Decentralized autonomous organizations (DAO) are entity structures created from scratch without an authoritative central figure, consisting of tokens owned by members who vote on proposals presented for consideration within its structure. A DAO typically utilizes smart contracts for its implementation while making their operating code open source.
Digital currency stands out as one of its main characteristics due to being decentralized compared with physical cash transactions, meaning they exist across several computers, networks and nodes rather than under one organization such as government or central bank authority. By virtue of being dispersed between many computer networks and nodes rather than being administered centrally they often achieve greater levels of security and privacy not usually possible with physical currency and its transactions.
This article provides an introduction to decentralized autonomous organizations (DAOs). Additionally, token-based memberships will also be explored; their role will include governance services as well as E-governance capabilities as well as any legal implications within the financial ecosystem.
What Is A DAO?
Decentralized autonomous organizations, or DAOs, are associations of participants who come together with a shared aim in mind. DAOs may be created for various reasons including collecting rare non fungible tokens (NFTs), forecasting stock market movements or raising money for specific projects.
DAOs (decentralized autonomous organizations) are completely virtual organizations whose members rarely come into physical contact with one another, using smart contracts and blockchain technology for operations. Since blockchain removes the need for centralized regulatory bodies overseeing transactions and policies, decentralization and autonomy are part of its name.
DAOs (Defined as Decentralized Autonomous Organization) are member-owned internet native businesses with untouchable internal treasuries that cannot be accessed without group consent, where voting and suggestions make up all decisions, giving every member of the organization their voice in decision making processes. Voting and suggestions make up decision-making mechanisms within each DAO; their technology and structure is currently under investigation across numerous industries including business and government; DAOs are seen by some organizations, particularly governments around the globe, as a potential solution against corruption due to their perceived openness and efficiency compared with conventional bureaucracy systems.
Who Invented DAO?
Early in May 2016 some members of the Ethereum community announced the formation of The DAO, also referred to as Genesis DAO, using smart contracts on Ethereum blockchain technology and designed by team, however members of the Ethereum community collectively distributed under the name of "The DAO."
DAO tokens were available to anyone on a 1-to-100 scale by contributing Ether to specific wallet addresses during its formation stage, with 12.7 million donated ethereum tokens totalling $150 Million being received in donations at that time; making The DAO one of the most successful crowdfunding initiatives of its time with total value estimated around $250 Million at $20 per token value.
Simply stated, the platform enabled anyone with an idea for a product to share it with the community and seek funding through The DAO. Since funding had already been secured, all holders of DAO tokens could vote on ideas submitted and possibly receive incentives if approved - things were looking up.
On June 17, 2016, however, an anonymous hacker took advantage of an error and other weaknesses within Ethereum smart contracts to transfer 3.6 million ETH - roughly worth $50 million at that point - without losing it in an exchange due to their 28-day holding period. This money subsequently ended up at one of two accounts which received it instead.
Ethereum community members viewed the attack as legal yet immoral and it proved challenging for both DAO members and themselves to come up with an adequate response. After considerable deliberation on both ends, however, the Ethereum network eventually moved the DAO funds back to an address for recovery; their original owners could then convert back into Ether or close down the DAO at their convenience; owners received tokens at a rate equivalent to 1 ETH per 100 DAO tokens as per original offer price.
How Does A Decentralized Autonomous Organization (DAO) Work?
Smart contracts are at the heart of DAOs; all data pertaining to an organization are housed therein and no changes can take place without being discovered, since DAOs are transparent and open organizations. Furthermore, unlike conventional enterprises that only accept one individual as decision maker on behalf of all of its members compared with all voting members having to approve any proposed changes collectively before becoming effective.
Crowdfunding, through token distributions, provides most DAO funding. Traditional firm governance largely rests with executives, board of directors and shareholders; by comparison DAO governance is community oriented and unconstrained by territory boundaries.
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DAO Membership
Membership models in DAOs vary significantly and could have an effect on other key aspects, like voting procedures.
Share-Based membership
Share-based DAOs are more restricted, in that membership must first be authorized before access is allowed. An individual seeking entry should submit a proposal in exchange for labor tokens to join. Each share denotes ownership and voting power within this DAO.
Organizations which put an emphasis on relationships and intimacy, like worker collectives, investment clubs and charitable organizations, tend to prefer share-based membership systems over token systems in controlling protocols or tokens.
MolochDAO stands out as an Ethereum project financing organization which accepts membership proposals to determine whether an applicant possesses sufficient funds and experience.
Token-Based membership
Token-based DAOs may offer totally permissionless membership depending on their token. Governance tokens tend to be freely traded on decentralized exchanges while others must be earned through offering liquidity or proving work; to vote one simply needs the token in hand.
Membership within this type of DAO typically serves to control tokens or protocols with wide distribution. An excellent example of such memberships using the Maker protocol is MakerDAO; their native currency MKR can be purchased and sold on decentralized exchanges such as Binance and Bibox for purchase and sale, thus giving anyone voting control of its future by investing.
The Role Of DAO In Government
Today, most nations provide electronic public services through ICT to enhance the lives of their residents. E-services are used by governments for numerous reasons including voter registration, driver license registration, immigration processing and payment of taxes among many other tasks. E-services have significantly enhanced government productivity and efficiency when it comes to data gathering, security and distribution processes.
"E-government system" refers to any and all electronic systems utilized by governments worldwide for increasing efficiency and transparency within governments. While e-government services available today may help, their success still requires significant human oversight; their non decentralized IT infrastructure makes them vulnerable against external attacks.
Outsiders present an obvious risk to data integrity by having access to systems that might compromise it - for instance through infected laptops or missing external drives - that compromise it directly, as do unauthenticated users within your organization who could compromise it directly. Also relying on human oversight of daily operations opens it up for errors as well as corruption and red tape that compromise the system itself.
Read More: Navigating the Present: Understanding the Blockchain Application Development Process
The Use Of Blockchain Technology In e-Government Services
How could blockchain based DAOs in e-governance offer? Such an arrangement would be completely autonomous and impervious to acts of violence; with smart contracts as its backbone, such a plan has the capability of managing interactions among decision-makers, management, agency personnel, consumers, suppliers, participants and citizens.
Some agreements could take the form of formal operational contracts (i.e. internal processes, standards etc), while others might hold legal force. To maintain accountability and transparency all government transactions such as usage/transfer of funds/assets/data usage rights etc would be documented on a public blockchain; smart contracts could provide different levels of access depending on a role-based authorization system.
Blockchain-powered DAOs would eliminate much of the paperwork and mistakes inherent to conventional human operations since their operations would be guided by predefined rules implemented via smart contracts.
Additionally, blockchain can also be leveraged to automate various government processes, with smart permits being one such example of such automation. Similar to smart contracts found within blockchain technology, smart permits lay out responsibilities between parties involved - for instance when issuing licenses the government and authorized organization both have different roles to play while permits provide non-governmental organizations the permission they require in order to perform certain regulated functions.
Given the complexity of government procedures and public resistance to adopt new technology, successfully deploying an eGov-DAO may require significant adaptations that present significant difficulties to general audiences.
But, like other blockchains, eGov-DAO would provide transparent and irreversible transactions; hence its incorporation into government services will increase security and dependability while speeding up service delivery; ultimately leading to faster request handling time frames thus increasing office productivity. Once citizens recognize its benefits they're likely to adapt more readily.
How Can DAOs Improve The e-Government System?
Existing electronic government services lack sufficient mechanisms and automation for effectively engaging all stakeholders, providing transparency, and monitoring and assessing in real-time services provided to all. With the use of blockchain-technology in eGov adoption bringing real-time monitoring/assessing of services provided to government bodies while improving resource management/efficiency/openness all benefit the government immensely.
This method facilitates contract allocation and execution more rapidly, reduces litigation between parties, secures documents for audit purposes more reliably, as well as providing ransomware protection - ransomware attacks are increasingly being used against public and private systems alike - that threaten their security; issues addressed by the e-Gov DAO while simultaneously cutting expenses related to IT infrastructure costs.
E-Gov-DAOs aim to develop an affordable, transparent, and secure e-government system which saves governments money, increases efficiency and lowers risks while simultaneously building public trust in governments whose levels have been gradually declining over time. Blockchain could restore public faith in government at a time when trust in them has been diminishing.
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Conclusion
What steps will the central government take to regulate DAOs? A decentralized autonomous organization (DAO) that plans on trading multiple cryptocurrency types may come under central government oversight due to their similarities with equity investment vehicles or exchanges. However, most DAOs will focus more on how best to allocate resources in order to achieve goals deemed significant by its members, than on using tokens to conduct internal business practices.
