Following Web3.0 applications such as decentralised finance (DeFi), non-fungible tokens (NFTs), Metaverse, it seems that decentralised autonomous organisations (DAOs), which are entities run by encoded computer programs, will be the next big thing. Industry analysts believe that DAOs can be a way for projects to show their commitment towards decentralisation through community governance attributes.
As per a report published by Consensys, an Internet company, more than six billion dollars worth of digital assets are held by the 20 biggest DAOs of the world. In December, 2021, TRON Network, a blockchain-based digital platform, completed full decentralisation to become a DAO, and reportedly is in charge of over 75 million accounts. “DAOs would allow anyone with a project idea to pitch it and potentially receive funding in return. Anyone carrying DAO-based tokens carry the right to vote on plans, and would then receive rewards post the projects making enough profit. In the last couple of years, blockchain grant communities, community-oriented funding projects, venture capital (VC) funding structures, among others, have made use of DAO structures to make different investments,” Amanjot Malhotra, country head- India, Bitay, a cryptocurrency exchange, told FE Blockchain.
Experts believe that DAOs have made their mark across fields such as blockchain gaming, fashion, art, VC platforms, among others. In November, 2021, ConstitutionDAO raised more than $40 billion to bid on the rights to acquire an official copy of the US constitution document in a Sotheby’s auction. “DAOs are expected to replace institutions and workplaces. This Web3.0 application will help people earn through non-traditional ways such as play-to-earn (P2E) games, art creation, content curation, among others. Apart from NFTs and fundraising, DAOs can be of different kinds and can contribute towards various developments,” Punit Agarwal, founder and CEO, KoinX, a cryptocurrency taxation platform, said.
In 2021, the US state Wyoming became the first from the country to provide legal recognition to DAOs, and gave it the same legal status as limited liability companies (LLPs). Reportedly, investors have also started to set up DAO-based funding projects, with some notable ones including Orange DAO, VC3DAO and BessemerDAO.
Moreover, reports have shown that DAOs enable management get benefits such as decentralisation, participation, publicity, community outreach, and transparency. Insights provided by World Economic Forum, a non-governmental organisation, stated that the number of participants in DAOs grew to 1.7 million from 13,000 in 2021. “Governance token-based membership provided by DAOs help in trust and transparency within community standards. Pioneer DAOs such as UNI are showing how the it can be done. The recent wave of mainstream institutional investment in DAOs is a sign of the potential for more widespread adoption, showcasing an alternative to traditional organisations,” Rajagopal Menon, vice-president, WazirX, a cryptocurrency exchange, mentioned.