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What’s a DAOs and Why they are a Crucial Part of the DeFi Market

What’s a DAOs and Why they are a Crucial Part of the DeFi Market

There has been a lot of talk recently about DAOs (decentralized autonomous organizations). These systems are one of the fastest growing features in the DeFi market. DAOs enable users to decide the direction of a platform via an open-source blockchain protocol.

You can think of a DAO as eliminating the personal of an organization and replacing these components with smart contracts. These smart contracts contain predetermined rules and regulations. The systems can determine critical components of a network including use of budget and fees.

How Do DAOs Work?

The main thing to understand about DAOs is that they provide decentralized control to a project. The DAO is set up in a manner to run autonomously with only input from users once created. In most cases, the rules of a DAO are created by the developers of a project. These rules have conditions that engage and activate certain other contracts to keep the system functioning properly.

Transparency is Key

The push for DAOs has been driven by a desire for more transparency in the market. DAOs prevent rug pulls and other ways in which a development team could scam their users. Notably, all rules and actions are recorded on the blockchain in an immutable manner.

It’s About Your Governance Tokens

Governance Tokens are how users participate in DAOs. There are a variety of different types of DAOs. Some provide all users with an equal vote regardless of their holdings. However, most DAOs give more weight to those users with large holdings.

Governance tokens serve multiple purposes. There are some networks that require you to stake your governance tokens to participate in the DAO while others just ask that your tokens remain in a network wallet to gain access to voting. Governance tokens can also be used as cryptocurrencies to send value globally.

The First DAO

The first time the concept of a DAO ever came up was during a discussion between BitShares, Steemit and EOS founder Dan Larimer in 2015. Less than a year later, Ethereum developers entered the market with the first functioning DAO. The project was named Frontier.

Officially, the Ethereum DAO launched in April 2016 to an interested market. The DAO broke records when it secured $150 million in funding to make the project a reality. There was participation from over 11,000 investors from a variety of regions.

The First DOA Hack

The Ethereum DAO hack was a major incident for the entire crypto market. The incident occurred shortly following the record-setting crowdfunding event. Sadly, the hack revealed several shortcomings in the security procedures of the project and eventually led to the entire Ethereum community splitting.

Technical forensics later revealed that Hackers figured out how to trick the system by creating a duplicate DAO that would then tell the system to send the funds to another wallet. Their plan went well at first as the hackers siphoned 3.6 million ETH from the ICO.

They were able to make out with such a large amount of Ethereum because the developers had mistakenly kept all the funding in a single wallet. Additionally, they didn’t use a multi-sig wallet, so there was only one key securing all of these funds. The hack led to an intense debate within the Ethereum community. Even the hackers put in their two cents via social media channels.

Eventually, the Ethereum development team decided to roll back the blockchain right before the hack occurred. This decision was and still remains very controversial as blockchains are to be immutable. The decision eventually led to the creation of the Ethereum you see today and Ethereum classic, which is the original chain.

Sadly, this move has haunted Ethereum in many ways till this day. For one, it has made it difficult for security tokens to operate on the network as their finality is legally protected. Regulators are not keen on the concept of developers having the ability to resent securities transactions.

DeFi DAOs

The DAO concept took flight recently thanks to the explosion in DeFi platforms. DeFi networks are the perfect fit for this technology as they eliminate the need for centralized financial institutions. DeFi networks enable users to leverage their assets to earn rewards.

For example, the META1 DeFi system enables users to stake their stablecoins and earn interest. Staking is low risk. Plus, you can determine your rewards by staking more tokens. The network also integrates scalable DEX and high yield savings accounts.

Joining the META1 network is a seamless process. You can convert +50 cryptocurrencies into the META1 token using the Onramper portal. Once you have META1 Coins, there are a variety of ways to generate wealth using the features and services of the network. You can also spend your cryptocurrency like fiat using the META1 Visa Debit Card.

The DAOs of the Future

The age of DAOs is already here. The efficiency and other benefits that DAOs bring to the market make them ideal for those seeking more control in their crypto endeavors. These systems save money and help to keep communities more transparent. Like any new technology, there are additional security concerns you need to think about such as the market history of the project you want to join. Stick to established and well-known project to avoid scams.

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