The Different Types Of DAO

2022-06-02, 07:20

The Decentralized Autonomous Organization leverages the smart contract, distributed ledger, and blockchain technology for its development.

DAO contains governance rules that are written, enforced, and automated using the developed codes.

All stakeholders and participants in DAO make the decisions and updates.

The widely-used programming language in DAO smart contracts is the Solidity PL.

Protocol, grant, entertainment, investment, and venture DAO are the common types of DAOs used by different communities.

In every organization, the governance protocol and regulations are always defined. Most times, during the enforcement of regulations, the parties involved either fail to follow the rules to the latter or the rules are not satisfactory to all.

The Decentralized Autonomous Organization (DAO) is proposed to be the best governance protocol to solve this organizational anomaly. There are various types that suit your organizational structure and operations to get the best out of the DAO governance protocol.

The DAO has suffered quite a number of setbacks. The first publicly launched DAO lost about 3.6 million ETH to a smart contract bug exploit, and the developers could not recover from the loss.

Eventually, the visible success came after a while. One of the prominent contributors to the success of the DAO is blockchain technology. Its smart contract and on-chain governance protocol helped build a robust and secure decentralized protocol for diverse purposes.

This article will identify the concept behind DAO and the different types of DAO.

Let's dig in.

DAO As A Governance Protocol

Image: Consensys

The Decentralized Autonomous Organization ecosystem has distributed ledger technology, smart contract, and blockchain as its main operation mechanism. DAO's governance rules are written, enforced, and automated using the developed software.

In DAO, those who form the participants and stakeholders oversee the contributed funds. All decisions and regulations are in the hands of the stakeholders to be executed by the smart contract code without external interference.

DAO gives you the unique avenue to build and grow communities in a decentralized form.

To join a DAO, you have to purchase its native currency. Some of the DAOs whose native currency is available for purchase on the blockchain network include DASH, MakerDAO, and Augur.

Smart contracts are used in building the rules and regulations in a Decentralized Autonomous Organization. Before the developer builds the codes, all rules are formed by the team members or stakeholders of such a community.

Smart contracts are open-source, verifiable, and publicly auditable. It is easy for all potential members and stakeholders to understand how the governance protocol will work when fully launched.

The most used code in smart contracts is the solidity programming language. DAOs are deployed on the Ethereum blockchain and, once deployed, require the Ether currency.

Having identified the concept of DAO, we shall examine the different types of DAO.

The Types Of DAO

Image: Alchemy

Presently, there are no specified numbers of DAO types because new sets or types are being developed at intervals.

However, we shall identify the most common ones among the DAOs:

Protocol DAOs

The protocol DAO is a Decentralized Autonomous organization deployed to govern a decentralized protocol platform. The protocol DAO is developed for building borrowing and lending apps, decentralized exchange, and other dApps.

In protocol DAO, tokens mostly serve as the voting metric for implementing changes in the regulation.

MakerDAO, Uniswap, and Yearn Finance are some of the notable dApps that deploy the protocol DAO governance mechanism.

Grant DAOs

Grant DAOs are built for nonprofit donations, a charitable extension of a larger project, and to strategically deploy capital assets throughout the web ecosystem.

The Grant DAOs are also developed for building an entirely different entity in the same DeFi space. The development of the community in Grant DAO is to support a comprehensive network of developers.

Some examples of Grant DAO protocols are Aave Grants DAO and MetaCartel.

Entertainment DAOs

In the Entertainment Decentralized Autonomous organizations, creators are allowed to bring their innovations and ideas to life on a digital platform. The entertainment DAO offers decentralized fun and gives you full control over your governance protocol.

A prominent example of entertainment DAOs is the Flufworld, which allows its members to personalize its 3D NFT flufs and license them.
The Bored Ape Yacht Club (BAYC) also plans to launch its Entertainment DAO, and all BAYC native token holders will be able to vote on its creative protocol.

Investment Or Venture DAOs

Millennials widely deploy the investment or venture DAO due to its transparent and open-source nature.

The investment DAOs allow you to pool capital and democratize investing for various DeFi operations.

A prominent example of Investment DAO is Krause House. Krause House is governed by basketball fans and used to operate the National Basketball Association (NBA).

Collector DAOs

In Collectors DAO, members can pull resources together so that the collective community can invest their treasury funds in digital art collectibles like the NFT.

In the Collector's DAO, each member owns a share equivalent to their investment in the community.

Digital artists leverage the collector's Decentralized Autonomous Organization to exert the ownership of their art in the Non Fungible token (NFT) space.

Some notable examples of the Collector DAO are flamingoDAO and ConstitutionDAO.

Conclusion

The Decentralized Autonomous Organization autonomous organization gives you a platform to leverage on, grow and build communities of like minds.

The largest decentralized autonomous organization platform is Uniswap, and there are several others on the blockchain network. The use of DAO cuts across finance to charity and a host of other industries.

There are various use cases of the DAO, and there are no limits to what you can build with the smart contract. For instance, a DAO is designed to raise about $3 million in support of the War victims of Ukraine.

Author: Valentine. A, Gate.io Researcher
This article represents only the researcher's views and does not constitute any investment suggestions.
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