The Future Of DAOs (Decentralized Autonomous Organizations)

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INTRODUCTION

Decentralized Autonomous Organization (DAOs) is all about a new innovation in the way organizations are structured. Traditional organizations leadership and decision making are centralized, but that is not the case for DAOs . DAOs rely on smart contracts and blockchain network for its leadership and decision making process. Rules and decisions are excited autonomously needing no intermediaries. This innovation to how organizations are structured helps to reduce cost , promote transparency and makes decision making a democratic process.

This innovation is now been used by blockchain technology as the mature and grow rapidly. This is so because, it offers a platform where stakeholders can participate or get involved in the decision making process, not minding their background or location. This transition to decentralized governance is being embraced all over the world by different sectors such as; finance, technology, art, and even entertainment.

The future of this innovation, Decentralized autonomous Organizations is likely to be shaped by several factors. In this essay we are going to throw more light on these factors. They include; Governance model, Legal recognition, Scalability and its Adoption by main stream industries.

• GOVERNANCE MODELS:

This is a very important factor in the future success of DAOs, because this organization depends solely on the evolution of it Governance models. Originally the Governance model is all about token voting. This causes power imbalance as a participant with more tokens will have more voting power and influence. Although it aligns with the principles of Decentralization it cause power imbalance mentioned before. As the Governance models continue to evolve we can be sure to have better models in the future that will be able to distribute power equally.

In other to address this issue of power imbalance, DAO is exploring innovations like quadratic voting, delegated voting etc so an equitable decision making process can be created, making sure that the voice of all stakeholders will be heard.

If this Governance models prove to effective, they would be adopted by centralized organizations who wishes to make their decisions making process democratic in nature , there by bridging the gap between these two systems

• LEGAL RECOGNITION:

DAOs lack legal recognition and this is one of it major challenge . Right now DAOs are operated with a clear law guiding how things are done. As a result there is uncertainty in matters relating to Liability, Taxation and other obligations. Legal clarity and recognition is needed for DAOs to flourish.

In years to come , more countries will likely start to establish legal structures for DAOs, when this happens they will be able to operate along side traditional businesses. However , in other to achieve this a balance must be met between the regulation and the decentralized ethos that make DAOs unique .

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DAOs will become more appealing to traditional businesses as this regulatory framework evolves. The risk involve in investing in DAOs will be reduced making people to adopt it for their businesses .

• SCALABILITY :

Scalability and Efficiency is another important factor that determines if DAOs will be adopted or not . Right now many DAOs are facing challenges that has to do with speed and the cost of transaction, because blockchain networks like Ethereum get attacked , as a result the gas fee is increased making transactions execution expensive. As a result of this, the chance of being adopted is reduced, and this limits the growth of the DAOs.

The transition to Ethereum 2.0 layer 2, will help to over come the challenge by reducing significantly the cost of executing transactions, and also increase the speed of DAOs operations, Making them more accessible and efficient .

Another factor that can enhance the scalability of DAOs is the off-chain governance, that is making decisions off-chain so as to reduce the burden on blockchain network. Thus enabling DAOs to scale us their operations without compromising their principles.

• MAIN STREAM AND INDUSTRIAL ADOPTION:

Another factor that influences the future of DAOs is their adoption across the world by industries. Even if DAOs where made primarily for cryptocurrency and blockchain sectors, they have other potentials which can be applied in other sectors such as finance, gaming and even social networks. For example DAOs can be used to manage investments funds.

As traditional businesses and industries begin to see the benefits of DAOs , there will be an increase in the creation of industries specifically designed to address DAOs challenges and opportunities. As the awareness of DAOs grows it will then become widely accepted as a perfect alternative for traditional organizations .

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CONCLUSION

In conclusion DAO has the power to change how are organizations are managed. It can also make it possible for the world to adopt a decentralized system of organizations if the problems of governance, legal recognition, scalability and mainstream adoption are solved