The DAO & De-Fi World: A Connection You Didn't Know You Needed
DAOs are the governing bodies entrusted with controlling and overseeing the allotment of its treasuries linked with a project, making them one of the fundamental De-Fi applications. The cornerstone of the crypto world, DAOs are the valued ownership of a community and operate without any central authority.
Decentralized autonomous organizations are one of the main parts of the crypto world. In a short time, DAOs have surpassed others in importance and are advancing the cryptocurrency market. There have been several excellent advancements since the time DAOs first appeared and their current status.
This blog post will highlight the position and importance of DAOs in relation to the market's current standing and structure. Read on!
What is a DAO?
A group of people that concur to abide by specific rules for a common goal is referred to as a DAO or Decentralized Autonomous Organization. The organization's rules are codified as smart contracts, which are algorithms that run when specific criteria are met. Blockchain technology is used by DAOs to keep track of their transactions, exchange currencies, and make choices on things like treasury management and technical advancements.
The organization is regarded as "decentralized" because it lacks a central authority. Due to the flattened structure of DAOs, no one person owns or manages the entire organization in the same way that a CEO would in a conventional business. Instead, everyone has a stake in the organization.
How Does DAO & DeFi Work Together?
When you comprehend the 2 primary aspects of decentralized DAOs, You can determine their relevance to DeFi space and the deep connection between the DAO & DeFi.
So what are those primary aspects? Here they are:
Decentralization
As already mentioned, DAO is Decentralized Autonomous Organization. The core characteristic of the entire blockchain ecosystem is decentralization. The platform is simply a public entity because no one has jurisdiction over it.
DeFi also stands for decentralized finance services, in which there is no central control over the financial system. Doesn’t all this look like a match made in heaven!!
The human factor comes into play when a dispersed group of coin holders dispersed across the globe exercise their voting rights, make financial contributions, or carry out other tasks that entitle them to more issued money.
This does not, however, imply that any group that works together or makes decisions via a voting system is a DAO. Additionally, it must adhere to the definition's second requirement, which is autonomy.
Autonomy
That’s another primary characteristic of DAO. It's difficult, to sum up, autonomy in a few words. There are many different roles and degrees of autonomy. Still, it implies that people will just serve as supporters in a DAO and that technology will take the initiative.
Therefore, in a DAO, choices are made independently based on the coding finished by a DeFi development firm or developers.
What are the Primary Advantages of DAO Protocols?
DAOs protocols aim to decentralize power within organizations. They are often created using blockchain technology and smart contracts, and they have a number of advantages over traditional organizational structures. Here is a list of 4 of them:
- Concerned About Community: DAOs are decent, if not ideal, because of collective effort, distributed accountability, and cooperative decision-making.
- Fast and Automated: Voting is used to reach a consensus on all decisions, which are then automatically carried out via the underlying smart contract. By doing so, the human factor is eliminated and project development and improvement are accelerated.
- Transparency: DAOs maintain transparency, the key advantage of blockchain technology, just like any decentralized protocol.
- Secure & Reliable: DAOs are significantly more secure than other DeFi projects, let alone traditional industries, because of the lack of a single point of failure and the absence of a human aspect.
The crypto environment of the present and the future cannot exist without DAO and DeFi. With the introduction of DAOs, the blockchain world is moving toward a more robust ecosystem that offers a significantly higher level of decentralization than what you now see.
If these platforms are authenticated and audited, the growing number of DAOs will all have a huge impact on how the decentralized and autonomous markets function in the future.
Author Bio:
Akanksha Malik writes to share her knowledge on crypto trends, investments, and NFT opportunities with her readers so they can stay updated! She works as a digital strategist and content creator for Mesha -- an online investing platform that serves as a club where investors from around the globe can meet new fellow investors, compete in money challenges, and invest in NFTs & crypto. Besides finance and fintech, Akanksha loves architecture and discovering cuisines of new places she travels to.