Updated on January 26, 2023 5:45 AM
Workers in the blockchain industry are often curious about DAOs (decentralized autonomous organizations). In the early stages of the blockchain revolution, when it was still only a notion being discussed in online forums, a decentralized governance model became one of the most popular structures for new companies. A recent study provides a brief introduction to DAOs. This article examines the origins of these groups and their current impact on the bitcoin market.
According to the data provided by Snapshot, there has been a discernible increase in the quantity of decentralized autonomous organizations (DAOs), or at the very least, the concept of such organizations. By the end of 2022, almost 4,000 DAOs were operational. Cryptocurrency holders and investors might benefit greatly from reading the study paper titled "DAO: The Evolution of Organization," which provides important insights that will help them better understand where DAOs are presently in their evolution.
This investigation's goal is to get a knowledge of what decentralized autonomous organizations (DAOs) are by beginning with a history of how the concept of a DAO was initially conceived. According to the findings of the research, the initial time period was given the designation DAO 1.0.
In those days, decentralized autonomous organizations (DAOs) were analog, and there was no one technology that made it simple to control or interact with them. Eleven years before Satoshi Nakamoto published his Bitcoin white paper, the term "cryptocurrency" appeared in business publications from the 1950s and 1960s in 1997.
One may argue that Bitcoin was the first organization of its kind to be decentralized and operate independently. The advent of the blockchain revolution and the subsequent transition to DAO 2.0, which began in 2015 with the introduction of on-chain governance by Dash, allowed for tremendous progress to be accomplished. In the age of DAO 3.0, there are great deals, more tools, and infrastructures that facilitate the creation and operation of DAOs.
According to the Research Venture Capital Database, only 40% of DAOs are currently focused on decentralized finance, while many others have been created with a focus on social and political causes (15%); physical assets represented by digital tokens (such as securitized housing), GameFi, and nonfungible tokens (26%); and infrastructure and tooling (14%).
The dilemma: To DAO, or not to DAO
Many may wonder if the best method to optimize one's return on investment is to hold a DAO token or a currency from a layer-1 blockchain like Ethereum, which serves as the basis for many DAO protocols. When you take a look at the leading DAO tokens in terms of market capitalization from January 2021 to July 2022, you will notice a few things that you would not anticipate.
During the whole boom in the cryptocurrency market, the majority of DAO tokens saw gains that were greater than Ether's. PancakeSwap's CAKE token was the only one to end the period with a positive balance. Although previous performance is no guarantee of future results, it is instructive to note that DAO tokens have a tendency to rise more sharply in times of high positive emotion and fall more precipitously in times of high negative emotion.
The above study paper includes of case studies, consisting ones on OlympusDAO, Coinshift, and the hack of The DAO in 2016. The infamous breach resulted in the loss of more than $60 million and led to a hard split, which in turn led to the development of two distinct blockchain systems known respectively as Ethereum and Ethereum Classic. The study also discusses tokenomics, governance, and other critical indicators that demonstrate how DAOs operate currently and what version 4.0 may look like.