Learn on SubDAO: Understanding the Structure and Governance Model of Decentralized Autonomous Organizations (DAOs)
DAO, or Decentralized Autonomous Organization, is an entity that has no central government and runs on software code instead of laws written by people. However, there’s still much confusion about these organizations and how they work. The ability to operate autonomously without human intervention makes DAOs potentially disruptive technologies that could change how companies are structured and how they operate.
In this article, we’ll take a deep dive into the structure and governance model of DAOs and compare them with the centralized models so you can learn and understand what they are capable of.
Structure model of Decentralized Autonomous Organizations
Decentralized autonomous organizations (DAOs) are groups of people that come together to form a decentralized, distributed network based on blockchain technology. Any one person or entity does not control them. Instead, they are governed by smart contracts that execute themselves based on various rules.
DAOs are distributed systems, so there isn’t any headquarters. Instead, its members all have their computers and vote on things, creating a peer-to-peer organization. Unlike traditional organizations, there is hardly any need for physical meetings; communication is done online, and all decisions are finalized on-chain, via smart contracts.
Members in a DAO can decide how much power they want to give to an individual’s actions within the organization and take full responsibility for those actions. For example, suppose there is a disagreement between members over what should happen with funds or other issues facing the organization. In that case, it is up to them to resolve these disagreements through discussion and voting. These decisions are made collectively by everyone who has invested in a particular DAO since they all hold tokens representing ownership in that specific DAO. Anyone holding tokens has an equal say over what happens with funds invested in that specific DAO regardless of how many tokens they own or when they purchased them.
Ultimately, DAOs seek to minimize human intervention as much as possible because humans are fallible. As a result, DAOs operate more consistently following their original intent by allowing code to rule instead of individuals.
Advantages of DAO Structure model over centralized models
The primary benefit of the DAO’s structural model over traditional centralized models is that it makes decision-making less expensive because decision-making isn’t reliant on hierarchical management. The streamlined structure also means no business meetings or other internal resource costs. In addition, rather than relying on employees, DAOs can hire freelancers to complete tasks, which dramatically reduces labor costs and opens up new business opportunities for firms while lowering the costs of external labor for DAOs. Finally, the DAO members can delegate a member for more financially sensitive tasks, giving them access to funds by signing a multi-sig contract.
The governance model of decentralized autonomous organizations
The governance model of a decentralized autonomous organization (DAO) is an organizational governance model based on blockchain technology. It has no leader or central authority, with transparent smart contracts making and executing decisions. This model can be seen as an extension of crypto-anarchism, where groups of individuals can create their own rules and systems to govern their organizations without any intervention from outside parties.
It is fully autonomous, meaning it operates under its own rules without any human involvement; however, it still relies on humans for its continued existence because humans must provide computational power to run operations such as decision-making processes or value-adding activities.
DAOs have no central management, but they can have a governance model. Any DAO can use various models of DAO organization and governance to oversee its activities. These include representative democracy (where a voting system is used), futarchy (which uses prediction markets for decision making), liquid democracy (which offers a combination of voting rights), and direct democracy (which allows decisions to be made directly by members).
Each of these has its advantages and disadvantages. For example, representative democracy may work well for complex issues because people with specialized knowledge can help make informed decisions about them. However, it does not offer much flexibility regarding how quickly they can implement changes or how fast new ideas can be adopted. Futarchy could help solve some of these problems because it makes decisions faster while still allowing for specialist input on important issues. Liquid democracy also helps speed up decision-making while still offering some specialization through delegation. Although it does not allow complete delegation, some expertise is required to use it effectively.
Advantages of DAO Governance model over centralized models
The advantages of a DAO’s governance model over the centralized governance models include trust. Trust is established in an organization through rules and regulations followed by all members. In a decentralized system, these rules are encoded into smart contracts. All participants in a network need to agree on these rules before participating in any activity within it. This agreement creates trust among participants because they all know what to expect based on these rules. Another advantage of using blockchain technology for creating organizations is transparency. As every action taken by an organization is recorded on the blockchain, there is no room for misinterpretation or fraudulence, as everyone has access to information about all activities that take place within an organization at any given time.
SubDAO’s unique governance and structure model
As the adoption of blockchain technology increases, many DAO projects have launched, each trying to integrate decentralization into our traditional world. However, many of these projects have some limitations that could be a potential drawback to decentralized organizations on the blockchain-based internet.
For example, some of these DAO projects are launched on a single chain, denying some intending members the opportunity to join the organization. In reality, saying an organization is only available on the Ethereum network or exclusively on the BSC network is tantamount to saying that a traditional organization is limited to Europe or Asia, and others cannot join. However, since launching on Polkadot, a cross-chain ecosystem, SubDAO isn’t limited; hence, intending members can join an organization from any chain of choice.
The Web 3.0 world, where most of the world’s processes will be governed on the blockchain hinges on interoperability, and SubDAO helps achieve this.
Also, SubDAO is developing sophisticated DAO templates to enable a comprehensive decentralized decision-making mechanism. Typically, decision-making in many DAOs is limited to basic voting such as “YES or NO,” “AGREE or DISAGREE.” However, in reality, decision-making could involve hundreds of other options that aren’t a straight approval or disapproval. Hence, to effectively replace traditional organizations, DAOs must grow from a basic voting system to one that executes decentralized choices.
SubDAO has recently kicked off, testing the Ventures DAO template for decentralized investments. The SubDAO team keeps working hard to develop DAOs that will facilitate the true nature of organizations in the Web 3.0 world.
SubDAO is a multi-chain DAO protocol. It allows any decentralized organization to swiftly create and manage DAOs. We are committed to serving as a Web3.0 entry by providing blockchain-based digital agreement signing, DAO social networking, asset management, and other tools and services.
The founding team of SubDAO is composed of the former Technical Team leader of the IBM Group and many early well-known developers from Polkadot. SubDAO has completed multi-million dollar financing from dozens of institutions including Hypersphere, Huobi Ventures, OKEx Blockdream Fund, as well as investment by Messari founder Ryan Selkis.Follow SubDAO