Source: The post is based on the article “Decentralised Autonomous Organisations (DAOs): how these decentralized entities are shaping the future of the digital world” published in “The Hindu” on 27th November 2023
Why in the News?
Decentralised Autonomous Organisations (DAOs) represent a groundbreaking innovation at the intersection of blockchain technology and governance.
What are Decentralised Autonomous Organisations (DAOs)?
According to the World Economic Forum (WEF), Decentralized Autonomous Organization (DAO) is a general term used for an organization group that uses blockchains and related technologies to coordinate its activities.
What are the Key Characteristics of DAOs?
1) Decentralized: DAOs operate on a decentralized network, often utilizing blockchain technology. This means there’s no single point of control or failure.
2) Autonomous: They’re autonomous in the sense that they execute predefined rules encoded in smart contracts without the need for human intervention once set up.
3) Use of cryptocurrencies: They often utilize cryptocurrencies as a means of decision-making and resource allocation.
4) Not influenced by the government: They are controlled by the respective organization members and not influenced by the government.
5) Voting: Participants can propose and vote on decisions related to the organization’s goals and resources. This decentralized decision-making process ensures that no single entity holds undue influence.
What are the Various Uses of DAOs?
1) Decentralised Finance: DAOs like Compound and MakerDAO provide lending and borrowing services, allowing users to access global finance without traditional banks.
2) Art & Intellectual Property: Artists tokenize their work using DAOs to manage royalties and protect intellectual property rights.
3) Supply Chain Management: DAOs ensure transparency and traceability in global supply chains, ensuring product authenticity and quality.
What are the advantages and challenges of DAOs?
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