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Cryptocurrency field has had a profound impact on every industry over the past few years. Now, the field is transforming the fundamentals of running an organization by codifying how they are managed in the blockchain.
Decentralized autonomous organizations (DAOs) are owned and operated by their members, who can vote on operational decisions through a blockchain-based governance token. Unlike traditional companies, KNIFE gives anyone the opportunity to contribute to a shared project with other like-minded individuals and have a say in the direction of the project.
It is this community- and user-first approach that underpins the ideals of Web3. But not everyone is convinced – especially when it comes to who will fund these novelty businesses.
The controversy over the venture capital source of Web3 is a high shade. While it may be a possible move for startups to scale rapidly by leveraging the funds, operational support, and networking opportunities that VCs provide, it comes with with some special caveats. One drawback in particular can be a significant pain point for founding teams – how do startups ensure that the business remains aware of all relevant perspectives when VCs controlling shares?
This debate has recently revived by Twitter founder – and former CEO – Jack Dorsey, who targeted Web3’s alleged over-reach of the venture capital sector.
While Dorsey’s view that Web3 is simply a toy for VCs is somewhat hyperbolic – this point still holds true. Centralization of Web3 projects (be it corporate control or centralized infrastructure) causes problems with transparency and, more importantly, decentralization.
Arguments for Decentralized Decision Making
Blockchain technology has ushered in the creation of businesses that give users greater control over the services they choose to use. These emerging services transform the top-down approach of traditional tech companies, allowing patrons a voice in the development of a next-generation Web of games, apps, and companies. new.
VCs now have a monopoly on decision-making over the investments they have chosen, giving them the power to make critical judgments and the direction of these companies. While this sounds fair in theory – given the money they offer – it could also mean a delay in key decisions or a completely different initial vision for the company.
However, following the Web3 model, it means that important business decisions should be decentralized just like the infrastructure that underlies them. Decentralized voting through a token governance structure means that anyone – regardless of ethnicity, creed or financial status – can participate and benefit from being part of the community. community of like-minded people, removed from the hierarchical structure of the standard business model.
By adopting this new model and removing the central gatekeepers of Web 2, a new form of business can emerge that is no longer controlled by a centralized entity. Furthermore, it also helps level the playing field with the struggling big tech companies by providing tangible incentives for platform usage and genuine governance of their chosen services. .
ConstitutionDAO is a true story that demonstrates the process perfectly, highlighting what it really means to be part of a decentralized organization. Launched in November 2021 by a group of crypto enthusiasts, CharterDAO is, as the name suggests, a DAO bid to purchase the first printed version of the United States Constitution.
ConstitutionDAO raised nearly 11,000 ETH (just over $45 million at the time), more than double the estimated purchase price of $20 million. While the intense bidding war ended in the loss of the Constitution, the group made history by showing that a collective of like-minded individuals can work together and take on the realities of life. may be larger, governed entirely by a protocol that allows all members to have an important voice in decisions.
The Aave Protocol is another such DAO, using its funds to build communities and nurture budding innovators and their projects. Aave allows its members to view proposals submitted by potential customers and vote for or against funding their development.
Aiming to stimulate this community-first approach to building businesses, Internet Computer, a public blockchain that hosts web-speed smart contracts, is preparing to implement DAO governance using 1. Clicks and Decentralized Fundraising Rails for Web3 dapps. This will allow private services built on top of the blockchain to transform themselves into DAOs and enable on-demand voting control.
Once a DAO is assigned to a dapp, it gives the community full control over future configurations and upgrades, and enables decentralized fundraising, with funds directly held by the DAO. .
Thus, startups can compete with incumbent services on a level playing field by building a strong user base by incentivizing contributors and driving network effects to grow. expand their reach. DAO members are also empowered to voice how they believe their coffers should be distributed.
The DAO’s unique structure and values complement startups, making them a viable option for companies that lack the resources to scale.
VC control of Web 3 is only half the battle
In addition to rejecting the tired business models of big tech, the real centralizing threat is the fact that Web3, in its current format, is more like Web2.5. Many “decentralized” projects masquerade as Web3 services when, in reality, they rely heavily on cloud providers like Amazon Web Services for their user interfaces – unfortunately, that This includes Ethereum. Internet computing is the only blockchain capable of delivering web content directly to end users without using a third-party cloud server.
While we may be a long way from mass adoption and use of this technology, it’s hard to ignore the effects an active DAO has on larger institutional investors. The use of decentralized networks such as Internet Computing to form the foundation of the DAO allows individuals to access opportunities previously available to VCs and home offices, while incentivizing members to work. together to achieve their common goal.
Josh Drake is COO at DFINITY Foundation.
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