What is a DAO? Explained In Simple Terms

TLDR

Decentralized Autonomous Organizations, or “DAOs”, are community-led entities designed with full transparency, decentralized decision making and autonomy. The flat structure of hierarchy enables a dynamic and democratic management structure. DAOs have built-in treasuries that no central authority has access to but the members. Rules and regulations are shared and followed by the community in order to achieve a shared mission. 

What Are DAOs For?

DAOs are community-owned organizations without centralized power. Instead of having to trust a single person, you can trust that the entire organization works for its members as it is intended. No one person can make decisions without a unanimous consensus. This helps mitigate risks of corruption and makes the organization more representative and inclusive. Additionally, it encourages collaboration and coordination across the globe. DAOs in DeFi can potentially replace some large traditional organization structures.

DAO 🗳️

✅ Flat organizational structure

✅ Operate transparently

✅ Democratic decision making

Traditional Organization 💼

❌ Hierarchical organizational structure

❌ Operate in private

❌ Centralized authorities make decisions

DAO Membership 

A DAO in crypto is run by a decentralized community and as such it has no central authority. Decisions are always reached in a democratic manner by the entire community. This means that the group makes decisions in a transparent and collective way, and payments are automatically authorized when votes pass.

Uniswap is one of the biggest decentralized exchanges and it operates as the most popular DAO for decision making. Anyone can become a DAO member by holding the UNI token, which gives voting rights to govern the way Uniswap is run and administered.

Decentraland is governed by a DAO, where administrative and governance decisions are taken by the stakeholders in a democratic fashion. Anyone who owns the platform's token, known as MANA, can take part in the process. 

There are several types of DAO memberships including token-based memberships, share-based memberships, and reputation-based memberships.

Token-based

Token-based membership allows token holders to participate and vote on decisions. The governance tokens can be traded permissionlessly on a decentralized exchange, or must be earned through providing liquidity or some other ‘proof-of-work’. This further enables DAO members to govern the decentralized protocols, or tokens themselves.

Share-based

Share-based DAOs give a more granular control of certain functions of a DAO, and each share allows people to own portions of an organization. This form of DAO typically authorizes its members to govern the protocol and tokens. Members are entitled to rights to submit a proposal to make changes while offering a tribute of some value in the form of tokens or work. Members can exit anytime with their commensurable share.

Reputation-based 

Unlike shares, reputation cannot be bought or sold, transferred, delegated and grants no ownership to contributors, but represents proof of participation and voting power in the system. Members who wish to propose new changes must earn reputation through certain types of contributions before they can join the network and receive tokens as rewards for their efforts to build value.

Umee & DAOs

DAO is the new star in the DeFi world. DeFi provides an economic outlet for those who would otherwise be unable to participate in the economy, while DAO-driven projects enable workers to focus on productive work, effectively eliminating bureaucracy.

At Umee, we are building a user-centric cross chain DeFi hub with products for everyone to experience the best of blockchains. We have previously introduced the Umee Validator DAO, where the DAO Committee takes the responsibility of making validator delegation decisions on a quarterly basis. The committee members get to review the validators' delegation applications, evaluate contributions and make delegation decisions as a group. 

In the near future, Umee plans to introduce its Community DAO, in order to incentivize and lead community contributors like writers, translators, designers, and more. The Community DAO aims to provide a sustainable infrastructure to reward valuable contributors and unlock the abundance of talent within our community.

The future of Umee is built upon each and every one of our community members. Your suggestions, ideas, contributions and engagements are what drive Umee to thrive and grow. We are excited to set up the systems for our community to take a bigger and bigger role in this journey. Stay tuned for the official announcement!

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