DAOs: What you probably didn't know about them.

Back in those days when we used to play our street football, the game usually started with two people challenging each other like this: "I challenge you; take one post." This was how the battle line was drawn in the game. Once the opponent chooses his own post, the challenger then proceeds to pick whomever he so desires, and the opponent chooses another person. This was how the combination occurred until the required number of people have been picked. Mind you, we would probably be about 6-10 boys, rearing to go. Ah, good old days! 🤩

This is not a very good analogy of DAOs. But then again, who said I was speaking of DAOs? This article, however, is about DAOs, so enough of the reminiscence. Before I tell you about DAOs though, I'd tell you a more interesting story, which is an even better analogy of DAOs.

In the traditional Igbo society, communalism is the way of life. In the sense that everyone helps another when there is a need. So, if I need to build a new house, for instance, the entire community would help me do that. Decisions are also taken unanimously. So, when there is something to be decided, the entire community gathers, and the cases are made, and everyone decides whether they are for or against.

This is also not a perfect analogy of a DAO, but it's a close one because it looks like democracy. And believe it or not, DAOs operate like some sort of democracy. If you have ever come across DAOs, you would probably have learned that they are decentralized autonomous organizations, which coincidentally is also the full meaning of DAOs. Surprise! Surprise!

Now, let's get into the meat of the matter, and talk about how they function. A DAO consists of a group of people who have entered into some sort of contract with each other. The idea of this contract is to achieve a common purpose. it doesn't matter what this purpose is. It could range from stock market price prediction to voting on the veracity of an insurance claim. Try comparing it with a group of people who came together with the purpose of making a decision. Just like the communal Igbo society, eh? Eh? 😄

DAOs are usually purely online, and the members of the DAO would likely never meet for anything. But here's the part that is interesting. The rules and goals of the DAO are governed by blockchain technology. I'm sure you have probably heard how the blockchain is like a huge ledger where all the digital transactions are recorded. And for each new record, a new block is added to the blockchain. If you haven't heard this before, well, you're welcome.

What makes DAOs powerful is the fact that they can be leveraged for anything. The power of the multitude is used here.

The hierarchy of DAOs is called a flat hierarchy because everyone is equal within the DAO. But here's the catch. Let's say I have a platform where disputes are resolved through votes. The ballots are the tokens. Let us say the name of the token is $DAO. A member who owns 50 $DAO can cast 50 votes, and a member who owns 2000 $DAO can cast 2000 votes. You're literally as influential as the number of assets you own within the system. Not a bad system, but yeah, not the greatest either.

One last thing I want to point out. DAOs are governed by a specific set of rules. So the rules of my DAO would not be the rules of your DAO. Your DAO rules might stipulate that the majority wins. Mine might state that a user is only eligible to vote after they have made a determined number of transactions within the system. These rules are etched into the blockchain (programmatically, of course) in what is known as a smart contract. What are smart contracts? They are just programs that run whenever a condition or a series of conditions are met. If anyone breaks these rules, the groups funding could be locked, and no one would be able to access the group funds. One for all! All for one! 💀

So, there you have it. DAOs. When next you hear of those, you'd know what they are. You could also memorize this entire article and when you're having a DAO conversation, you just rattle it off word for word. Makes people think you're a genius. And believe me, it works all the time! 😎