DAOs or decentralized autonomous organizations are one of the unique entities that were able to be created thanks to decentralized blockchain technology. DAOs are virtual organizations that make decisions, manage resources, start products, and launch projects without a central authority. Essentially, they are an organization or company that runs itself with its own set of rules via its members.
The DAO model has been used many times to great success across many different blockchain ecosystems and types of organizations. The result is a new ecosystem of organizations that are global and accept members from virtually anywhere in the world.
Now, DAOs are at the forefront of technological innovation and open many exciting possibilities for how organizations might be increasingly run soon.
In this blog, we discuss some of these possibilities taking shape for DAOs and their implications.
One of the first use cases for DAOs was as an investment vehicle. A group of people would organize a particular type of DAO structure and use their preferred voting rights to choose portfolios of assets. Each member would contribute to a shared treasury and profit proportionally to the contributions they made towards buying the assets.
In some cases, these DAOs became very successful when allocating to NFTs, tokens, and other crypto assets. Now, there is a new logical extension from the initial DAO investment vehicle, which looks at asset tokenization.
Real-world assets hold a lot of promise for decentralized or distributed blockchain technology. In this sector, there are groups of DAOs that select a type of good, commodity, or other asset and tokenize them to be traded on a given blockchain. These are some of the main forces driving asset tokenization in many networks.
Asset tokenization enables businesses, organizations, and investors to tokenize or represent physical assets such as real estate, and non-physical assets such as stocks and bonds, as digital tokens issued on a blockchain. This enables much more liquidity for the asset, fractionalized trading of the asset, opens access to a wider range of global investors, facilitates transactions, enhances transparency of the asset and transactions, and provides faster settlement, among other benefits.
Read more: What is asset tokenization?
There are DAOs for tokenizing real estate, gold, silver, intellectual property, vintage wine, and many more real-world assets. In 2024, these efforts will expand and bring blockchain technology to a new market as tokenization starts to gain more traction in blockchain and business circles.
In 2023, governments have started to create frameworks and regulate tokenization and financial institutions have expressed supportive views about tokenization as a new vehicle for business growth.
Identity has been one of the most anticipated technologies in blockchain for a while. As a decentralized blockchain enables instant verification on a peer-to-peer level, the idea of being able to have an identity outside the control of central parties and fully owned and controlled by the person is revolutionary. In this respect, there are many efforts to deliver on this promise.
DAOs are taking a step in this field as well. There are many DAOs creating identity management tools, pseudo-anonymity solutions, wallets to hold identities and tokens, and also privacy protection wallets. All these tools are built around decentralized identity which can be very important in 2024.
These days, user privacy is valued more than ever before due to the increasing amount of security breaches and data hacks of centralized organizations. More people are understanding the importance of how identity is managed and recorded on the internet.
According to DataProt, “43% of people globally feel that they lack control over their personal information” with many users increasingly distrustful of centralized entities having access to their data.
Here DAOs have an advantage, as they are managing people’s information by their very nature. As the technology of decentralized identity improves, the DAOs creating products around it will increasingly stand out in the market.
The rise of Large Language Models (LLMs), neural networks, vectorial databases, and a whole host of other technologies related to Artificial Intelligence have revived the need for decentralized computing. Today, AI is mostly run by centralized data centers that have bought powerful GPUs to process parallel computations.
These data centers are controlled by a handful of people in the world and are quickly becoming a monopoly. These not only restrict who can use AI tools, but they also control the information used to train the various models behind AI technology.
Many DAOs have been created to manage decentralized computing networks. In them, regular users delegate some of the computing power of their local machine in exchange for tokens that reward them for their computational power.
These networks can leverage the power of the crowd to open GPU, storage, and computational power to AI developers who don’t want to be controlled by the centralized players in the world of cloud computing. These DAOs are a massive promise for the future of AI and computational technology itself.
Another major development in the future of DAOs is their relationship with national governments. Much of the unlocked potential of DAOs is due to their uncertain legal status in most countries. Yet, this is set to start to change in 2024, in some jurisdictions.
The European Union is preparing to launch a comprehensive overhaul for crypto assets called Crypto-Assets Regulation (MiCA). The law does not have any direct provisions for DAOs, but when a DAO issues crypto tokens sold in the EU, they will have to comply with the financial regulations contained in MiCA.
In the United States, things are even less clear. Some states have legalized the DAO, such as Wyoming, but the legal status is not recognized at the federal level. The DAOs registered in that state are in limbo and may have to wait until a legal case challenges the Wyoming law that gives them protections.
Read more: DeFi and global regulations
A more positive country when it comes to the subject is Japan. In 2023, the Liberal Democratic Party (LDP) released a Web3 white paper that signals a more open disposition by the country’s ruling party towards crypto, including frameworks to recognize DAOs as legal entities in Japan. Things are still under consideration, but given the desire to make Japan a leader in Web3, there is gaining support for clarity and approval.
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