DAOs have made something possible that till now was unimaginable, like bringing together a group of people worldwide together establishing their own set of regulations while they do not know each other. DAO development has made this a reality, where rules are ingrained into the code with the help of blockchain, so there is no need for any centralized management separately.
DAOs are now grabbing attention with the rise in popularity of DeFi, and many blockchain experts have said that “the year 2023 belongs to the DAOs”. Here in this article, we will let you know what DAO is and why DAO is important in 2023.
What is DAO?
DAO or Decentralized Autonomous Organization is a community-led organization where any centralized control is absent, but to achieve breakthrough consensus, it applies a specified set of pre-mentioned rules. DAOs, as transparent and autonomous organisations, function over the blockchain networks and smart contracts to enforce the decisions approved by the voting process. All planning regarding the future course of protocol about it, will be operated are taken through these proposals, which reach at consensus and are further accepted for enforcement.
There are certain hierarchies present in DAO regarding who will look after the protocol in a certain way and perform specific duties, and to encourage participation, there are incentive frameworks. An individual can participate in the voting process to secure the protocol’s best interests and earn rewards. The healthy protocol translates into the increased value of tokens, ensuring all participants remain happy while ensuring the protocol remains robust.
Why is DAO important in 2023?
When we look at DAOs, we can see that they have democratized the organization compared to traditional companies. To make a change, all members need to vote instead of any central authority overriding the consensus, and for funding, it crowdfunds by issuing tokens.
Investment, fundraising, charity, borrowing, or buying NFTs, DAOs are used everywhere, without intermediaries. Worldwide, a company named Axie Infinity launched a blockchain-based game, reaching a multi-billion-coin cap. Another entity in Kazakhstan named Astana International Financial Centre has set the world’s first investment DAO incorporation framework.
The challenge faced by DAO
Till now, we have been talking about the advantages of DAO technology, but let’s not overlook the shortcomings like DAO can’t be an ideal choice for those enterprises whose work nature demands them to be centralized. A senior blockchain developer at Rejolut says that since DAO is a relatively new technology so it might be challenging to deploy by some enterprises. So, the expert advice offered is that before choosing a DAO, enterprises must access carefully about their goals and requirements or, even better, consult a DAO expert.
DAOs are feasible as a decentralized platform for enterprises that can be adopted. The legal recognition of DAOs remains an issue in major countries, although some have decided to bridge the gap. It’s no secret that technology has consistently outpaced regulations, and the current need is to build well-designed regulatory frameworks for DAOs so that the future of digital entrepreneurship remains safe.