More Than Just Tokens: How DAOs Help You Get the Best Out of Cryptocurrency Projects
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DAOs (decentralized autonomous organizations) have become one of the biggest trends within the cryptocurrency world.
They have enjoyed tremendous growth across 2021 as DeFi protocols like PhoenixDAO integrate the model as part of a strategy to promote greater decentralization and the delegation of governance. In short, DAOs carry out activities like managing assets, tabulating votes, and executing changes through smart contracts, all but eliminating the need for traditional legal or financial infrastructure.
In contrast to the hierarchy seen in legacy institutions, DAO membership is fluid and flat. Many believe the advantages of a DAO, including transparency, decentralization, and simplicity (as disputes are settled by a democratic voting system) could make them a key part of the future.
The Advantages Of DAOs As Part Of Crypto Projects
Yearn.Finance core contributor ‘Tracheopteryex’ told CoinDesk in late September how “DAOs are a bet on the future of human organization itself, which is an even bigger thing.”
DAOs are an important tool in the world of cryptocurrency because they benefit project developers and investors in ways traditional infrastructure never could. In traditional finance, those with a project idea have to pitch their proposal to a venture capital, hope they receive funding, and then continue to deliver value to stakeholders to receive more investment funds.
With the current model, many people with great ideas often need to modify or water down their approach to appease the whims of investors. In the end, the developer and the investors themselves often stand to be rewarded much more than the actual users or project participants.
A DAO allows any person to be a VC fund and help dictate the future of an organization or project. When users participate in a crowdsale for a DAO, they essentially purchase ‘shares’ of the particular decentralized platform. DAO token holders can then vote on a variety of proposals dealing with how funds are spent, the future project roadmap, and even the hiring of team members.
This sense of autonomy can lead to a variety of decentralized organizations that directly benefit the consumer. DAOs are a particular benefit to crypto enthusiasts as they give an equal playing field to individuals from all over the world, ensure complete operational transparency, and empower participants and investors to have a fair voice in governance operations without having to complete complex paperwork or jump through regulatory hoops.
General DAO infrastructure has greatly expanded over the last few years. Many DeFi and NFT projects are governed by DAOs, while an ever-growing percentage of the $2 trillion plus crypto market capitalization are governed by these types of entities.
Full-time DAO workers can even receive health care thanks to the Opolis benefits and payroll cooperative.
A DAO is at the forefront of ecosystems like that of Phoenix, allowing users to decide how budgets are spent across the open-source community driven project. PhoenixDAO is a suite of protocols covering authentication, identity, and payments, all designed to power a new digital economy.
Phoenix’s Advantageous DAO Structure That Promotes Transparency
In contrast to other DAOs, all spending concerning the PhoenixDAO project (which comes after voting) is publicly posted on a running budget page to promote transparency as the DAO is completely self-sustaining through revenue generating products like the dApp store and does not rely on outside donations.
PHNX holders can log into the DAO’s user interface to read about proposals, vote, view PHNX transaction history, track the status of current, active projects, verify voting results, and view rewards based on user participation. Currently, voting on proposals requires a minimum of 1000 staked PHNX. Participants must hold 10,000 PHNX to make a proposal. Users also need to complete KYC procedures using Phoenix’s Identity protocol before voting.
Phoenix’s DAO architecture allows for a decentralized community of stakeholders to govern and control the overall network. The many advantages DAOs have over traditional governance structures continue to leave many optimistic. Billionaire investor Mark Cuban tweeted in May how “entrepreneurs that enable DAOs can make money. If the community excels at governance, everyone shares in the upside.”