Learn With SubDAO: DAO Frequently Asked Questions (FAQs) Answered
Decentralized autonomous organizations, also known as DAOs, are getting more and more attention in the blockchain community. They are one of the biggest and most promising blockchain applications. But there are loads of questions about their membership models, how the assets DAOs have in their treasuries are managed, and many more questions.
In this article, we’ll explore some frequently asked questions about DAOs and their answers, so you can make an informed decision about what it means to invest in a DAO project.
Question 1: What are the distinct models for membership in DAOs?
DAO developers have the power to create membership models. Membership benefits can offer a comprehensive picture of the mechanics driving voting and other important aspects of the DAO. For example, DAO membership may be divided into two types: token-based membership and share-based membership.
The former provides users with a stake in the DAO proportional to their holdings in its native token.
On the other hand, share-based membership grants members rights based on an ownership stake in proportion to their shares.
Token-based membership: DAOs that are token-based have a governance token that grants their holders voting rights, allowing them to vote on the DAO’s destiny. As a result, anybody with the DAO’s governance token is a member of the DAO.
DAOs can have entirely permissionless membership thanks to the approach of governance tokens. Moreover, since owners may openly exchange such tokens on crypto trading platforms like DEXes, they are easily accessible to anybody interested in joining a specific DAO community.
A DAO can also provide consumers with other ways to gain governance tokens. Tokens, for example, can be obtained as incentives for staking, validating, confirming liquidity, and so on. These methods encourage users to preserve their token holdings and participate in the DAO community.
Share-based membership: The share-based architecture is permissioned, yet membership may be easy to gain depending on the DAO; this is because, in most situations, anyone interested in joining a DAO may submit a mouth-watering proposal to become a member. Such ideas usually entail donating to the DAO, whether in the form of tokens or effort; hence, they are granted if deemed good enough. A share grants its possessor voting rights and control of the DAO’s money. Notably, members are permitted to depart a DAO with their treasury share.
This architecture is ideal for DAOs that are established around smaller groups of like-minded individuals who wish to collaborate to achieve common goals. The model may also be utilized to govern tokens and protocols.
Question 2: Who controls or manages DAOs assets and treasury?
The control of a DAO’s assets isn’t within a single person’s power; typically, DAO treasuries are multisig wallets requiring multiple people to sign off on any transaction. All DAO members may have multisig access, or it could be a group of elected representatives (which can be frequently changed). The point is that no single person controls the DAO’s finances — everybody does.
So if nobody has control of a DAO’s assets, what happens when a proposal is put forward? The equity tokens assigned to vote for that proposal are locked until a decision is made; even if someone comes up with an idea for a business or project, it’s impossible to cash in those tokens immediately. Instead, they would need to wait until their proposal was accepted by voters, at which point they could cash out their stake as a profit share in exchange for their services or goods. Also, because all of these actions are recorded on the blockchain, there is total transparency for everyone involved.
Question 3: What does the future hold for DAOs with the growth of AI technologies?
Despite their meteoric ascent, DAOs continue to be plagued by human flaws that might prevent them from reaching their full potential.
By conducting activities on behalf of individuals in a DAO, artificial intelligence (AI) might provide a better road ahead. AI would integrate sentient, dynamic reasoning abilities with split-second data analysis and other computer benefits to make better execution.
A DAO’s ultimate purpose is to function beyond human bureaucratic administration. The presence of AI DAOs would allow many processes carried out by humans to be automated with smart contract integration, facilitating perfect judgment and execution, and eliminating human error and bias.
Most DAOs will switch to this enhanced model in the coming years while still benefiting from blockchain and other developing technologies. In addition, numerous DAOs will likely migrate from entire human execution and control to automation in the future. DAOs would therefore be able to fully utilize AI, blockchain, and other developing technologies to increase their efficiency.
Question 4: How can DAOs deal with bad behavior by major token holders?
The possibility of malicious actions cannot be ruled out; more so, when major token holders carry out these actions, the DAO could become compromised; hence, to prevent this, it is important for DAOs to employ an anti-whale voting system that doesn’t attribute voting power as an equivalent of equity tokens.
Another way is to have a reputation system, where holders with bad behavior are given a low reputation score. This score would then be used to determine whether or not they can participate in certain activities, such as voting.
Finally, some DAOs may choose to blacklist certain addresses, preventing them from participating in the DAO altogether. For example, suppose there were a group of people sending harassing messages to others. In that case, the other members of the DAO could decide to block their address.
Question 5: Can DAOs effectively scale?
Yes, DAOs can effectively scale. One reason is that they can be forked. When a network gets too big or too slow, you can fork it and create a new one; this is impossible with traditional organizations.
Additionally, because DAOs are decentralized, they are not subject to the same jurisdictional issues as traditional organizations; this makes them much more flexible and scalable. Finally, because DAOs run on code, they can be updated much more easily than traditional organizations, which must go through lengthy bureaucratic processes to make small changes.
Although it has to be said that while DAOs can be very effective, they may not be able to scale in the same way as a traditional company; this is because each member of a DAO must agree on every decision, which can take time.
Furthermore, as a DAO grows, it may become more difficult for members to reach a consensus. However, there are ways to make DAOs more scalable, such as by using voting algorithms or having a smaller group of core members who make decisions on behalf of the larger group.
About SubDAO
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.
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