What is DAO? 5 exciting types of DAOs that overcome many challenges of legacy orgs to deliver value to members

what is dao: decentralized autonomous organization

Many people keep asking themselves this question: ‘what is DAO?’ The initials DAO, the latest form of governance structure in the blockchain ecosystem, stand for decentralized autonomous organizations. Unlike legacy organizations with a central governance structure, DAOs lack this form of administration. Instead, DAO web3 is managed by all its members who share a common goal and act to promote their collective interest. The DAO crypto market has become popular due to the bottom-up governance method in decision-making. Members form a DAO to attain specific objectives. Here, we dive deep into various types of DAOs that members can use as vehicles to achieve their collective interests.

What is DAO, and what are its main benefits?

The critical features that make a DAO an attractive form of governance are blockchain technology and innovative agreements. So, when defining ‘what is a DAO,’ you must always incorporate these features into your explanation. Furthermore, the main draws of a DAO emanate from the attributes of the distributed ledger and smart contracts. Here are the primary benefits of DAO web3:

  • Decentralized power: unlike a legacy organization where a centralized clique makes decisions on behalf of stakeholders, the DAO market allows all its members to participate in the decision-making process. All DAO members enjoy distributed powers that will enable them to act in the best interest of their org.
  • Participation: in an organization, members have a solid bond to the entity when their voice and vote matter. DAOs encourage members to actively participate in matters that improve the condition of their community. Through active involvement, the community can quickly achieve its objectives.
  • Publicity: in a DAO, voting happens on the decentralized ledger, allowing each to view publicly how every member casts their ballots. This encourages voters to support actions that enhance their standing.
  • Global community: what is DAO without the mention of a worldwide community? DAOs exist in a decentralized ledger that’s accessible to many people. So, you can create a DAO and invite people from all over the globe to join it.

Types of DAOs

Now that you’ve known ‘what is DAO,’ let’s switch gears to the types of DAOs in the market. Here are the main categories of DAO in the market:

Protocol DAO

This type of DAO governs a distributed protocol, such as a loaning/lending app, a decentralized exchange, and many other dApps. The tokens facilitate the introduction of any changes in the protocol.

Examples of dao under this category include MakerDAO, Uniswap, and Yearn Finance.

Collector DAOs

The collector DAO allows members to collect finances that they can use in buying high-quality NFTs and other virtue collections. As the popularity of NFTs keeps growing, the DAO trend also keeps rising. Examples of DAO under the collector category include Flamingo and PearsDAO.

Investment DAOs

A prominent use case of DAOs is to help raise investment funds. You may fail to offer an answer to the question: ‘what is DAO’ if you don’t mention an investment DAO. An Investment DAO is also known as a Venture DAO and helps to pool up resources for funding start-ups in the blockchain industry. Also, an Investment DAO offers members an opportunity to invest in Web3 projects.

An example of an Investment DAO is Krause House, which is under the administration of basketball devotees.

Philanthropy DAOs

The Philanthropy DAOs concentrate on supporting social responsibility matters in the web3 ecosystem. They’re nonprofits that focus on initiatives that positively impact a community. An example of Philanthropy DAO web3 is Big Green DAO, a charity that helps sensitize people about growing food.

Grants DAOs

The dao market is also witnessing an emergence of Grants DAOs that help to finance and nurture new projects in the blockchain industry. These forms of DAOs are philanthropic-oriented and help to support big projects. An example of Grants DAO is Aave.

What is DAO and how do you create one?

DAOs have become trendy in the blockchain industry. You can reap their benefits if you decide to create one. Here are the steps to follow when creating a DAO:

Create a solid foundation

Before you start creating a DAO, you should brainstorm with your peers to determine why you require it. At this stage, you should identify the opportunities in the DAO market, the current DAO trend, and the smart contracts you need.

While brainstorming with your other colleagues, clarifying your objectives is critical. Proceeding with clarity minimizes the chances of disagreement along the way.

Also, it’s essential to know that DAOs create money through dividends you earn after investing money. So, you need to develop a DAO promotion strategy to attract many members. A DAO promotion plan should highlight various techniques of marketing your community, such as social media and Public Relations (PR).

Decide ownership strategies

An essential step when studying what is DAO is to know the ownership procedures that help to create and expand your organization. A DAO can grant ownership through airdrops and prizes. An airdrop enables community members to access tokens based on their conduct in the group. On the other hand, members get rewards after accomplishing specific tasks. Also, interested people can buy DAO tokens via a DEX, such as Uniswap.

Develop a governance format

Once you create a decentralized autonomous organization, you need to determine the decision-making process. This process demands that one understand ‘what is DAO’ and how to use a token-weighted polling procedure to determine how members vote. DAO voters hold tokens, and one token represents a single vote.

Create a reward and incentive program

You can build trust among your DAO users by setting up a reward and incentive program. A reward program shares native governance tokens with individual members who use the DeFi protocol. DAOs incentivize contributors with different cryptos, such as Tether (USDT) and ETH.

Final words on what is DAO

Now you know ‘what is DAO’ and its primary benefits! A DAO can help you collect funds from a community and use the money to invest in various projects. There are multiple types of DAOs, such as Protocol, Grants, and Collector DAOs. So, when learning ‘what is DAO,’ it’s critical to understand various types of decentralized autonomous orgs and determine the one to choose.