The last two to three decades have seen a paradigm shift in the lives of almost everyone. The Internet and the web particularly have given a whole new meaning to the way we communicate and interact with each other. Web1.0 was all about connecting people and devices. Web2.0 was all about connecting people with each other. Recent years have seen the development of Web3.0 which is an entirely different ball game.
Web3.0 is all about connecting people with machines and devices to create a more efficient and trustworthy internet. This new web is built on the back of blockchain technology which allows for decentralization, transparency, and security. One of the most exciting applications of this technology is the DAO or decentralized autonomous organization. With everything Web3.0, some concepts are harder to understand than others for now. With increased adoption, they will enter the mainstream sooner.
A lot of our clients at Panterra Finance ask us about DAOs, what they are, and how they work. So we thought it would be helpful to write a blog post explaining them.
The Foundation of Web3.0
Before getting into DAO, a brief few things about blockchain. A blockchain is a decentralized and distributed digital ledger that records transactions on many computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the collusion of the network. Sounds complicated? Let’s take an example to understand this better.
Suppose there are two people, A and B, who want to transact with each other. A wants to buy a product from B worth $100. In the old way of transacting, A would hand over the $100 to B, and B would hand over the product to A. This process is called ‘centralized’ because there is one central entity, in our case, a bank or PayPal, through which both parties have to go through to complete the transaction.
Now, suppose the same transaction happens on a decentralized network like the Bitcoin network. There is no central entity here. Both parties can interact with each other directly. The product is transferred from A to B, and $100 is transferred from B to A. This transaction is then recorded on a digital ledger which is available to everyone in the network. So there is complete transparency, and everyone knows that the transaction has taken place.
This process of recording transactions on a digital ledger is what we call ‘blockchain technology.’ This is not limited to just financial transactions; it can be used to record any kind of transaction. Now that we know what blockchain is, let’s get back to DAO.
A DAO is a decentralized autonomous organization that is run by smart contracts on the Ethereum blockchain. It is an organization or company that is not centrally controlled by any one person or entity. Rather, it is governed by code that is written into the smart contracts. This code can be modified or updated by anyone who has access to the DAO’s GitHub repository.
To put this into perspective, imagine a traditional company or organization. There is usually a board of directors or executive team that makes all the decisions about how the company will be run. With a DAO, there is no such thing. The code that governs the DAO is open source and available for anyone to view and audit. In this new scenario, an organization can be run by anyone in the world who has an internet connection.
The most important thing to understand about a DAO is that it is autonomous. This means that it can exist and continue to function without any human intervention. Once the code is written and deployed, the DAO will continue to run according to the code that governs it. This is made possible by the fact that smart contracts are immutable. This means that they cannot be changed or altered in any way once they have been deployed to the Ethereum blockchain.
The DAO’s basic idea, while intriguing, is also fascinating, and it represents a point where technology trends such as artificial intelligence (AI), blockchain, and the internet of things (IoT) are coming together to provide fresh possibilities.
Putting Into Perspective
To make you understand it in simple words, let me explain it with an example. Suppose there is a website that allows people to buy and sell products. This website has a smart contract that governs how the transactions will take place. When someone wants to buy a product, they will send a request to the smart contract. The smart contract will then check if the person has enough money to buy the product. If they do, then the transaction will take place, and the product will be sent to the buyer. If the person doesn’t have enough money, then the transaction will not take place.
Now, suppose there is a problem with the website. Maybe the server goes down, or maybe there is a bug in the code. In such a case, the smart contract will still be functional, and the transactions will still take place. This is because the smart contract is running on the blockchain, which is a decentralized network. Even if one node in the network goes down, the other nodes will still be up and running, and the transactions will take place. This is just a very simple example to show you how a DAO works. In reality, DAOs can be much more complex, and they can do many more things. For instance, they can be used to create decentralized versions of traditional companies or organizations.
A better real-life example is Ukraine DAO, which is a fundraising effort to help the people of Ukraine in the current war against Russia. It collects and distributes funds to various Ukrainian charities. The funds are collected through Ethereum’s smart contracts, and they are then distributed to the charities according to the code that governs the DAO.
The Possibilities Are Endless
The main goal of a DAO is to decentralize power. In a traditional organization, the power is concentrated in the hands of a few people. This can lead to corruption and cronyism. With a DAO, the power is decentralized, and it is distributed among all the members of the organization. This makes it much more difficult for any one person or group of people to abuse their power.
Another purpose of a DAO is to automate decision-making. In a traditional organization, decisions are made by a small group of people. This can often lead to delays in decision-making. With a DAO, decisions are made by the code that governs the organization. This makes it much faster and easier to make decisions. In business environments, it frees up space for people to focus on other things.
It has opened up opportunities for more decision-makers to get involved in the governance of a DAO. The most notable example is the MakerDAO, which is a decentralized autonomous organization that governs the Dai stablecoin. The MakerDAO has a voting system that allows anyone to participate in the governance of the organization.
The option of working from anywhere in the world is another advantage of a DAO. In a traditional organization, you have to be physically present in order to participate in the organization. With a DAO, you can participate from anywhere in the world. All you need is an internet connection.
There are many other examples of DAOs, and there are many different ways in which they can be used. The possibilities are endless, and it is up to the creativity of the developers to come up with new and innovative ways to use them.
Examples of Real-Life DAOs
Before getting into how your business can benefit from a DAO, let’s take a look at some examples of real-life DAOs.
Uniswap is a decentralized exchange built on the Ethereum blockchain. It allows users to trade tokens without the need for a centralized exchange. The Uniswap team has created a smart contract that governs the exchange. The smart contract automatically matches buyers and sellers and executes the trades. Anyone with a UNI token can participate in the governance of the Uniswap exchange.
Friends With Benefits
Friends With Benefits is a decentralized social network. It allows users to connect with each other and share content. It allows the users to collaborate and create new content. Users may connect with individuals who share their interests in other cities through city-specific hubs. The more FWB tokens a user has, the more opportunities to meet and interact with others develop.
This is a decentralized autonomous organization (DAO) that uses the power of the blockchain to adjudicate disputes. Kleros is a DAO because it is powered by smart contracts. The Kleros token (PNK) is used to incentive jurors to vote on disputes. When someone wants to submit a dispute to Kleros, they first have to deposit some PNK. If the jury rules in favor of the person who submitted the dispute, then they get their PNK back. If the jury rules against them, then they lose their PNK. Kleros can be used to adjudicate any kind of dispute. It has been used to adjudicate disputes in online markets, freelance platforms, and even in the sharing economy.
As you can see, there are many different types of DAOs. each with its own unique purpose. The possibilities are endless, and it is up to the developers to come up with new and innovative ways to use them.
Climate Change and Web3.0
A big downside associated with Web3.0 is the intensive energy consumption. The entire system runs on computers that need to be constantly powered by electricity. This has led to concerns about the impact of Web3.0 on the environment.
However, even with such concerns, it’s mainly DAOs and products of Web3.0 which can address the climate crisis as they are decentralized, inclusive, and transparent. One such example is KLIMA, a decentralized autonomous organization (DAO) that is fighting climate change.
Just like a central bank issues the policy for currency, KLIMA regulates the monetary policy for carbon-backed assets. With the idea of creating a carbon-crypto economy, the DAO serves as an inclusive, borderless, and trustless organization that is fighting climate change. KLIMA allows anyone to create a carbon-backed asset. These assets are backed by real-world carbon credits. They can be used to offset emissions or to finance climate-friendly projects.
The sky is the limit when it comes to the potential of DAOs. They have the ability to create a more inclusive and decentralized world. As we move into the future, we will likely see more and more DAOs being created.
What Can A Dao Do For Your Business?
Irrespective of the scale or the sector, your business can benefit from a DAO in various ways.
The primary purpose of a DAO is to decentralize power and decision-making. This decentralized governance model is more inclusive and transparent. It also leads to better decision-making as decisions are made based on the consensus of the community. This also increases the engagement of the community as everyone has a say in how the DAO is run. The community can also help with the development and marketing of your product.
A DAO makes it easier to raise funds for your business. By selling tokens, you can raise capital without giving up equity in your company. This is a more efficient way of raising funds as it doesn’t require you to go through the traditional channels such as banks or venture capitalists. As you can see, there are many benefits of using a DAO for your business. If you are thinking of starting a business, then you should definitely consider using a DAO.
Panterra Finance — The Financial Partner Solution for Decentralized Autonomous Organizations
If you’re looking for a financial partner solution for your decentralized autonomous organization (DAO), then you should definitely consider Panterra Finance. Panterra is a leading provider of financial services for DAOs. We offer a comprehensive suite of products and services that can meet the needs of any DAO.
The divisions at Panterra Finance, headed by CEO Sam McQuade, cover the entire gamut of financial and management services. The three core services offered by Panterra are International Business Solutions, Fractional CFO Services, and Mergers & Acquisitions (M&A) Advisory.
All three services are essential for the success of any DAO. International Business Solutions helps DAOs expand their operations into new markets. Fractional CFO Services provides DAOs with the financial expertise and resources they need on a part-time or project basis. And finally, our M&A Advisory service helps DAOs identify and assess potential acquisition targets.
Traditional bookkeeping, internal audits, risk management, and compliance reviews are some of the other services offered through our key partners.
So if you’re looking for a comprehensive financial partner solution for your DAO, then look no further than Panterra Finance. Contact us today to learn more about our services. You can learn more about our company by visiting our website or by directly scheduling a free consultation call with one of our experts