What is "DAO"? Why "DAO" is booming because of DeFi?

"DAO", short for "Decentralized Autonomous Organization", is a community of interactions around hard-coded rules encoded in the blockchain.

The biggest advantage of DAOs is their global, permissionless nature. To join a modern company, individuals must prove academic qualifications and relevant experience, and then go through multiple rounds of interviews. Joining a DAO has no physical constraints and is global, allowing them to grow much faster than corporations.

The core rules and governance of DAOs are handled by smart contracts. Similar to how DeFi protocols automate the necessary trust between financial participants in the traditional world without having to worry about self-serving CEOs or dishonest CFOs in the DAO world.

Huobi Institute believes that DAO has recently made great progress in the encryption field, and the root cause is the outbreak of DeFi.

DeFi protocols have been perfect validators for DAOs. DeFi protocols rely on smart contracts to eliminate intermediaries between users. Second, cryptocurrencies allow permissionless global interaction between members.

DAOs are often a natural extension of DeFi protocols, as builder protocols seek to decentralize governance and move from team-led to community-led, while still having built-in incentives to reward core contributors and users of the protocol.

The team distributes governance tokens to incentivize early participation and facilitate the development of the protocol, from helping with development to promoting the project. This is an important way to guarantee innovation and fair competition between existing and new protocols.

The complementary nature of DeFi protocols and DAOs is a turning point for adoption. Now that The DAO has shown that it can handle a large number of DeFi protocols, it is only a matter of time before traditional organizations and institutions realize the potential of blockchain-based infrastructure.

About the author: Cheng zhipeng (Cheng Zhipeng), head of the Huobi Institute. Huobi Institute, an investment research institution focusing on in-depth research on the digital asset trading market, gathers industry KOLs. It has columns such as Huobi Evening News, Huobi Watch, and Huobi Depth.

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