Can the decentralized autonomous organization DAO become the next financial revolution after DeFi?

While the entire cryptocurrency market has been in the doldrums, one sector has outperformed the rest of the market: decentralized autonomous organizations, or DAOs. DAOs are the natural evolution of DeFi, and if the idea appeals to investors as much as DeFi did a year ago, it’s a compelling investment opportunity for those who get in early.

DAOs are a revolutionary new governance model made possible by the power of blockchain. In traditional governance systems, like those seen in public companies, there is an advisory board and a team of executives who act as the core authority figures of the company. Shareholders have the right to vote on the actions of the company, but the items they vote on come from this leadership team, so individuals cannot propose changes. Additionally, traditional companies are created as single entities and exist in the current business world through traditional methods such as hiring employees, signing contracts, etc.

The DAO operates in a completely different way than the current system. Unlike a company, a DAO has no centralized authority. There are many different people who own tokens that represent a share of the DAO (called governance tokens), and anyone can vote on the DAO or propose changes. The DAO is also governed by smart contracts and code, rather than contracts written by lawyers. This means that fraud, misappropriation, or other suspicious activity cannot occur in a DAO because all the code is transparent and public. It also means that conditions and operations can be achieved without a middleman, which increases efficiency by reducing costs.

An example of a DAO can be seen in the decentralized exchange Uniswap. In September 2020, they provided the UNI token as a governance token for platform users and transitioned from a protocol owned and operated by Uniswap Labs to a DAO. Now, any UNI holder can vote on changes to the protocol, such as fee changes and grant approvals. If someone wants to add something to the platform, but no one votes for it, they can create it themselves and let other UNI holders discuss and vote on it. This is why Uniswap is one of the most decentralized and democratized DeFi products to date, and is completely in the hands of token holders who believe in the project.

Currently, DAOs are not very popular in the cryptocurrency space. Only about 2.5% of the entire cryptocurrency market cap is made up of DAO-related projects, a number that is likely to increase significantly in the future as DAO technology and awareness improve.

It is inevitable that DAOs will one day take over many current businesses. For example, DAOs could help spread the gig economy, which was pioneered by companies like Uber, to a wider audience. Right now, these companies act as middlemen, taking a cut of the profits of their users to keep their businesses running. In fact, Uber takes anywhere from 25% to 47% of the fares paid by passengers. With a DAO, this fee could be significantly reduced, resulting in cheaper services for users while also increasing profits for drivers. Furthermore, if an “Uber DAO” follows Uniswap’s lead and issues tokens to platform users and gives them to drivers, then the people working for the DAO will have a direct impact on the future of the company and will be incentivized to provide better services to increase the value of the DAO.

Just like DeFi in the summer of 2020, DAOs could become a highly promising investment opportunity for investors in the crypto space. A year ago, the DeFi industry was only worth around $10 billion, but has now surged to over $72 billion. This is not only due to the increase in existing technology and opportunities, but also due to the increased interest from mainstream investors who see the potential of DeFi to earn safe returns on stablecoins and other assets. The DAO industry is now worth $26 billion, nearly half of which comes from Uniswap.

If institutional investors realize the efficiency of DAO solutions and begin to understand why they are a revolutionary model, the value of DAO-based projects and solutions could soar.

It remains to be seen when DAOs will go mainstream. However, just like DeFi or NFTs, DAOs have great potential to attract public attention, and it may only be a matter of time before a DAO revolution appears in the business world.