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A decentralized autonomous organization is a system without any central leadership. These organizations are transparent and community-centric and generally give their members the power to vote on proposals and updates, proportional to a member’s potential. Decisions are from the bottom-up, owned and managed by their members. DAOs are governed and organized by specific rules coded on a blockchain.
DAO operates through smart contracts, essentially a set of codes that automatically execute whenever a set of criteria are met. These smart contracts define the organization’s rules. Once these rules are live on the blockchain, no one can change them except the entire group votes for them. This group makes a collective decision, and even the payments are only passed with votes. There are mainly three types of DAO membership models. Now let us see what the membership models in DAO are:
Membership models often determine how voting works in a DAO and its outcomes. There are mainly three types of DAO membership models – Token-based, Share-based, and Reputation-based membership.
Token-based membership
Token-based membership models are completely permissionless. The tokens here are distributed on permissionless decentralized exchanges. Others should be earned through “proof -of work “or liquidity. A token gives a holder access to vote.
Related Article: Top FAQs on Decentralized Autonomous Organization (DAO)
MakerDAO is a famous example of token-based membership where anyone can buy the voting power in the Maker protocol’s future.
Share-based membership
Share-based tokens DAOs are more permissioned ones. Any member can submit a proposal to join the DAO membership by offering some value to the organization through tokens or work. Shares represent direct voting power and ownership. Members can leave at any time with their proportionate share.
MolochDAO is focused on funding Ethereum projects and is an example of share-based memberships. Here, the membership requires a proposal to assess expertise and capital to judge potential guarantees.
Reputation-based membership
Reputation represents proof of participation, and users need to earn voting power through participation in a DAO membership. DAOs don’t transfer ownership to contributors; the reputation cannot be bought, transferred, or delegated. In reputation-based memberships, members can submit proposals to join DAO and request reputation and tokens as a reward in exchange for their contributions.
Related Article: NFT DAO: How do NFTs and DAOs coexist in DeFi?
DXDAO is reputation-based governance. Here holographic consensus is leveraged to manage and coordinate funds. There is no way a potential member can buy their way inside the organization.
Some other examples of DAO membership models are given below.
Uniswap comes under Protocol DAO, which offers an ownership and governance mechanism to support lending platforms. It is one of the biggest Ethereum-based decentralized exchanges, developed with its governance system and token.
PlearsDAO: They are DeFi leaders engaged in acquiring culturally significant digital pieces teamed up with high-priced NFT companies and other investments.
Talk to our experts to build your own DAO.
ConstitutionDAO: This DAO was a decentralized, crowdfunded endeavor to win a rare edition of the US constitution. This project informed many people about the potential of the DAOs for generating money. But the project didn’t succeed at the auction despite receiving over $40 million from 15,000 donors.
Related article: How does DAO Governance work, and how to launch one?
Bit DAO: A decentralized investment fund called BitDAO was established to enable anyone to purchase a stake in web3, de-fi startups, and initiatives. Token holders can vote on how managed capital is distributed among the projects supported by the fun.
Democratization: It is decentralized, and the main focus is on a collective rather than an individual. All members in a DAO membership model can vote on moves and changes, encouraging accountability and careful thinking among members. It creates fair and equal organization without any chain of command hurdles.
Transparency and Trust: Traditional organizations keep much of their operations internal, but DAOs are operated on a decentralized blockchain network where participants don’t need to know each other as the rules are embedded in a transparent, safe, and secure blockchain record.
Talk to our experts to build your own DAO.
Community Driven: DAO transitions from a hierarchical system to a community-led organization that supports encoding rules, not depending on the role of the members. Within the organization, each token-holder has voting rights depending on the number of tokens one holds.
Over the next few years, we will see the maturation of DAOs. DAO memberships provide a platform where the entire community benefits from the organization’s profit without any central governing authority. It helps bond people together, providing an ecosystem that does not require a call for a central governing authority.DAOs offer creative opportunities; all required is to connect your wallet and buy some tokens. The different DAO membership models will help you understand this crypto movement with human collaboration.
