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What Are The Features of a Decentralized Autonomous Network? Purpose of DAO

What are the purpose of Purpose of a Decentralized Autonomous Organization Network. Benefits and Risks of a Decentralized Autonomous Network

Written by Niel Patel · 4 min read >
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The technology has helped many to achieve groundbreaking results. Every time a new technology has emerged it has shaped the sphere of many sectors. 

And one such technology is the Decentralized Autonomous Network. The network is widely known as the DAO, and this guide will explore everything about the DAOs and their network. 

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Decentralized Autonomous Network Explained

DAO is one of the primary pillars of the blockchain-powered entity that works without intermediaries. The DAO network returns full control to its participants. The particulate that creates the rules and changes in the DAO using the governance tokens. 

The participating voting right depends on the number of tokens they possess. In short, DAO is a type of digital democracy, where the stakeholders engage with the organization’s activities and take part in its vital activities and decisions. The DAO can currently operate without any governance. So, it is always state free from personalized views or one-sided decisions.   

The Purpose Of The DAO

The purpose of a Decentralized Autonomous Network is to manage cryptocurrencies. Despite being decentralized Cryptocurrency needs some kind of management to stay in the sight of its users while being private. Overcoming the issues, in 2016 a group of developers came up with the idea of DAO to manage the cryptocurrency. And as a result, instead of being forced on its participant and acting like a centralized authority managing the currency, the Decentralized Autonomous Network commonly chooses its participant and then lets them govern all the decisions independently. So, DAO manages a type of or a set of cryptocurrencies accessible in a network. 

DAOs may have concrete objectives, such as amassing a coding project, or they may not have specific investment type parameters. In the case of a coding project, a DAO becomes a good fit because it represents an investment category beyond reach for most individuals on their own, in addition to the added benefit of utilizing the DAO members’ collective industry knowledge to make well-informed investment decisions. This collective action carries weight.

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Understand How  Decentralized Autonomous Network Works

Like any other blockchain-associated technology, the DAO also functions based on smart contracts. DAOs heavily rely on smart contracts. These logically coded agreements govern decision-making predicated on underlying blockchain activity. The DAO has its voting process recorded on a blockchain. Users can choose between mutually exclusive options. Participants’ voting power is frequently distributed based on the number of tokens they own. 

DAOs frequently possess treasuries housing tokens exchanged for fiat. Members of the DAO can vote on how to allocate those funds.

Features of The DAO

The purpose of the DAO is to execute and achieve common goals from the perspective of its participants. The features of the DAO ensure the smooth execution of its day-to-day operations. The DAO adapted most of its features from the blockchain. For those who don’t know, let’s understand some of the key features of a Decentralized Autonomous Network in detail. 

Proportion Of The Members & The OwnerShip 

DAO does not require to have any owner. So, the investors in DAO are also its owners as well as operators. In traditional organizations, however, whoever owns the largest stake controls the organization and makes the final decision. But, the DAO eliminated this factor by distributing equal rights to everyone. 

Transaction Transparency

The DAO maintains the transparency feature and works on the blockchain. Therefore, financial transactions and rules for the DAO have their record on a blockchain, removing the need for any third party in a financial transaction. Smart contracts can make transactions easier which makes them the backbone of DAO.

Capital Raise

The DAO receives most of its capital raised from the funds generated through the public or board. DAO raises capital through crowdfunding by selling its native token.

Open Participation And Contribution 

Because DAO is a decentralized entity, it is simple to contribute to its development. Anyone can contribute to and participate in a DAO’s operations. DAOs typically promote one-on-one communication via Discord channels or even other means. It is the opposite of centralized organizations as the traditional organizations, on the other hand, adhere to a rigid hierarchical structure that is often tedious and demotivating.

Decentralized Structure

The backbone of the DAO or smart contract eliminates the need for a CEO for the functioning of the network. DAOs are generally very flat which follows the theme of unanimous decision-making. So, the system replaces the widely practiced in traditional organizations by allowing every member to propose and vote on DAO changes. 

Control 

Understand this with the example of the centralized organization. In the centralized environment, the legal contracts bound the employees to organizations. In place of these legal contracts, The DAO uses smart contracts. Anyone who does own a DAO native token could indeed participate in its operation and vote. Traditional organizations are not like this. The DAO solves the principal-agent problem, in which the agent’s interests do not always align with the ones of the principal or primary stakeholder.

Future Of The DAO And Its Implementation

In the future, the DAO structure may successfully reduce administrative burdens such as tax payments, as it aims to automate the tax payments. Audits can also run on the DAO, reducing the cost and complexity associated with accounting. Using a DAO may also help to prevent the worst types of financial abuse that the traditional sector is facing now. The future will witness a lot of automation in regular tasks. However, the world still needs to identify the possible implementations and use cases further of the DAO. 

The one thing to notice here is that despite the amazing features and uncertainty associated with it the DAO is already facing very strong criticism. One of the strong critics of the DAO has been the IEEE. The DAO was vulnerable to programming errors and attack vectors, according to IEEE Spectrum. They have addressed their few concerns like the fact that the DAO was venturing into uncharted territory in terms of regulation as well as corporate law did not help matters. The implications of the DAO’s structure potentially have multiple use cases: So, the investors may have concerns about their rights for actions taken in the DAO as a whole.

Conclusion

The Decentralized Autonomous Network provides a secure and organized network of cryptocurrencies while being opposed to the traditional and centralized organization as well as the networks. The network has blockchain features and benefits to make all the designs made on the network safe, widely assorted, and transparent.

The DAOs are mostly open networks which means that anyone can contribute and participate in the network. DAOs are still figuring out their full potential while being criticized. So, the world can only hold an eye on the future to figure out what the DAOs can do. The tech industry already has the famous DAOs, in which any user can take part. The guides have covered everything about the DAOs including the features and their purpose of it for the users. 

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