For those of us layman just becoming familiarized with cryptocurrency vernacular, a DAO is a decentralized autonomous organization.
They use mart contracts to provide sundry functions to users. The transactions are then registered on the underlying blockchain, creating a permanent record and eliminating the need for any central governing authority to manage users’ data or transaction history.
The DAO was originally designed to serve as a venture capital fund for the evolving cryptocurrency industry. Unfortunately, however, the original DAO entity succumbed to a hack of its funds, and went defunct.
Yet even, still the underlying ideas behind the DAO remain important to the advancement of the cryptocurrency industry and have been utilized heavily by its thought-leaders to engineer the industry's next steps.
One such thought-leader, Tekin Salimi first predicted that DAOs would continue to proliferate and disrupt many functions of traditional firms. DAOs do this by blurring the line between a firm’s shareholders, management, creditors, and customers. This creates a model of incentive alignment never before accomplished in business organizations (which traditionally suffer from the principal-agent problem).
Salimi elaborated “Gas prices and scalability concerns on Ethereum today are bottlenecks that have led many project founders to consider launching DAOs on other platforms. Polkadot is a great example of a platform that stands to win DAO market share. Through utilizing Parity’s Substrate framework, a project founder can now launch a DAO chain that is natively interoperable with all other Substrate-based blockchains. This DAO chain can also participate in Polkadot’s parachain auctions to become an elected parachain and effectively piggy-back off of Polkadot’s consensus security. The value proposition of a platform like Polkadot is through reducing the surface area of issues that a DAO founder needs to worry about, so the founder can focus fundamentally on building a valuable economic model for the DAO’s tokenholders.”
The named Polkadot is a blockchain platform that connects private and consortium chains, public and permissionless networks, oracles, and future technologies that have not been created yet in a single, cohesive, and interoperable system.
Polkadot makes it possible for different independent blockchains to seamlessly swap data and transactions, in a trustless way, through “parachains”, with each individual parachain utilizing the security of the Polkadot relay chain.
Polkadot is just one such use case of a DAO. The modeling system will likely carry over into many other verticals of the evolving crypto industry in years to come.