How will DAOs redefine organizations in Web3?

As Web3 becomes the new hub of modern business, businesses are showing greater interest in alternative ways of organizing corporations. Centralized management and traditional hierarchies of new talent might soon become things of the past.

One such way of organization is a DAO. The DAO model is a breakthrough in redefining work culture by prioritizing community over hierarchy. Its rapid adoption is set to change organizations and leadership forever. How? Let’s explore, but first, let’s understand what exactly is a DAO.

What is a DAO?

Let's look at the definition of DAO. DAO is an acronym for Decentralized Autonomous Organization. In simple terms, it is a community platform built on a coded set of rules. The members of a DAO agree to certain terms of engagement which are implemented through smart contracts. These contracts work on a blockchain-based algorithm that is self-executing and irreversible.

DAOs try to do away with legal contracts and corporate hierarchies which are a hallmark of traditional organizations. They focus on decentralization of functioning where members are united by a common goal. In this way, contributors can maintain their autonomy as workers while also being a part of a larger mission.

How does a DAO work?

What makes Web3 DAOs special is the unprecedented autonomy they offer to governor-members. A typical DAO operates on a foundational framework of smart contracts which fulfill pre-defined protocols set by its developers. Once set in place, these contracts carry out transactions and other functions without human intervention or oversight.

A key feature of DAOs in Web3 is complete transparency and verifiability of all operations. This helps in building a trustless and secure relationship among members as each stakeholder relies on a computer code to complete a task. All actions carried out by these contracts are stored on a blockchain-supported database, which can be audited publicly by all members.

DAOs need funding in order to carry out their goals. This funding is collected from members through a token issuance method. Participants who believe in the vision of a DAO buy tokens in exchange for funds. The ownership of said tokens offers them voting rights in proportion to their virtual holdings. As stakeholders, these members play a role in decisions related to governance and the further growth of the DAO.

DAO Benefits

Collective ownership merged with independence in functioning makes DAOs a unique model of team management. The high level of flexibility and freedom offered on this Web3 platform has led to its growing popularity among new groups, businesses, and individuals. Here are some key benefits of using DAO-

Decentralization in participation

DAOs promote collective participation to achieve the highest level of decentralization. Blockchain and crypto-based contracts eliminate dependence on a few individuals or centralized boards for decision-making. The affairs of an organization are managed on consensus between various stakeholders who hold voting privileges based on their level of investment.

Compared to traditional institutions, DAOs encourage more participation by empowering all members to have fair say in their activities. Because of well-distributed power, these projects enjoy greater trust among new investors, freelancers, and budding brands.

Enhanced accessibility

As a community-based project, DAOs can remove the many barriers to entry newcomers face in accessing high-paying work niches. People from any part of the world can become a part of a DAO by simply buying their tokens on the internet.

This supports the democratization of labor and income by providing a level playing field to talented individuals. With endless scope for innovative growth, DAO-based communities could serve as networking machines to unite people with a shared vision.

Transparency and accountability

DAOs are built with open-source software that works on blockchain-based ledgers. The votes cast by a member as well as the transactions secured between parties are permanently stored as an immutable block of code. Each member of the network can view the history of exchanges made on a DAO. This ensures complete transparency in operations and imparts public accountability to members.

Impact of DAOs on business in web3?

The explosion of DeFi post-2020s has led to renewed interest in DAO as a business model for the Web3 ecosystem. As blockchain-based investments become mainstream, enterprises and social organizations around the globe are looking to leverage the decentralized web.

The simplified executability of smart contracts can be useful for streamlining the governance of large organizations. Trusted timestamping and publicly distributed databases are being employed to enhance the trackability of digital interactions over long periods.

Cryptocurrency-based projects such as MakerDAO, JuiceboxDAO, and DAOSquare have employed blockchain to raise and distribute digital funds for various purposes. Using similar technology, Solana-based decentralized talent network Outdefine has created a novel solution to revolutionize the talent market.

Future of DAOs

The crop-up of DAOs in different fields such as investment, fundraising, social work, and art gives a glimpse into the ubiquitous usability of this framework. Many industry insiders and analysts have come to show faith in the possibility of applying blockchain technology to different arms of business management.

As businesses adapt to Web3, DAOs are likely to become a significant part of expanding outreach and funding. However, areas such as determining a uniform governance structure and legal status of DAOs are critical to their adoption into real-world organizations.

Keeping the undeniable benefits of AI in mind, one cannot ignore the role of human intelligence in business management. Client-facing relationships and intuitive decision-making are certain aspects of a business that are best left to the training of human experts. This limits the role of DAO-based governance to the execution of contracts and record-keeping.

Conclusion

DAO has emerged as a promising branch of blockchain technology with the potential to transform the face of corporate business. Smart use of this model can help new entrants bypass the centralized structures of traditional institutions and make a direct impact on the larger economy. As innovation continues, we are sure to witness new ventures that utilize DAOs to acquire recognition and influence on Web3.