Decentralized finance is gaining traction, so ever more DeFi-related words come into popular use. One of them is DAO standing for a decentralized autonomous organization. It is ruled by a self-sustaining protocol influenced by shareholders. However, the use cases of such a governance model can range far behind the DeFi sector, promising a fair power distribution and optimization of business processes.
What’s the point?
Unlike centralized organizations, DAOs are not controlled by a small group of people. All the decisions on the project’s future are taken by numerous individuals dispersed around the globe. The model structure is designed to incentivize each of them to actively participate in governance. By voting for the most relevant protocol changes, community members help the project grow, which means more utility and higher profits for all the participants.
Currently, there are many various DAOs having different missions, structures, and rules. Nevertheless, all of them target long-term growth, mass adoption, and further development of blockchain technology and crypto. Let’s look at some of them.
MakerDAO
This is one of the most famous DAO projects in the DeFi space. MakerDAO is an Ethereum-based decentralized lending platform. It allows users to borrow against a variety of crypto assets as collateral they supply into smart contracts. Having made a deposit, they receive DAI tokens, stablecoins whose value is pegged to the USD. Thus, the project is aimed at providing “financial freedom without volatility”.
The MakerDAO protocol is governed by MKR token holders. There was no ICO; instead, MKR tokens were distributed via private sales and sold on exchanges. The liquid supply is 999,277 MKR (at the moment of writing). Token holders can adjust policy for the Dai stablecoin, select new collateral types, and enhance governance itself. MKR holders vote for platform changes and the voting power is proportional to the number of tokens owned.
Aragon
Besides being a DAO itself, this blockchain project is focused on providing users with the tools to set up their own DAOs. The platform reminds of a website builder, as it relies on already configured modules to be customized to suit your business’s particular goals.
The initial ANT total supply was 39,609,523.8 units. 70% of them accounted for public sale and pre-sale, 15% were granted to Aragon Foundation, and another 15% were distributed to early contributors and founders. The governance token is ANT, whose holders shape the Aragon’s future by voting on key updates to the network. Moreover, there is an ANJ token to vote on digital jurisdiction matters.
KyberDAO
The platform was set up as a voting platform for the Kyber Network, a blockchain-based protocol that aggregates liquidity and enables P2P token swap. The project’s team encourages participation by enabling transparent governance and rewarding KNC holders with ETH tokens.
According to the official token distribution paper, 61.06% of tokens were sold to the public, 19.47% were saved for the founders, advisors, and seed investors, and 19.47% was reserved for the company. Stakeholders directly influence Kyber's development and long-term objectives. Besides, the platform’s business model involves burning governance tokens to combat inflation.
Uniswap
One more example of a DAO is Uniswap, the largest world’s decentralized exchange (DEX) by market cap. Its protocol allows users to swap ERC-20 tokens in a trustless and permissionless manner. There is no traditional order book but an automated market maker (AMM) protocol that enables trading with a smart contract called a liquidity pool.
The Uniswap governance token is UNI, and 60% of its genesis supply (600,000,000 UNI) is allocated to community members. UNI is available through four liquidity mining pools, and its holders can vote for integrating more pools after a 30-day governance grace period. They get the ownership of Uniswap governance, UNI community treasury, protocol fee switch, uniswap.eth ENS name, Uniswap Default List, and SOCKS liquidity tokens.
WhiteSwap
WhiteSwap is another AMM decentralized exchange (DEX) currently on the Ethereum blockchain. It was forked from Uniswap V2, and unlike Uniswap, its governance tokens (WSE) are locked on smart contracts to be put into circulation over time.
This project allocates the largest share of governance tokens to community members, which is 870,000,000 WSE (87% of the initial four-year allocation). WSE holders get the ownership of WhiteSwap governance, WSE community treasury, the protocol fee switch, and WhiteSwap Default Tokens List. Community members play a key role in governance and often make proposals targeted at the project’s development, most of which get executed.
Conclusion
The principle behind DAOs provides a new perspective on how companies can be managed. Decentralized governance eliminates the hierarchical organizational structure, so every community member has a say. Smart contracts distribute funds between projects once the proposal has been approved. Thus, no bureaucracy can interfere with its implementation if the decision has already been made.
