Exploring DeFi as We Enter 2022: Rise of DAOs

The debates over centralization and decentralization are a contentious topic. Decentralization is a crucial part of cryptocurrency because it protects the platforms from being controlled by outsiders or overbearing authorities.

Resisting censorship is vital as this allows for blockchain-based platforms that can access markets and empower users in countries with hostile governments.

In an increasingly hyper-connected world where commerce and the exchange of ideas flows beyond borders, decentralization becomes even more vital to promote innovation and efficiency, especially with an Internet described as the “biggest decentralized communication system humanity has ever seen.”

Decentralization fosters transparency and security – elements that only become more important as the crypto market sees larger amounts of money moving around. One argument for increased decentralization of the NFT community has been made by some who have accused OpenSea NFT Marketplace traders of insider trading.

“Whether or not there is truth to the accusations of insider trading—OpenSea needs to use this as a catalyst to build a more decentralized platform,” Compound Finance co-founder Robert Leshner notedSeptember

Crypto Projects Interested Towards Democratic Governance are Including DAOs

Particularly when it is about community engagement and participation, decentralization can be of great benefit for projects. To empower their users, decentralized projects turn to DAOs. This allows them to take part in governance through a democratic voting process where they can submit proposals and vote on various initiatives.

Even in traditional finance, decentralized governance is a popular choice. The private venture capital firm Andreessen Horowitz announced in August it was “Open Sourcing Our Token Delegating Program” to share resources like legal agreements and other criteria to foster decentralization.

Many blockchain projects have found success using the DAO model for community participation. Maker uses a DAO framework for protocol development. MKR holders have the ability to vote on issues ranging from increasing protocol fees, to forcing a platform shutdown or changing its rules.

PhoenixDAO is another digital identity-based protocol that focuses on decentralized governance, authentication and payments. For proposal creation, you will need 10,000 PhoenixDAO tokens and 1,000 staked PHNX. The members can vote on and suggest a variety of topics, from platform governance to marketing, ecosystem participation and rewards structure.

Uniquely, Phoenix’s DAO is entirely self-sustaining through revenue-generating products and does not rely on donations, unlike other DAOs. All spending decisions made by the members are posted to a budget page. This further demonstrates transparency.

DAOs can help with many of the problems that plague centralized structures

Phoenix’s open participation and governance framework allow for anyone across the globe to get involved. The democratized voting process ensures the will of the majority (and not just a few developers or leaders) dictate the platform’s direction.

Due to the bureaucratic nature of centralized structures, it can often be complicated to settle disputes. PhoenixDAO platforms make it easy to resolve disputes. Any disagreements can be put up for final resolution.

Platforms like PhoenixDAO have shown that DAOs offer unique benefits in governance, transparency and engagement, making them an important model for 2022. Many people are beginning to think that DAOs may become an integral part the future work environment and human organizations.

Also, DAOs will continue to have an impact on the business community.

Joseph Raczynski predicted at the 2021 Thompson Reuter’s Emerging Legal Technology Forum a DAO would own a major sports franchise within the next four years, later writing how “Imagine the ability for you and others to vote on which players the New York Giants pro football team acquires… yet, by owning tokens of the NYGiantsDAO or whatever it may come to be named…”

As protocols seek to tap the collective wisdom and passion of their members in order to drive growth, interaction and innovation, decentralized governance continues to gain popularity. This places DAOs at the forefront of the vibrant cryptocurrency ecosystem.

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