With the emergence of blockchain technology, 'decentralization' has expanded beyond the financial sector. It is now revolutionizing every other industry, including health, business, gaming, and, most significantly, governance.
When you think about governance, you probably think of leadership – the power is given to a group of people to make decisions on behalf of others. Also, when you think of an organization structure, you probably picture a chairman, CEO, and department heads reporting to them, or something similar, because this is the most common and the traditional hierarchical structure.
However, by combining social construction and governance, blockchain technology challenges conventional governance frameworks and redefines our perception of how organizations and systems should be governed.
So, to eliminate or minimize the risks of centralized manipulation and administration, organizations can integrate into their governing infrastructure the concept of DAO.
What is a DAO?
In its simplest form, a Decentralized Autonomous Organization, DAO is a community controlled by its members with no centralized authority. As a result, the community is focused on a specific objective that collaborates with a shared set of rules encoded on a blockchain. This means DAOs provide decentralization, cryptographic security, and community-centered direction to help projects and innovations thrive.
DAO adheres to the decentralized principles of cryptocurrency and blockchain, with no single person having undue power over a system. Instead, DAO projects are built on public blockchains, allowing a community of like-minded individuals to contribute and vote on how a project should run.
How Does DAO Work?
Smart contracts are the bedrock of the DAO's rules, and they establish the foundation for the DAO's activities. These rules are built on smart contracts, determined by a core team of community members. Hence, they are visible, verifiable, and publicly auditable, allowing any prospective member to fully understand how the protocol will operate.
Let's look at how traditional organizations work to better understand how DAO works.
In traditional organizations, it is a top-down format. There is a hierarchy to rank individuals based on several factors; there might be a CEO, a board of directors, senior partners, and others who decide the fate of several other shareholders or members. As a result, a few individuals in authority determine the organization's goals, objectives, plans, roadmaps, and other crucial decisions. This monopoly creates corruption, bureaucracy, and a lack of innovative ideas.
To address the inadequacy of the traditional organization, a DAO allows you to work and associate with someone without trusting them, as all of the organization's activities are built on decentralized technology and the smart contract codes that define them. In addition, Decentralized Organizations do not restrict access to prospective members of the community; so long as you meet the requirement and entry standards are completed, you will be immediately welcomed because no one person is in charge of the process.
Every DAO has a treasury to keep its digital currency, and it is funded by issuing tokens, which members can only access with the group's agreement. Group decisions are decided collaboratively over a specified period. However, you must have a "governance token" to participate in DAO decision-making, and token holders have the opportunity to propose recommendations for DAO's organizational operations. Thus, the value of a member's vote is proportional to how much they have given to the project.
In addition, DAO code is written in the "Solidity" programming language, and it is activated when deployed on the public blockchain. After the code has been deployed into operation, it can no longer be changed without a vote of the members; this means no central authority has the power to override the DAO's rules.
Advantages of DAO
The DAO idea is built on a decentralized framework in which control and authority are distributed among all community members, giving everyone a voice. It is decentralized since there is no central authority, and everyone has the same stake.
Trust and Transparency
Traditional organizations carry out most of their activities confidentially, undermining trust within the organization. However, DAOs provide immediate trust because they operate on a decentralized blockchain network where processes and transactions are transparent, permanently stored, and viewable by the public. Moreover, since the blockchain ledger is immutable, no participant can change the rules without a majority vote.
Without a community, DAO is nothing. As a result, it provides a platform for communities worldwide to interact and collaborate on productive projects. All of the participants express themselves independently, and the ideas offered are decided by a vote among the members, and they are carried out independently by the participants.
How to Create a DAO?
Three steps can be taken to create DAO.
Smart Contract Development
This is the early stage of development of the DAO. First, the DAO's early developers create the rules or consensus of the DAO. Then, the DAO's early developers create the smart contract code with the rules and consensus that will govern the group and determine the group's purpose. This code would be thoroughly checked before proceeding to the next phase, as these rules only are changed by team voting as soon as the DAO is launched.
DAOs depend on a shared currency cache raised from their members. As a result, people buy into the DAO if they support its purpose, agreeing to purchase a particular amount of tokens in exchange for a stake after a smart contract is written and the DAO's purpose and regulations are determined. The governance regulations for the DAO are also being developed at this stage.
Launching and Deployment
This is the DAO's final development stage, and it is at this point, that the DAO's code is deployed on the blockchain. From this point forward, each stakeholder's interest can only be changed by the stakeholders who choose it together. As a result, the DAO is no longer under the control of early developers.
Similarly, Cwallet enables the creation of exclusive DAO communities where rules are governed by members. With Cwallet DAO, a group of people can set their target audience by setting a minimum amount of tokens required to join a telegram/discord group. It is a beneficial tool for crypto startups and tokenized communities to engage with their target audience and grow their community.
How to Setup a DAO Group on Cwallet?
The DAO Group is a Telegram group that you can create, and it refers to a group of people who match specific criteria. You can easily create a limit to allow just those who meet those criteria. Before creating a DAO, you must first enable the @cwallet bot by inviting it to the Telegram group and making it an admin.
Step 1: Find the "DAO Group" button in the Advance Group Setting.
- Once you're logged on to your Cwallet account, go to the Tools page and locate the Bots page.
- Next, click on the Telegram Bot option and select from your created list.
- Next, you locate and click on the group advance setting button.
- Three options will pop up; select and enable the DAO Group option.
Step 2: Fill in the information and click "Save."
- To join the DAO Group, you must fill up and specify asset restrictions for group entry.
- Next, you must verify that you have a certain amount of a particular token in Cwallet or hold a certain amount(USD) of total assets in your Cwallet balance.
- The next step is to verify the on-chain balance if you hold a certain amount of a particular token under the selected network on the blockchain. Finally, click the Save button to activate the process.
Done! You've successfully created a DAO on Cwallet.
The reality of decentralization has shown that blockchain applications will continue to gain adoption in new industries. DAOs have grown in popularity due to the growth in Decentralized Finance (DeFi), which has increased demand for decentralized organizations for a wide range of projects.
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