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DAO has more capital than individuals. DAO has opportunities for growth. It has a positive impact on DeFi in many ways.
Original title: “The future of DAO is far, but it is immeasurable”
Written by: xDAO
With Vitalik Buterin recently published an article on the decentralized management of article , we would like to further expand the DAO topic, this topic is now more and more popular on the market has matured DeFi.
It has been a while since the first smart contract was deployed to the Ethereum blockchain, however, the mistakes made during the creation of the first DAO will never be forgotten. But the crypto community has learned from these mistakes. More than 700,000 people are now involved in DAO operations, and the total assets under management exceed US$8 billion.
What does it mean? This means that managing DeFi and supporting blockchain (whether it is Ethereum, BSC, Polygon or others) will become a more challenging task for developers and investors to support this rapidly growing demand. .
Most DeFi users have one main goal-personal wealth growth. Most people don’t realize that someone needs to support and develop this ecosystem. Fortunately, more and more enthusiasts are now willing to participate in the development and management of these blockchain protocols.
DAO is a successful attempt. Thousands of people have participated with their hard work and funds to contribute to the development of the blockchain and the increase of general wealth.
Technically speaking, DAO is just a series of smart contracts that define two main functions:
What is managed;
How to manage.
DAO smart contracts are all about “what” and “how”
These two functions can be applied to any company, fund, community or non-profit organization. DAO is the digitization of our daily lives.
The same way we transfer:
Now, we are witnessing the transformation of enterprises from centralized management to → decentralized management.
The management of DAO has become more and more complex. The pioneers of the DAO ignored important issues such as conflicts of interest, the excessive influence of big players (“whales”) on decision-making, and voter bribery. As the DAO becomes more and more open to the public, these issues become more and more important. Moreover, now everyone can access to create DAO.
Coordination, responsiveness and consistency are the main triggers for growth and DAO operations.
There are many examples of how small projects with joint governance can become the largest DAOs. For Uniswap and Compound, setting up their governance in the form of DAO is a correct and logical decision to help the development of the DeFi ecosystem.
This is a risky step, but now it promotes the development of the agreement and the prosperity of all participants. With the increasing popularity of NFTs, we have even seen the emergence of agreements such as PartyBid, which allow people to jointly purchase NFT assets and profit from them as a group. Nearly 400 people jointly purchased the super cool Crypto Punk. Therefore, DAO becomes the owner of NFT, and its value is distributed among users in the form of special ERC-20 tokens. This is also a DAO, although it is completely different from a serious agreement fund.
What tools are needed to manage DAO?
We expect to see massive growth in projects that facilitate DAO operations. The first famous project was MakerDAO in 2014. Before the advent of DAO builders and different management tools, DAO was written and supported using internal resources.
Now, DAO founders can fully focus on formulating concepts and rules: what to manage and how to manage, and the building platform will safely and easily wrap these rules in smart contracts.
We now have an application that supports voting and allows DAO participants to make joint decisions. These include Boardroom and snapshots, to name a few.
There are protocols that allow multiple signatures (requirements for transactions mean that multiple keys are required before accepting the transaction), such as Gnosis Safe.
DAO’s treasure management tools, such as Lama or Parcel.
There are also dashboards that track DAO balances, such as dFox (mobile app), DeBank, and Zerion. Finally, there are some powerful constructors that provide everything DAO needs, combining all the tools listed above. These include xDAO and Aragon.
What does DAO need, and what needs to be sacrificed?
We understand DAO as a completely transparent and open organization. Since any operation and any data record on the blockchain network need to pay gas fees, for DAO, complete chain transparency is an expensive privilege.
Vitalik Buterin also talked about his support for off-chain governance in his last article. If there is an urgent need to hard fork the current state of the agreement, then off-chain voting may become a problem. If this happens, all off-chain data will be lost.
This is not a problem for most DAOs, because only the voting process is stored off-chain, and subsequent executions are transmitted on-chain. Yes, off-chain voting has lost the absolute transparency of DAO. In any case, there are several reasons why we should keep some data.
The first and most important point is that it is built on security guarantees that are not affected by external factors and are not affected by third-party pressure during the voting process. The voting results will always remain on the blockchain.
Second, off-chain voting is cheaper and faster. Suppose we have a DAO with two members. Non-emergency transactions on Ethereum take about 3 minutes on average. Therefore, we need 3 minutes to create a vote + 3 minutes to record the signature of the first member + 3 minutes to record the signature of the second member + 3 minutes to record the final decision of the blockchain.
The voting will take 12-15 minutes in total. Now suppose we have 200 members instead of 2. Assuming that all participants can vote immediately, we will spend about 10 hours! If we want to speed up voting by increasing gas subsidies, voting will become very expensive.
The off-chain method can shorten the voting time to 3 minutes (0 minutes to create a vote, 0 minutes to record the signature of the first member, 0 minutes to record the signature of the second member, and 3 minutes to record the final decision on the chain).
If there are 200 MPs, it would only take 3 minutes if all voters voted immediately. This is why the upcoming xDAO v2 will provide this hybrid mechanism for voting on DAOs, which will maintain a balance between transparency and fast and cheap voting.
To sum up: There is no doubt that DAO has a positive impact on DeFi in many ways. DAO has more capital than individuals. DAO has the opportunity to grow. DAO supports the DeFi platform. As a form of managing DeFi agreements, DAO reflects the consistency of the project as a whole.
For individuals, participating in DAO is much more beneficial than managing their own assets. Indeed, DAO management is a complex process, and there are still many unsolved problems related to it.
However, we must continue to advance in technology, take into account positive and negative experiences, and change the situation, try new solutions and methods of voting rules.
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