decision-making framework for corporate networks, especially technology companies.

Do We Truly Need DAOs??

There is no denying the strength of a group of individuals united by a common goal. People enjoy making decisions and having a voice in how things are done. In short, people dislike being controlled and would love to be allowed to contribute.

That is why the concept of Decentralized Autonomous Organizations (DAOs) and their implementation have disrupted both startups and existing corporate businesses.

Consider social media platforms such as Facebook, Tiktok, Twitter, Wikipedia, and others, which have achieved mainstream success by allowing users to construct their worlds rather than having one created for them. They are successful because they enable individuals to build and make decisions. While these technology giants are principally not decentralized, they showcase what a DAO aims to accomplish.

Employees are increasingly choosing remote employment over onsite jobs that allow them to work from home because they prefer not to be controlled like robots.

These are some of the roots upon which DAOs are built, and it is for this reason that DAOs will continue to thrive.

DAOs vs. Traditional Companies

Running a business with partners needs significant financial investment and confidence to achieve harmonious collaboration and goal alignment. The danger ratio grows considerably more when dealing with people via the internet.

However, with DAOs, you don't have to trust anybody but the "smart contract" that executes the DAOs on the blockchain, which is open source and verifiable by everyone.

Let's have a look at some of the differences:

A DAO, for example, is democratized, whereas a regular firm requires human administration and execution. A DAO also maintains voting rights for its members for any infrastructure updates. Because voting is done on the blockchain, results are obtained instantly without intermediary interference, improving confidence. A committee is frequently formed to count votes in traditional establishments, which might be manipulated due to human variables.

DAO solves the Principal-Agent problem

The PA dilemma, also known as the Principle-Agent paradox, is a prevalent issue in physical organizations where the agent's objectives aren't matched with the principal or key stakeholders.

Consider the agent to be the CEO of a corporation and the principal to be the investor.

Agents take employment at their discretion, putting the firm's main aim in jeopardy. DAO tackles this problem by offering community governance, in which stakeholders are not needed to trust any agent and are instead rewarded by the smart contract for their contributions.

In basic terms, it's like putting the organization's power in the hands of the people who operate it rather than the intermediaries who manage it.

How does a DAO make money??

Most DAOs will earn money via a return on operations or investments—the methods for collecting and making capital differ depending on the type of a DAO.

Listed below are a few examples:

• Profits from operations or investments made by the DAO itself might be profitable for a DAO whose primary goal is company longevity.
• A DAO whose primary goal is to realize a short-term vision might get a part of collections from individual wallets that have invested in the DAO's objective, as well as voluntary donations.
• A DAO whose primary goal is to help its organizations, DApps, protocols, and other initiatives may get a percentage of the funds raised by the projects it supports.

What's next for DAOs?

While most DAO use cases are now limited to the blockchain industry, DAOs may eventually extend to more traditional domains. Joining a DAO, for example, may soon be more appealing than joining a startup since DAOs may generate liquidity much more quickly while allowing workers to participate in the organization's governance actively.

Real estate is another way DAOs may begin to affect the real world. It's possible to foresee DAOs, which currently hold digital property such as NFTs, acquiring physical property in the near future. The physical property will offer DAOs more regulatory clout, perhaps paving the way for a loose network of DAO-owned properties that provide their members with a kind of pseudo-citizenship that allows them to roam freely between them.

Nothing can be hidden because of the transparency. Every update has been made public. Every time a house is worked on, evaluated, or remodelled, the information is automatically stored inside the token, and no one can delete it.

This means that the individual purchasing the property would be aware of all the details, and the seller would be unable to conceal anything. Likewise, every escrow transaction would be altered since the third-party mediator (such as an escrow officer) would be encoded into the token.

However, DAOs are still in their infancy, which means that the most innovative applications for this new kind of organization may still be identified.

In the end,

to guarantee the continuous success of DAO systems in the community and enterprises, the engineers and pioneering team must discover the ideas that would function best with a DAO model.

With emerging trends, DAOs may eventually take over how technology firms and other corporate enterprises are operated since it enhances shared risk and reward while also developing robust social communities.