MADE IN CANVA
DAO was created as a way to bring automation and decentralization to cryptocurrencies. Due to a major hacking incident that took place, people look down on DAO and many Exchanges also took back their support for the DAO token.
What is DAO?
DAO or Decentralized Autonomous Organization was developed by developers who were inspired by decentralized currencies or cryptocurrencies. The DAO was completely decentralized, which included even the management structure of the company, as the company had no head or CEO or other individuals who made important decisions. The way it worked was by getting investments from people around the world while creating open-source code to create decentralized tokens along with voting rights on new projects in exchange. It was also focused on automation and promoting the community to make decisions as a whole. It was propelled by a large crowdfunding event in April of 2016, where it raised about $150 million in funds.
The attack that stole 3.6 million Ethereum tokens!
DAO was criticized heavily since its inception as it had numerous security risks which were not addressed as there was no one in charge of the organization.
By May of 2016, DAO was able to get its hands on about 14% of the ETH tokens that were issued at the time, which was a lot considering that it was launched only a month prior. This did not last long as only a month later, the DAO was attacked by hackers who got their hands on 3.6 million ETH tokens which were worth $50 million at the time. This caused great turmoil as no one knew what to do, and there was no one there to enforce a particular decision on whether they should tackle the problem or disband the organization. There was also a concern about the value of ether, which could be influenced by investors liquidating their Ethereum.
This was followed by Exchanges de-listing the DAO token in September of 2016. The DAO was also vague about whether it was selling securities which was later confirmed in July of 2017 by the SEC(Securities and Exchange Commission) that the DAO was indeed selling securities in the form of tokens on the Ethereum blockchain, which violated portions of US securities law. Not to mention the violation of the trust of investors who had funded this entire project.
The obvious problem was a lack of regulation that failed to ensure that appropriate security measures were taken and also a lack of faith in the project. Accountability is also important especially when starting a new company, though decentralization is great, it is crucial to have people that are equally committed and working for the betterment of the organization. In this sense, some degree of regulation is required.
Is there a future for DAO’s?
There could be a future where people from DAO’s or some variation of a DAO, but there is only a limited amount of time before Venture capitalists dominate the industry.
DAO1 is something that has been developed recently, which claims that it will be working on constant upgrades to stay up to date with modern practices. This time it is taking a more diverse approach to cryptocurrencies as it is working on Artificial Intelligence, Crypto Venture & Startup Fund, Incubation, Staking, Farming, NFTs, Artificial Intelligence, Crypto Venture, and Startup Fund. Currently, it is only available on SWAP exchanges.
Investing in DAO’s is still vulnerable to a bunch of risks and should be done after researching and looking into the company because there are many projects in the DeFi space that capitalize on the trend only to offer no real-world value.
Published By
DWAYNE D’CUNHA, WRITER ON MEDIUM.
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Do DAO’s Still have Any Validity? was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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