The year 2021 has been a landmark in the history of cryptocurrency and its role in shaping tech and the financial sector, and 2022 is the year for the potential progress of a relatively recent invention looking to take shape in the digital industry.
Some mainstream news companies believe decentralized autonomous organizations (DAOs) are the next big thing to look out for in the crypto industry in 2022, barring unforeseen circumstances. DAOs are a part of the larger crypto market with their unique ways and processes of operation not found in other blockchain networks.
What Does “DAO” Mean?
People can find a simple and accurate definition of the DAO in its name. An organization in this context is a collection of people sharing a shared idea with a decentralized structure where no one single individual is the decision-maker, and it is autonomous, meaning it is self-governed.
The DAO came into being as an investment contract platform, providing Ethereum holders the means of depositing their assets. Others come to DAO for the funding its investors give after token holders agree with the investment terms. However, things turned out for the worst for the DAO when, in 2016, a hacker found a bug in their smart contract code and successfully wiped $70 million ETH from the DAOs’ safes.
The DAOs made no progress after the hacking incident, and not until the Defi Project movement became widely advertised did the idea of DAOs become more enticing again.
DeFi’s Emergence And The DAOs’ Resurgence
The DeFi project was created when the blockchain community saw an opportunity for a more open and decentralized digital token system. The emergence of DeFi makes the DAOs an attractive scheme for projects to test their decentralization agenda through the self-governance offered by the DAOs.
Buying into the DAO system saw DeFi gain momentum and decentralized tokens become more popular.
Present And Future Trends
The surge in the acceptance of non-fungible tokens (NFT) is the critical ingredient in the popularity of DAOs again, and NFTs have a significant role in DAOs’ mode of operation currently. Funding has increased with DAO-affiliated businesses as they look to consolidate their stronghold in the NFT marketplace.
Challenges Lie Ahead for DAO Adoption
The inadequacy of information about DAOs and the process involved in running and administering the platform is one of several obstacles to be overcome before it becomes mainstream. The cryptocurrency community does not have enough education on the concept of DAO in the industry.
Regulation is another identified challenge to adopting DAOs, as transitioning into the mainstream requires new laws to accommodate the DAOs.
Decentralization is perhaps one gray area that needs more than just a regulation to correct it because some blockchain networks operate with some certain degree of centralization. And decentralization stops the dominating influence of whales and their activities.
These, and many others, are some of the barriers that need addressing to make the comeback of the DAOs more effective and efficient.