HashKey Digest

7 July 2021

The Overview of DAOs Ecosystem

Kevin Nielsen discusses the ecosystem and essentials of DAOs in the article, which helps readers to understand DAOs better. Everyone talks about DAOs now, but DAOs encompasses so much more.  

What is a DAO?

A decentralized autonomous organization (DAO) is an entity that enables a distributed group of actors to organize or achieve a certain goal or meet a mandate, broad or specific, by coordinating through a shared set of rules enforced on a blockchain. These rules are coded into smart contracts (in most cases) with the help of  “governance frameworks”.

  • DAOs or DOs offer a mechanism that helps reduce external information, facilitate bargaining and enforce transaction costs,
  • to bridge the gap between market and firm dynamics by enabling any actor, anywhere in the world, to engage in certain activities aligned with a common and communal mission.
  • These activities can be as simple as pooling capital or building a website, but that capital and talent coordination can now occur almost instantaneously, at scale, and anywhere in the world.

The Current State of DAOs

  • DAOs have already begun to spin up with different use cases. Smaller entity profiles, like curator or guild DAOs, have managed to craftily coordinate around existing community tools and channels like Discord, and have opted for simpler, more noble frameworks like Moloch or Snapshot.
  • We have recently seen the emergence of intra-DAO relationships, most notably smaller communities interacting and offering services to large blue-chip DeFi projects and communities.

Frameworks – Governance frameworks are smart contracts that enable rules of a decentralized governance process to be enforced on the blockchain. Its code specifies the parameters by which power is distributed, the process is executed, and votes are cast. Compound’s Governor Bravo contract is a good example.

Controllers – Some of the frameworks have a controller that allows users to directly interact with the governance contracts through a user interface. They tend to be built by the same team building the framework. Controllers can also offer data and application programming interface (APIs) to help developers pull and index information, as well as provide more comprehensive features helping integrators spin up their DO.

Treasury – Treasury and capital allocation is a common decision that DO members have to make. Funds can be secured in a smart contract “multi-sig” wallet requiring a minimum number of people to approve a transaction before it can occur, or they can be stored in other types of smart contracts (these treasuries are growing pretty significantly). There are a number of teams building the contracts and tools for signatories and members to seamlessly interact with locked capital or portfolio assets allocated and managed by governance.

Work – Talent and contributions are core to the value created by DOs internally and externally. Tools are being built to measure labour and output from contributors and members, given that in a multidisciplinary environment, the delivery of product, knowledge, and services will end up taking in many forms and could become quite subjective. There are also complex identity, contributor reputation and trust issues that still need to be addressed.  

Aggregators – Aggregators can act as the glue that bridges the gap between these different tools and frameworks. They are designed to abstract away the nuance and complexity of infrastructure and middleware to lower user experience frictions in interacting with DOs. These providers are also well positioned to index and serve global statistics, as well as study the more ‘meta’ relationships emerging from cross-DAO interactions.

Link to original article: https://thedefiant.io/what-is-a-dao-mapping-out-the-ecosystem/

Don’t miss out

Subscribe now to receive notifications of our articles and newsletters: