, 2 years ago
DAO stand for decentralized autonomous organization. But what are those organizations doing and who is running them in the end?
A DAO works like a company. Except that it does not have personnel, no manager and nobody is the owner. Instead, its foundation is often built on a smart contract that makes sure that every aspect of the organization is a binding agreement.
Once the smart contract is written and set in motion, the DAO works on its own and without any interference of a third party. That being said, its purpose is part of the smart contracts design and a programmer can easily identify how the DAO is build and how it is serving its purpose.
The Dash DAO is an organization which is led by all masternode owners. Together they control funds and the development of the cryptocurrency Dash. Developers and businesses can propose developments or services and the masternode owner vote for or against such a proposal. This way the Dash DAO even allocates funds to chosen projects.
Another example is Maker DAO. Maker is a smart contract on the Ethereum blockchain and it controls the stablecoin DAI. While a stablecoin is usually backed by Euros or US-Dollars, DAI is backed by a pool of crypto collaterals.
In this case the DAO controls the balance between the stablecoin DAI, the underlying assets and market mechanisms that guarantee its value.
While a DAO can exist peacefully and effectively on a blockchain, it is still facing some issues. This is due to the fact that the DAO often acts similar as a company, but there is no regulatory framework covering its functions.
Therefore, a DAO usually has a hard time hiring lawyers and get represented in court. It is also completely unclear how a DAO could ever sign a contract (aside from smart contracts). A contract requires a person or legal entity signing it. A DAO usually has none of that.
Another issue is the IT security. Since a DAO is often fully dependent on a smart contract, it is going to fail or gets hacked, if the smart contract isn’t designed well enough. Such a security flaw can lead to a disastrous outcome and the loss of millions of Dollars.
Luckily, nowadays most DAOs get audited multiple times before they are finally going live.
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After the successful Ethereum Merge, a potential censorship issue has crept up on Ethereum. In the new block production architecture, an increasing number of transaction blocks is being built by an organization called Flashbots. This organization has chosen to be compliant with the sanctions list of the American OFAC. This poses a risk of censorship on the protocol level of Ethereum. Flashbots is aware of this and has proposed a solution.
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A mining rig is the assembled hardware you need to mine crypto. Bitcoin is the best-known example of a coin that comes into circulation through mining. Doge and Litecoin are also well-known coins in this list.
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Maximal Extractable Value (MEV) is the (potential) profits for miners or validators producing blocks on a blockchain. They do this by picking and re-ordering transactions within blocks. You can view MEV as a tax on users of the blockchain.
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Is most of the value in the crypto world going to be in the base layer? In other words, the blockchains like Ethereum and Bitcoin? Or will the applications built on them be the winners? Think Uniswap or Aave. This is the main question many followers of crypto are asking.