The Crypto sphere is full of novel techniques and innovative platforms to make it easier for people. Since its beginning, it has provided customers with several platforms that have gained mainstream traction. For instance, to make trade easier, safe, and accessible can be used. There are many more other examples of Crypto Engine reliable platforms. One such platform is DAO, which was designed to enhance user experience. The article provides a complete description of this organization since its beginning.
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What is meant by DAO?
DAO stands for decentralized autonomous organization. It was built to provide a democratized system to the blockchain network. Since it is decentralized and not governed by a third party, but is governed by the node operators, the DAO platform provided a majority is an authoritarian system that offers several ideas which are selected through voting.
A charity program can be given as an example of DAO where a group of people raises funds worldwide to help other people. They then decide the best spending methods based on people’s needs. In the same way, the crypto holders are given a chance to present their ideas and get them selected by voting.
How does it work?
DAO is built on an Ethereum based blockchain network. It is operated by a flattened hierarchy system. No person or big stakeholder can govern it solely. Instead, anyone, without considering the number of stakes they hold, can give ideas and vote on them. The rules in this software are created by smart contracts. Smart contracts ensure the transparency of the system and make it safer to use. Anyone violating the smart contract rules in DAO gets their funds locked and inaccessible. This is how it enhanced the security systems of the digital market.
How to create it?
DAO follows three steps in its creation which are listed below:
- Building smart contracts: The first and foremost step in initializing a DAO is building smart contracts. It is done to set strict rules to be followed by a particular group of people. The smart contracts pass through extensive testing before their launch as it is nearly impossible to alter them.
- Raising funds to support the idea: The people who support the mission join the cause and lock up their money to raise funds for the movement.
- Launching a new DAO: After setting rules and raising funds DAO is launched into the Ethereum based blockchain network. The developers handed over the control to the group participants.
DAO and major cyberattack
The organization was developed to regulate cryptocurrency by setting inalterable rules. Despite its contributions, it underwent a significant cyberattack where the attackers scammed millions of Ethereum coins equal to $50 million at that time. This event led DAO to face a severe downturn.
Following this hacking, people criticized it to great extent. Some countries imposed a full ban on it. This incident also resulted in the Ethereum fork (split into two).
DAO vs traditional authorities. What are the key differences?
DAO and traditional organizations differ from each other in so many aspects including the following?
- Hierarchy: Traditional organizations are run by a hierarchical system and the one who is at the managerial level can make decisions. On the other hand, DAOs are run by a voting system.
- The traditional market is not democratized whereas DAOs are fully democratized.
- DAOs are software-based and the decision by voting is implemented autonomously. In contrast, the decisions are followed and monitored manually in a traditional market.
- Financial activities are private and accessible to all the participants in DAOs. At the same time, it is kept private to the authority and publically limited.
Future of DAO
The future of DAO seems dark as fewer financial activities are recorded following the hackers’ attack. But, cryptocurrency is very unpredictable and anything can either skyrocket or stoop down overnight. So, hopes are high that it would gain back its position and rise higher.
Despite predictions of the dark future of DAO (based on the current situation), investors believe that these types of organizations are essential for the digital market and will gain mainstream traction in the coming days.