What is Crypto DAO? How it works? See Examples

11/14/2022

     What is DAO in the Crypto World? How it works? What is a DAO Company? How to invest in DAO? In this article you will know everything about this newest segment of decentralized finance, see.

What is Crypto DAO? How it works? See Examples
What is Crypto DAO? How it works? See Examples

What is Crypto DAO?

     A Crypto DAO stands for: Decentralized Autonomous Organization behind every Cryptocurrency. It boils down to organizations of fraternal societies, very similar to what happened in the past.

     But what happened in the past? - It was like this: the members paid monthly fees and these fees were allocated in the treasury and this treasury was used to maintain the members' annual expenses with doctors.

     Later, this "democratic" scheme was replaced by public and private institutions, thus being centralized. As everyone wanted to be part of this type of fraternity - because it was cheap, doctors felt inferior as their work increased and their Salary remained the same.

The goal of DAOs is to make these schemes decentralized, resulting in a more democratic society.


Off-Chain DAO Type:

     Off-Chain DAOs are mainly used through more decentralized cryptocurrencies that are mined through computational power - proof of work - such as Bitcoin and Litecoin. The disadvantage of this model is that it is not very structured - considering that many investors hold these cryptocurrencies and, also, today, the newest Cryptocurrencies are mined in another way: through stake.

     Thus, miners have more voting power, which does not make it so democratic: if we were to compare it with a political system, it would be closer to a politeia (Aristotle's political model) where the voice of the leaders of society is with politicians - who are the majority.

We recommend: How to Invest in Bitcoin with Little Money?

On-Chain DAO Type:

     The On Chain DAOs types are the best known for being "proof of bet". Unlike previous models, these cryptocurrencies are Mined through Staking two examples of cryptocurrencies that are mined in this way are Cardano and Polkadot. In this model, we can also bring DeFi protocols, such as Uniswap, where these projects will have a forum for investors to vote.

     Other DeFi projects that have grown a lot are AAVE and Badger who have the same line of thinking as Uniswap. As the staking mining model boils down to the amount of cryptocurrencies or tokens you have locked up, as part of the miners' validation, it infers that in "each unit means one vote".

     The proposal will be approved from 51% of the votes of the users; the weak point here is that whoever has the most money in these cryptos or tokens may have more voting power.


Polkadot System:

     For this, Polkadot brings innovation. In this model, the time factor is also important, as each staking month the user will be entitled to an additional vote 2 months, 3 votes. From the fourth month onwards, the number of votes may decrease.

     In short: the longer you staking your cryptocurrencies, the more voting power you will have. this model is more democratic because the more you believe in the project, the more decision-making power within this project you will have.


How it Works?

     It works like this: in DAOs, there is no CEO behind as in centralized organizations (traditional companies). this way, each person has their voting power... all users have a voice within the project chosen by that person.

     Everyone is the owner, who ensures this is an algorithm of Smart Contracts. When a DAO makes a profit, that profit is distributed to the "shareholders", that is: the community. With this, it is possible to Make Money with DAOs.


Example: BitDAO:

     BitDAO is a decentralized autonomous organization that wants to level the playing field for all people in the world by building a decentralized token economy. This protocol is one of the world's newest and largest decentralized autonomous organizations focused on DeFi, and is managed by BIT token holders.

     One of the main goals of the initiative is to attract talented developers through token exchanges and co-development efforts. The token exchanges will allow the BitDAO treasury to amass a collection of top cryptocurrency project tokens.

     BitDAO's vision is of open finance and a decentralized tokenized economy. BitDAO hopes to support a wide range of projects including DeFi, DAOs, NFTs and games. This will take the form of research and development, initial liquidity investment and financing.

     BitDAO aims to partner with existing and emerging projects through token exchanges. The token exchanges will allow BitDAO's treasury allocation to bring together a collection of top cryptocurrency tokens. Priority is given to spot and derivative DEXs.


How to invest in DAO?

     The easiest and most practical way to invest in a DAO project is through Cryptocurrency Exchanges. At a broker, you can buy the project you want and from there, transfer it to a Wallet of your choice - and that accepts this project.

     You will be able to use Bybit to buy BitDAO, Uniswap, AAVE and several other Tokens that are part of this amazing universe of decentralized autonomous organizations!

Lucas Lippe

Passionate about the digital world, from classic marketing to the fabulous world of cryptocurrencies. The idea of freedom is fascinating and bitcoin gives us that in many ways. Explaining ideas of a decentralized web on the Bitcoin Lovers website.


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What is DAO in the Crypto World? How it works? What is a DAO Company? How to invest in DAO? In this article you will know everything about this newest segment of decentralized finance, see.