24hoursworld

Analysis of DAO, a key piece of decentralized finance

DAO is a type of organization that was designed in order to function in an automated and decentralized way.

It acts as a form of venture capital fund, based on open source code and without a typical management structure or board of directors.

The DAO have been created following the scheme of decentralized finance or a new model of application of the DeFi following the idea of ​​being able to eliminate human error or manipulation of investor funds by putting decision-making power in the hands of an automated system and a process of collective collaboration.

DeFi Decentralized Finance.jpg

Kindness: Sigma

Having been Powered by Ether, the DAO They were designed to allow investors to send money from anywhere in the world anonymously. Then the DAO will provide tokens to those owners, which will allow them to participate in different projects.

DAOs are basically organizations that work through pre-established rules in smart contracts that define the agreements of the parties involved in them, the logic would be as follows:

DAO – Smart hiring – Users

It is important to understand that when applying the decentralization thesis where intermediaries such as companies and banks do not participate within the consumption chain, but goods and services are provided directly through the use of automated platforms through the use of codified rules. pre-established within the use of smart contracts, this is how they work through the application of the DAO.

A clear example of the operation of a DAO could be seen within the whitepaper of the loan and liquidity project of Compound.

Although these types of organizations have only just begun to be born, it is understood that they are the key to the proper functioning of the Dapps within different ecosystems.

Many are the doubts that still exist on the part of the regulators, common questions that arise: How should they be regulated? What type of company should be applied? What taxes do they pay?

Little by little we can see how the new system of DeFi It will be gaining strength with the evolution of DAO, and they will become normal instead of the exception.

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest Posts