Thanks to the internet and social media, like-minded people can now engage more efficiently than ever before, regardless of their geographical location. In addition, a new type of social network has emerged as a result of the introduction of digitally native money and banking, allowing like-minded individuals to not only socialize but also coordinate around the capital. These new networks, like their predecessors, are unconstrained by geographic borders, allowing them to expand on a wide scale or within a small number of select individuals.
According to the most optimistic thinking, Decentralized Autonomous Organizations (DAO) can transform how people organize and eventually surpass the scale and scope of the world’s most significant corporations and even nation-states.
DAOs are software-enabled organizations, to put it simply. They enable individuals to pool resources to pursue a shared objective and share in the value created once those goals are met.
DAOs can be the preferred organizational primitive for Web3 in the same way that the LLC (limited liability corporation) was for the industrial revolution. However, whereas companies are based on the historical financial system and managed through legal contracts, DAOs are organized by tokens with their rules recorded in smart contracts and run on open blockchain networks like Ethereum.
To understand Decentralized Autonomous Organizations (DAO) better, let’s try breaking the terms individually:
- Decentralized: refers to the technology on which these autonomous organizations are constructed and is further defined in this article as Ethereum smart contracts. Organizations founded on legal documents recognized by a central authority, such as the government, maybe the polar opposite of this.
- Autonomous: in this context, it refers to the ability to continue without outside help. Similar to a self-governing “autonomous” zone within a country (like Hong Kong).
- Organization: This component is well-known, and it may be readily referred to as a group of humans and, if desired, other organizations.
How does a DAO function?
Smart contracts are used to create the DAO’s rules, which are set by a core team of community members. These smart contracts set the groundwork for the DAO’s operations. They are apparent, verifiable, and publicly auditable, allowing any potential member to comprehend how the protocol will operate at all times fully.
The next stage is for the DAO to learn how to acquire financing and impart governance once these rules have been legally inscribed onto the blockchain.
This is mainly accomplished by token issuance, in which the protocol sells tokens to raise cash and replenish the DAO’s treasury.
Token holders get their voting rights in exchange for their money, which is generally proportionate to their holdings. As a result, the DAO is ready for deployment once financing is finished.
Benefits and future of DAO
DAOs, according to a growing number of Ethereum proponents, can be the future of labor, human organizations, and cultural communities. As a result, some believe that DAOs like DeFi and NFTs will achieve widespread adoption before them.
DAOs will take the place of CEO decisions, border meetings, and ordinary business operations, reducing the amount of time spent on pointless tasks. Furthermore, tokens can be used by shareholders to vote.
DAOs may also use tokenomics to alter the recruiting process, pay decisions, and the employment of engineers.
Let’s look at some of the benefits offered by DAOs to understand their future potential better.
- Trustless and secure: DAOs provide security and are decentralized. If a developer cannot continue working on the project, the system will continue to function, and a new developer will be appointed via a voting mechanism.
- Continuous functionality: Another advantage of DAOs is that their functions cannot be turned off. No government or financial institution may terminate a DAO unless it has substantial tokens to vote on. Even yet, reaching an agreement on such a proposal will be difficult for the authorizers.
- Open-source ecosystems: Finally, DAOs are open-source ecosystems, meaning anybody may improve the code. Typically, open-source systems are more dependable since programmers may aid developers in locating code issues and recommending appropriate fixes.
Let’s see, is DAO a real game-changer for social media?
How does DAO impact social media?
- DAOs are social by nature.
A social network is created when a DAO is created. A DAO is a collection of people that have banded together to achieve a common objective. They require communication and governance technologies to function and collaborate efficiently. DAOs naturally combine all members’ contributions, create a shared social network, and allow social data to be monetized on-chain in a transparent manner.
- Bridge to Web3 for social media firms.
Each social media platform has a stranglehold on a vast amount of user data. As a result, authorities, and consumers are becoming critical of this system. Using blockchain technology to ensure data accountability, openness, and ownership can help to alleviate these issues.
- Power of tokens for content providers.
Today’s social media is centered on user-generated content and the creator economy. However, the platforms that host such activity collect most of the revenue it generates. Blockchain tokens have the potential to change this by allowing creators to monetize their following using many of the same methods that DAOs use to reward members for efforts.
- Early adopters as investors
Every new network has the challenge of attracting the initial users and generating enough activity to attract more clients. One barrier to entry that stops new techniques from gaining traction is the network effects exerted by current social media behemoths. DAOs can help networks get off the ground by providing financial incentives to early users.
DAOs are still in their infancy, yet they have already accomplished so much, and their potential to be a genuine force for social good is infinite. Moreover, the intrinsic character of DAOs as open, decentralized, community-based organizations lends nicely to the social impact sector, where grassroots and community-level decision-making are valued more than traditional hierarchical structures of charities and non-profits.
In the not-too-distant future, DAOs will be a game-changer for social media. All you need to do now is sit back and watch it develop.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn’t represent any investment advice or WazirX’s official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.