What are DAOs, Decentralized Autonomous Organizations?

What are DAOs, Decentralized Autonomous Organizations?
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What are DAOs, Decentralized Autonomous Organizations?

What are DAOs?

As the decentralized finance (DeFi) and NFT communities increase, controlling decentralized protocols becomes increasingly important. One of the most pressing issues confronting these communities now and in the coming years is figuring out governance—coordinating collective decision-making to maximize budgets and operations.

On the other hand, governance necessitates considerable coordination costs because network participants must vote on every decision. These coordinating costs can be drastically reduced in emerging decentralized networks that use smart contracts to allow users to rule collaboratively.

Many new protocols are being developed utilizing this framework, with much of the effort thus far centered on open-finance-based platforms and, increasingly, on cultural networks that buy and sell art and other valuables. These new networks are known as DAOs—decentralized autonomous organizations—and comprise core team members with aligned incentives and similar interests, have no one leader or single point of failure, and are nearly exclusively managed by code. DAOs are, in many respects, a mash-up of investment banks, corporations, and social clubs linked together by cryptographic pledges.

Different DAO governance models 

Juicebox 

This DAO is still not completely decentralized. Some DAO members own a sizable portion of the tokens, giving them disproportionate influence over critical decisions. Each workspace serves as a collection of tasks with a common topic. They separate the jobs into workstations. This is similar to the group division provided by other DAOs, except workspaces do not have a limited voting reach or a governing authority over their responsibilities. Its sole purpose is to separate the duties to tackle them more effectively.

Juicebox's governance structure is very formal and centralized. The main distinction between them and other groups is that they organize their voting process in cycles.

During the last cycle, several recommendations were discussed on Discord, resulting from countless chats and soundboard sessions with essential team members. Once you've got a proposal in place, you'll run it through a Discord channel, where a group of community members will structure it—you're invited to join in and help. 

The ideas that have made it to the start of the financing cycle are now subjected to a heat test. As the name implies, this test assesses if the community receives the suggestions well. They are uncovered and debated in Discord.

FWB

Their methodology has developed a multi-group-based governance model from a simple consensus paradigm (using Discord to communicate suggestions, papers to codify them, and Snapshot to vote). Each group has a sphere of competence, decision-making, and voting power in that subject.

Their most recent shift has been back to a centralized consensus approach, emphasizing the funnel of ideas, allowing for more visibility and reach.

When the information funnel becomes a bottleneck, especially on large projects with several bids, you must figure out how to ensure each proposal gets its fair share of attention. The Snapshot community, for starters, will vote on the different possibilities. The team allocated to the proposals that receive the most votes will next put them into action. The recommendations that receive the most votes will subsequently be put into action by the team that was assigned to them. This is the model of the sovereign.

FWB has established an upvote mechanism like Reddit, in which the community may both offer and upvote suggestions that are important to them. This strategy aids in curating such ideas in terms of substance and time.

The proposals team curates the ideas before they are reviewed and voted on by the community. Over 5,000 token holders visit Snapshot to read the ideas and vote. This aids in the standardization of the format and substance of the proposals. Finally, the voting is held.

OrcaProtocol 

Instead of token ownership, the Orca Protocol aims to construct governance around persons. An ideal governance model would maximize meaningful interaction while maintaining the organization's effectiveness. By aiding in constructing a permission surface for accountability, checks, and balances, the protocol would benefit communities in the middle.

DAOs fall into two categories: decentralized and unorganized and centralized and organized. The Orca protocol would benefit communities in the middle by creating a permission surface for accountability, checks, and balances. Compared to the resources available now, a DAO stack would be much more versatile, adaptable, and tremendously advantageous without adapting to current structures.

GitcoinDAO

Gitcoin allows users to engage in platform administration using their Gitcoin governance tokens. Gitcoin is pursuing a gradual shift to total decentralized governance, with the community eventually taking over platform administration. As of October 2021, this shift will be led by community "stewards." Initially, Gitcoin stewards were entrusted with establishing policies for Gitcoin Grants.

The core operations of the Gitcoin governance process revolve around various defined "workstreams," which appear to be broad categories. Public Goods Funding, Public Goods Prototyping, Sybil Defenders, and Progressive Decentralization are the main workstreams. Enlisting the cooperation of society to invest in public goods and creating criteria for numerous financing rounds is referred to as public goods funding. Sybil defenders devise techniques to keep Gitcoin safe from Sybil attacks. Gitcoin's architecture becomes more modular and simple as decentralization progresses, making community governance easier.

Gitcoin is a platform for a community of contributors and programmers that want to work together to build a more open network. Gitcoin continues to advance Web 3.0, the distributed web, by providing a mechanism to distribute funds to key open-source projects through an open governance funding structure.

The bottom line

DAOs, as internet-native organizations, can transform corporate governance. While the concept grows and the legal gray area in which they operate is addressed, many organizations may adopt a DAO governance model to help manage parts of their operations.

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