If you already conduct or intend to start transacting using cryptocurrencies, it is important to know what a Decentralized Autonomous Organization (DAO) is. This organization is a revolution of the traditional business model of organizations.
Through blockchain technology, it is possible to carry out organization processes using smart contracts. Keep following this post and learn more about DAO and how it promises to facilitate processes in organizations.
What is the Decentralized Autonomous Organization?
DAO – Decentralized Autonomous Organization – is an organization in which the rules are defined in the blockchain system through smart contracts, allowing total transparency to all users.
Therefore, there is no central server (not even an entity) that supervises the processes – the control is done by the shareholders involved in the project. The DAO’s main objective is to finance the projects that are operated by these smart contracts.
How does the DAO work?
Many decentralized organizations rely on some managers to command the voting of the proposals made on the blockchain. With this, the DAO becomes a democratic process, since it works by the amount of votes, and not by dubious criteria.
The organization starts to work through an autonomous system, which is an increasingly necessary process for current companies to survive, as the efforts made by individuals need to be smaller and smaller.
For the functioning, votes are used to represent the amount of ether cryptocurrencies that have been invested by each member during an offer that seeks collective funding for a certain project.
What are the main challenges encountered by this technology?
This ease and cost reduction in trading may suffer from some challenges. Among them we can mention
The legal sphere can be one of the barriers faced by an Autonomous Decentralized Organization. This is because a company is recognized through a legal entity, according to the legislation in force in many Countries.
However, one of the main points of the new autonomous organizations is precisely decentralization, that is, there is no representative – a legal entity – to answer for its structures.
Fortunately, the code of a DAO is visible to all users, and if there is any flaw, the security of this code can be considered a threat by malicious members, generating losses to the project. This security (or lack of it) is influenced by the platform used for trading.
As happened last week when several bugs were found in several tokens of the Ethereum network.
Decision making process
There is no team or representative responsible for studying and considering the proposals. Therefore, the considerations and criteria for evaluating a project are left to the members of the organizations.
Therefore, decisions must be an agreement between all members because the non-consent of only one is enough for the autonomous organization to consider that divergent opinion. Thus, agreement and responsibility are required in any and all decision-making that affects the progress of the vote and the project itself.
The Decentralized Autonomous Organization allows ease, speed, cost savings and transparency in its processes. However, because it is still a recent technology in the market, it can leave some points to be desired.
How about helping your friends to stay updated on market innovations and decentralized finance updates? Share this post on your social networks!