A recently discussed topic that we had is about the ABBC DAO. We have covered the basic definition of the decentralized autonomous organization (DAO) governance model and how it makes a significant impact within the ABBC network through the roadmap and ad hoc voting processes.
If you are someone who is just new to the concept of DAO, then this comprehensive blog is for you. It is important for us to understand the basics behind this decentralized organization as it is one of the most significant aspects behind the ABBC Blockchain.
Before we tackle the how’s and why’s of a DAO community, let us first talk about what it is actually made of — smart contracts.
What makes a contract ‘smart’
A smart contract is just a set of computer codes that collectively functions to facilitate, verify, or put into effect any agreement or performance of a certain procedure.
Let’s say you are eating in your favorite restaurant. You are a loyal customer so you always get served by your favorite waiter, given your usual order, and offered exclusive perks that are applicable to what you want. See the logic? A smart contract does the same.
Once the agreements are set within the codes, the smart contract will be automatically executed whenever necessary. The agreements will be followed incessantly and without fail. Modifying smart contracts is not possible. Yet you can create a new contract with the previous contract’s information to overrule the existing one and serve as the “updated” smart contract.
Smart contracts allow the performance of credible transactions without any intermediaries or third parties. They are self-executing in nature and are operated within distributed ledgers or blockchain networks.
Though referred to as ‘contracts’, these series of codes cannot be interchanged with the legal contracts lawyers deal with on a daily basis. It might be legally binding but determining the legality of a smart contract depends on the factual source within which it operates, and the applicable law determining the issue.
In the blockchain sector, smart contracts have several use cases. From financial derivatives to insurance premiums, real estate property acquisitions, credit enforcement, and crowdfunding agreements.
Another eminent application of smart contracts involves the creation of decentralized organizations. This is where the DAO governance comes in. Unfortunately, one notorious case regarding DAO has tainted its reputation.
The Fall of The DAO
Created by the Slock.it team, a German startup that specializes in smart locks, The Dao has been launched in April 2016. Having raised more than $150 million, the DAO became the biggest crowdfunding project up until today and was considered the first massive implementation of Ethereum-based smart contracts.
The main purpose of The Dao is to become a digital venture capital fund where DAO token holders can submit proposals of their projects and get them financed.
ICO participants were allowed to exchange 1 Ether for 100 DAO tokens. These tokens will give the holder voting rights within the network. Just when things were about to go well, a month after the successful initial offering, The Dao got hacked. Before the situation got handled, the hacker managed to steal more than $50 million worth of Ether.
This treacherous scenario has caused a ruckus to the investors, as well as Ethereum developers. Within 27 days, the community has to decide what action to do to save the funds within the system, bringing to life two separate units — Ethereum (hard fork) and Ethereum Classic (old blockchain).
Since blockchain and crypto are still on shaky ground during that time, and currently still need time to get accepted as part of the norm, The DAO hack raised more questions than answers.
DAO Moves Forward
The DAO code is not flawless mainly because developers are still in the initial stages of running this computer-based program. This does not make the losses less tolerable but it just opened up the opportunities to build better and more efficient smart contracts.
As people become more skeptic on the capability of smart contracts to form a secure and impenetrable governance model, developers have been working relentlessly to prove that DAO remains to be a powerful and practical solution.
As mentioned in our previous blog, Dash is one of the well-known projects that established a DAO. Fueled by DashDAO, the network has built a great ecosystem and has supported numerous proposals with different objectives like marketing and community awareness.
Another protocol that is being enforced is MakerDAO. The decisions made in MakerDAO are meant to adjust the configuration of the whole system concerning its stable coin, Dai, whose value is pegged to US Dollars. Maintained by a number of feedback mechanisms, the smart contracts trigger emergency shutdowns whenever necessary.
If you want to run your own DAO or let your organization have its own, the Aragon DAO will allow you to do it. Creation of DAOs can be done in just a few steps and you can assign stakes for the initial members, vote for new members and release of funds, or set your own DAO’s purpose.
With successful DAOs within reach at present, the views of people regarding this decentralized governance might have already changed. With the main goal of performing tasks in a non-complex manner, DAOs can promote a standardized system to ease the connection between community members.
DAO = Unity of Action
Now let’s get into the core of how DAO works in general. To easily understand what the decentralized autonomous organization really is, we will define first these three words.
- Decentralized pertains to the transfer of power or rather a delegation of authority from a central or single entity to all the participating entities concerned in a certain faction. Meaning, rather than having someone entitled to be the upper hand, the majority decision will always prevail.
- Autonomous means self-governing or having the freedom to govern itself. It does not rely on outside factors, instead, it will function as is, within the agreed-upon rules.
- Organization is a group of people or a certain structure that serves a common purpose. May it be promoting a product, educating about a certain topic, or doing something you are passionate about.
Putting all three together, we can discern that DAO is a unity of action. Based on what the codes are made of and the algorithms it follows, these actions will be executed in a communal manner. Everyone within the DAO is united with an objective that needs to be achieved.
With this in mind, we can divide the dimensions of DAOs into two:
- The Social Layer
- The Automation Layer
Derived from being decentralized and the organizational approach, the social layer refers to being “owned by many.” The DAO governance is influenced by a diverse set of individuals, commonly investors and token holders of a certain blockchain.
On the other hand, the automation layer is represented by the state of being autonomous or being “owned by none.” The working rules within a DAO are automated and cannot be controlled by any participant within the network. The only way to affect the rules is for the majority to agree on a decision and come up with a proposal to create a separate smart contract, or in worst cases like The DAO, a fork has occurred.
For a DAO to work effectively as what it is supposed to do, both aspects should be present. These layers complement each other. The social layer protects the autonomy by ensuring the legitimacy and adaptability between the community. While the automation layer protects the decentralization by showing transparency and the ability for self-enforcement.
Together, trust, distributed power, and resilience are made possible through DAO. This somehow makes it preferable in comparison to traditional social organizations we have in society.
DAO Versus Social Organizations
There are all sorts of organizations existing either by interpersonal and human interactions or via digitization. When looking at the way how these organizations are governed, several things are being highlighted.
1) What is needed to be done?
2) How will we do it?
3) What are the resources needed to take action?
4) How can we ensure a smooth flow of execution?
Based on Dr. Bruce Tuckman’s group development stages model, social organizations tend to form, storm, and norm to enable them to perform productively, often creating some friction along the way.
In a typical team, the forming process takes some time as people still need to get along with each other and get to a certain level of comfortability before the storming process begins. As the people storm, clashing of ideas and considering ineffective solutions happens. But once these arguments settled and a common ground was set, a norm will be formed that will be followed by everyone — finally resulting in a good performance.
Those processes seem tedious and complicated, right? This is where DAO seems like an ideal solution as it aims to reduce the complexity of a task. Instead, it will filter out the core principles of what’s needed to be done, encrypt it through codes, and then automate it so as not to be susceptible to any quick changes.
A well-structured DAO gives every investor an opportunity to shape the organization. There’s no hierarchical structure, giving everyone the freedom to pitch a proposal or project idea that will be taken into consideration by everyone. The pre-written rules will be made known to anyone who will be interested in being part of the DAO, making no room for unnecessary arguments.
Moreover, the voting process that will be conducted through the DAO will be at the discretion of each investor, pushing them to evaluate their decisions — thinking not only for their own good but for what will benefit the network as a whole. Finally, all transactions and decisions are available for review as DAOs are completely transparent.
After understanding what DAO is and how it works, the benefit it provides to a certain community genuinely looks favorable. For a DPoS-powered blockchain like ABBC, this type of management could further empower the community members.
Purpose of ABBC DAO
Our team has created ABBC DAO to improve transparency and community participation in the oversight of the funding within the network. Through this governance model, the management of funds and the decision-making process becomes more intact and sustainable.
The main functions of ABBC DAO can be summarized into four:
1. Further development of the ABBC Wallet
Interrelated to the ABBC Blockchain is the newly-upgraded non-custodial ABBC Mobile. This wallet has unique features like multi-account creation, ERC-20 token support, staking, Cloud backup and restore, and fund migration from the previous MC and Aladdin wallets.
Needless to say, the ABBC Mobile will be continuously updated to provide our users with the best service and experience. Through the ABBC DAO, the community can vote and propose which features should be improved later on.
2. Maintenance of ABBC Blockchain
Any alterations and modifications within the ABBC Blockchain will be accomplished via a cumulative decision. Since the ABBC Coin holders and block producers (BPs) are mainly involved in the DAO, every single one of them can use their corresponding voting rights for any significant changes that might emerge.
By having the ABBC DAO, the possibility of making detrimental decisions will be reduced. The smart contracts within the ABBC Blockchain are catered to the smooth operations of the system and it is the responsibility of the ABBC DAO members to keep this up and running.
3. Interactions within ABBC Server Infrastructure
The ABBC Wallet interacts with other nodes on the ABBC Blockchain. This is necessary to check the account balances and statuses of users. In the same way, the wallet also works alongside the ABBC Server Infrastructure.
With the help of ABBC DAO, transactions can be facilitated more efficiently. Authentication of customer accounts, synchronization of transactions history, migration notifications, and wallet software updates are among the matters handled through the Server Infrastructure. To have a fluid flow of actions, the ABBC DAO ensures that all provisions required are carried out.
4. Development projects on ABBC platform
It has been stated that the more people come into the ecosystem and implement valuable projects, the more established a network becomes. ABBC acknowledges this and allows its blockchain to be a platform wherein the community’s point of view matters.
The ABBC DAO can then be able to submit proposals regarding any developments that they think can be helpful to the whole network. These include expansion of ABBC’s service to a certain region; launch of a strategic partnership; creation of custom hardware; and presentation of ABBC in front of major industry leaders.
The concept of DAO is an innovative paradigm that can really give an impact to a certain network or organization. With the collaborative effort of everyone and the self-regulating attribute of DAO, the functionality of a network improves — with the goal of completing tasks without fail.
The ABBC DAO will be capable of handling different tasks that is significant to the growth of the ABBC community. In fact, the ABBC Blockchain will prove to be as robust, community-driven, and scalable than before through its DAO system.
As we understand what makes up a DAO, how it came into existence, and why it benefits the community, we can then be certain that its potential to keep the ABBC Blockchain in the best-performing level is realistic and attainable.
