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Gate.io Blog How Will Decentralized Autonomous Organisations Lead The World?
Industry Analysis

How Will Decentralized Autonomous Organisations Lead The World?

02 December 17:53

[Outline]

1. DAO may be the next hot topic in the cryptocurrency field after DeFi, NFT, and Metaverses.
2. Although ConstitutionDAO's bold crypto sale for a real US Constitution did not properly function, they still displayed the great potential of the decentralized organization (DAO) to the world.
3. DAO greatly lowers the organization's management costs and enhances operational efficiency, making it possible for people worldwide to cooperate without frictions.
4. DAO breaks down into DAO operating systems, Investment DAOs, Grants DAOs, Collector DAOs, Protocol DAOs, Service DAOs, Social DAOs, and Media DAOs.
5. In the Web3.0 era, the Bounty Economy empowered by DAO may become a mainstream work mode in the future.

DAO may be the next hot topic in the cryptocurrency field after DeFi, NFT, and Metaverse.

On November 11th, several encrypted digital enthusiasts established ConstitutionDAO. They did so to bid for the first edition of the U.S. Constitution that would be publicly auctioned at Sotheby’s Auction House on November 18. This Constitution is one of 13 Constitutions prepared by the United States Constitutional Convention hundreds of years ago according to the report. S. Howard Goldman, a real estate developer, purchased the Constitution for $165,000 in 1988 and transferred it to his widow Dorothy Tapper Goldman after he died.

ConstitutionDAO set a goal to raise $20 million funds for auction and officially started crowdfunding on Juicebox, the Ethereum-based crowdfunding platform, where users who paid ETH to the project could get their official governance token PEOPLE in return. Meanwhile, crowdfunding participants would get voting rights based on this to decide how to keep and display the copies of the Constitution that they bought in the future. The raised ETH is stored in a Multisig wallet with 13 signatures to preserve its safety through multi-signature technology. If the auction failed, participants could exchange PEOPLE tokens back to ETH.

ConstitutionDAO achieved its crowdfunding goal in just one week and raised more than $46 million worth of ETH before the auction started. But unfortunately, this precious copy of the Constitution was purchased by hedge fund Citadel founder Kenneth Griffin for $43.2 million because ConstitutionDAO could not afford the subsequent huge storage costs and related handling fees. Kenneth Griffin said that he would lease the copy of the Constitution to the Crystal Bridge Museum of Art in the United States for free. However, this auction set a world record beyond any auction record of books, manu_script_s, historical documents, or printed matter.

On November 24, ConstitutionDAO announced that it officially suspended operations. It also indicated that it would permanently reserve 0.000001 ETH for each PEOPLE as a reserve asset, and PEOPLE holders could apply for a refund as ETH at this rate. In the following days, about half of the holders returned the ETH at the original price, and the other half of the holders kept on holding PEOPLE. PEOPLE had also become a MEME, an ETH-based concept currency, because it was short of operational teams.


Last weekend, multiple exchanges including Gate.io were launched, causing the price of PEOPLE to skyrocket several times from about $0.0044 at the beginning to a maximum of $0.16. Currently, the price remains at around $0.06.


Although ConstitutionDAO's bold crypto bid for US Constitution falls short, they still displayed the great potential of the decentralized organization (DAO) to the world.

DAO-A New Way of Human Governance

DAO is short for Decentralized Autonomous Organization. The origin of the concept was coined by American writer Ori Brafman in his work Starfish and Spiders. Among the two animals of “starfish” and “spider”, the latter can be regarded as a "centralized organization" since it will die if its head is cut off, while the "starfish" be compared to a "decentralized organization" since it will not die but grow two more tentacles if one of its tentacles was cut off. Its "decentralization" makes “starfish” more flexible and vital. The traditional organizational model is often similar to a "spider", with a strict hierarchy and a "central nervous system". Once the "central" is damaged, it will collapse globally.

Since Bitcoin was born in 2009, blockchain technology and subsequent smart contracts have brought the decentralized organization into realization. It is understood that the core of blockchain technology lies in creating trust. However, trust among organization members can also be achieved through blockchain technology which, at the same time, is able to create good organizational transparency in the organizational structure. Value incentives can be implemented to encourage members of the organization to actively contribute through pre-created smart contracts, enabling organization management to run under an "automated" process without a center.


This means greatly-reduced management costs and improved operational efficiency for the organization. DAO makes it possible for people worldwide to cooperate without friction.

Cooper Turley, the co-founder of Friends With Benefits, indicated that "DAOs are internet communities with a shared cap table and bank account." He also concluded that DAO included DAO Operating Systems (also known as DAO infrastructure), Investment DAOs, Grants DAOs, Collector DAOs, Protocol DAOs, Service DAOs, Social DAOs, and Media DAOs.

DAO governance also matters more for mature blockchain projects such as the Maker, Compound and Uniswap. In these community-governed projects, all proposals are voted on by the token owners. This makes DAO more democratic and fairer than traditional enterprises and other organizations. Meanwhile, it will be impossible for DAO to be controlled by a single individual because it is more secure.

From UGC to DAO

Moreover, the token incentive system adopted by DAO also brings new jobs to people. In the Web 2.0 era, we have already witnessed the growth of UGC (User-generated content). In the Web 3.0 era, empowered by DAO, UGC will evolve and gain wider applications, and may even make its work model the mainstream in the future. We can also conclude that the DAO-based economic model is a Bounty Economy.

In the Web 2.0 era, with the adoption of the equity system in companies, the value created by UGC grows greater, and the number of participating users grows bigger. However, more profits will eventually be held by the core members of the company. In the DAO of Web 3.0, the community motivates users to contribute to the community by allocating its governance tokens as a "bounty" for a certain task. The blockchain has replaced people as the core of the community, and the company is under the control of all contributors, enabling a fairer distribution of the value among members.

Meanwhile, users who have obtained governance tokens will also get voting rights to determine the future growth of the community. In this process, the more governance tokens each individual holds, the greater the contribution he/she makes to the community, the more benefits he/she gets, and, similarly, the greater the right to speak.

Conclusion
On March 10 this year, the Wyoming State Senate passed Bill No. 38, which officially recognized the legal status of DAO and its limited liability company status. This means that DAO has gained the approval of the Wyoming state government, and the existing limited liability company is also expected to transform into a DAO. Various types of DAO will further develop, bringing about commercial changes.

DAO’s appearance ushered in a new stage in the development of cryptocurrency. DAO empowers various institutions and has created new value and boundless possibilities for humans’ large-scale cooperation in the future. Perhaps, DAO will truly become an integral part of our lives one day, which will definitely be a stride forward for human cooperation.

Author: Ashley. H, Gate.io Researcher
*This article represents only the views of the researcher and does not constitute any investment suggestions.
*Gate.io reserves all rights to this original article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
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