The benefits of DAOs – decentralized autonomous organizations – are becoming more pronounced with the DAO model increasingly gaining popularity in the Web3 space. As internet-native entities with no central governance, DAOs create multiple opportunities for companies, community members and the world in general. Although still considered in their early stage, DAOs are already present in different projects, from DeFi protocols to social media clubs and venture funds. This stems from the diverse benefits that decentralized organizations bring to the table.
In this article, we explore the benefits of DAOs in more detail.
For our first clue about what DAOs bring to the table we need to look no further than the DAO moniker and what it stands for.. Decentralization is a core trait of a DAO and shapes the very nature of this model. Instead of relying on a single entity or a small group or selected individuals for leadership, decentralized autonomous organizations rely on their members for governance. Collective participation is strongly encouraged via the distribution of voting power.
Every member of the organization can have a say in the decision-making process and can suggest changes within the organization for the future. This often results in new and creative ways to develop products, services or other projects that the DAO is responsible for.
Unlike in centralized organizations where the voice of members is usually muted or neglected by the CEO or the board of directors, in a DAO members can have a say regardless of their position.
Another element in the list of benefits of DAOs is transparency. Decentralized autonomous organizations are powered by blockchain technology which provides an immutable and secure way to record and manage data. Every transaction is visible to all members as it lives on a public blockchain.
Furthermore, DAOs are underpinned by smart contracts, which establish the rules of the organization. Once created and set in place, the smart contract guarantees that all DAO activities abide by pre-coded rules. The smart contract can only be changed via a vote by all involved members.
This eliminates human error from the equation and also prevents the manipulation of funds – two problems that centralized organizations are often faced with.
While a lot of traditional organizations are limited by geographic location when it comes to making the business accessible for all, decentralized autonomous organizations are not affected by this barrier. They’re globally accessible and are often associated with a lower barrier to entry. In addition, the DAO structure typically affords greater flexibility compared to the more traditional corporate models.
DAOs encourage autonomous operations and create opportunities for communities around the world to unite and work together.
Encouraging non-profit organizations
Last but not least, DAOs are not only an advancement for businesses around the world but they can also encourage non-profit organizations that represent multiple communities that are united under a common objective or shared principles. DAOs offer automated efficiency, transparency, and a lack of central authority, which are essential for non-profit organizations.
Different causes can be supported via crowdfunding that is based on complete trust and transparency, with minimized risks of stolen funds.
The future ahead
Examining the benefits of DAOs only confirms the potential of this type of organization. As blockchain technology matures, we’ll see further innovation in the DAO space. New solutions and governance models are expected to arise, in addition to methods to overcome existing concerns related to decentralized autonomous organizations.
If you’re considering launching a DAO, you might find our “How to build a DAO” piece informative. And if you’re looking for the right partner to help you in that endeavor, you’ve come to the right place! Let’s talk!