How Will DAOs work in Public and Private Organizations?
DeFi, General - September 3, 2020
Decentralized autonomous organization, or DAO is an important concept in the decentralized finance or DeFi world. You might’ve heard of MakerDAO which runs on the Ethereum blockchain. In this video, we break down what a DAO is and why its governance is important.
A DAO operates like an automated and smart company. Before this company begins working, a specific set of instructions are given to it. Ways the company is funded, generates revenue, pays expenses, and earns profits. The DAO will have investors. These investors will hold certain tokens.
Tokens can either be bought at the beginning, during a coin sale or can use third-party platforms like cryptocurrency exchanges.
Every token holder has a vote depending on the number of tokens they hold. This works along similar lines of the proof of stake or PoS model. Etherum’s main token Ether and other cryptocurrencies work according to this model.
Once this is established the DAO works in a decentralized way in the DeFi world. No management, no middlemen, and no fees and frictions. This will save costs and increase profits through automation. All the work done is according to the rules generated at the start. For everyday dependent financial functions like insurance, investing, invoicing and more a DAO will be essential.
Due to the decentralized nature of the DAO, they can work in a public or private setting. The DAO can also work for a for-profit motive or a non-profit motive. Its horizontal and vertical application can be altered, but its governance remains the same – completely decentralized. This model will suit the growing world of DeFi which is integrating several real-world financial functions.
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