Epik’s DAO

What Are Decentralized Autonomous Organizations and How Do They Work?

A decentralized autonomous organization (DAO) is a blockchain-specific organizational architecture that tackles the principal-agent dilemma, which is a persistent problem in practically every sector and organization.
Blockchain technology allows for new ways to trade currency and information while also automating complex procedures in a transparent and secure way.

A well-known example, intended for venture capital funding, was The DAO, which launched with $150 million in crowdfunding in June 2016, and was nearly immediately hacked and drained of US$50 million in cryptocurrency. The hack was reversed in the following weeks, and the money restored, via a hard fork of the Ethereum blockchain: the Ethereum miners and clients switched to the new fork.

When a system is set up so that one person or entity (the “agent”) has the power to make decisions or take actions on behalf of another person or entity (the “principal”), there is a danger that the parties’ goals, priorities, or access to critical information will diverge.

This is known as the principal-agent dilemma, and it indicates that even if the agent was chosen to make judgments on behalf of the principal’s interests, it may be inclined to behave in its own self-interest.

Decentralized Autonomous Organizations, for starters, have the ability to usher in a new era of trustless corporate governance.

Aiming to address this problem by reducing or bypassing the need for hierarchical human intervention or centralized coordination, DAOs are often referred to as “trustless” systems. By ensuring that the incentive structures and information flow within an organization are properly aligned in a codified format, DAOs play a central role in mitigating the typical problems associated with the principal-agent dilemma.

The alignment of incentives is a defining concept of blockchain protocols, and DAOs apply similar logic to organizations and governance. A properly executed DAO aligns the incentives of stakeholders from founders, to token holders, to users, and the general community in governing an organization or decentralized platform. The potential effects of implementing DAOs on a broad scale are enormous, as are the real-world challenges of effectively applying technology that enables a DAO.

The benefits of a decentralized autonomous organization

Starting a business that includes money and funding necessitates a high level of confidence in the people you’re collaborating with.

But it’s difficult to put your trust in someone you’ve only met online.

You don’t have to trust anyone else in the group with DAOs; all you have to trust is the DAO’s code, which is completely visible and verifiable.

Difference between Conventional means and Decentralized Autonomous Organization

Decentralized Autonomous Organization are usually flat, fully democratized, Services offered are handled automatically in a decentralized manner (for example distribution of philanthropic funds). Votes tallied, and outcome implemented automatically without trusted intermediary and Voting required by members for any changes to be implemented.

Decentralized Autonomous Organization are usually flat, fully democratized, Services offered are handled automatically in a decentralized manner (for example distribution of philanthropic funds). Votes tallied, and outcome implemented automatically without trusted intermediary and Voting required by members for any changes to be implemented.

While the specific underlying mechanisms powering a DAO vary across different blockchain projects, there are several general phases a DAO must undergo to launch in a sustainable manner:

  • Smart Contract Setup:
    Before a DAO can be deployed, the underlying rules must be defined and encoded in a series of smart contracts. Given that future changes to the DAO’s operational workflows, governance system, and incentive structures will need to be voted on in order to take effect, this phase is arguably the most important step to creating a sustainable and autonomous DAO, as any initial mistakes or overlooked details can potentially destabilize the project down the line.
  • Funding:
    Once the creators of a DAO have established its governing smart contracts, the DAO needs to receive funding in order to operate. The DAO’s smart contracts must entail the creation and distribution of some form of internal property, such as a native token that can be spent by the DAO, utilized in voting mechanisms, or used to incentivize certain activities. From there, individuals or entities interested in participating in the DAO’s growth can purchase or otherwise acquire the DAO’s native token, which typically results in acquiring voting rights.
  • Deployment:
    Once a DAO receives enough funding to be deployed, all of its decisions are made via a consensus vote. As a result, all token holders become stakeholders who can make proposals regarding the DAO’s future and how its funds are spent. If the DAO’s token distribution policy and consensus mechanisms defined in its underlying smart contract architecture are well-designed, the DAO’s stakeholders will naturally work towards the most beneficial outcome for the entire DAO network.

The resulting DAO organization can therefore operate independently from its creators or any other central authority. Since DAOs are open source, all of their rules, transactions, and activities are recorded on the blockchain and can be reviewed by anyone, which generally ensures full transparency and immutability. In short, a DAO’s stakeholders are bound together by a common goal, which they will vote to advance through the pursuit of specific network incentives defined by the DAO’s underlying consensus policies.

Incorporating Decentralized Autonomous Organization into Real-Life Situations

Decentralized Autonomous Organization embodies a marked departure from the struc becauseture of traditional organizations and how they operate, there are numerous legal and operational challenges these organizations must overcome. For instance, because DAOs can be physically distributed across multiple countries and jurisdictions, any resulting legal issues likely would require dealing with multiple regional laws and any relevant cross-border contractual relationships.

Furthermore, because changing a DAO’s code or smart contract structure requires a consensus vote, malicious actors could possibly exploit a bug or design flaw before the DAO’s stakeholders manage to collectively resolve the issue. This type of exploit crippled one of the earliest crowdfunding efforts on the Ethereum blockchain: In 2016, The DAO was hacked because of vulnerabilities in its code base, which resulted in a controversial hard fork of the Ethereum network to move funds stolen from

The DAO to a new smart contract. The incident was a critical moment in blockchain, and since then avoiding another such hack has been a priority for developers.

That said, DAOs have continued to gain traction in the marketplace. At present, there are a number of promising blockchain projects that have fully incorporated decentralized governance mechanisms, particularly within the decentralized finance (DeFi) landscape. Below is a non-exhaustive list of existing blockchain projects that embody the core tenets of a DAO:

  • Bitcoin:
    The Bitcoin network can be considered the first rudimentary DAO since it operates fully in accordance with an open-participation consensus protocol that coordinates the behavior of a vast network of participants unknown to each other. However, the Bitcoin network lacks the complex governance mechanisms typically associated with a DAO, and is rarely referred to as such.
  • Dash:
    Dash is an open-source, peer-to-peer (P2P) cryptocurrency that offers instant payments and private transactions. While the project is a DAO to the extent that all decisions are made collectively via a subset of masternodes, the degree to which the Dash network is decentralized remains debatable given that the network’s governance tokens were distributed in a way that concentrated wealth to a small group of stakeholders, granting them disproportionate voting power over the project.
  • MakerDAO:
    MakerDAO is a decentralized lending network built on the Ethereum blockchain and is the protocol behind the stablecoin DAI. The MakerDAO Foundation, which has steered the development of the project since inception, initiated several moves in April 2020 to achieve full decentralization, namely giving control of the undistributed supply of the project’s governance token (MKR) to MKR holders at large, establishing a process of electing paid contributors, and improving the voter participation process to benefit smaller stakeholders. In this way, the MakerDAO Foundation hopes to make itself obsolete and pass full ownership of the project on to its distributed network of project stakeholders.
  • Uniswap:
    In September 2020, Uniswap released a native governance token, UNI, in order to transition Uniswap into a decentralized, community-owned protocol. However, the Uniswap community has raised concerns about the degree of decentralization granted by Uniswap’s governance model, particularly given the fact that a minimum threshold of 1% of the total UNI supply is required in order to submit governance proposals — a sum that effectively bars 99% of UNI holders (who each hold less than 1%) from introducing a proposed change to Uniswap’s protocol.

From the examples above, it’s clear that many blockchain projects built with decentralized philosophies are on a journey toward achieving the ideal of complete decentralization. To this point, it’s important to note that the more stakeholders a DAO has, the more decentralized it becomes. This is a major reason why so many existing blockchain projects allow for a certain level of centralized decision-making in the initial stages of the project prior to achieving the scale required to transition into a full-fledged DAO. And, given that most DeFi projects are only a few years old, many of these projects have yet to transition into a fully-fledged decentralization, although achieving DAO status is oftentimes a central goal of these projects.

While the challenges of designing and deploying highly sustainable, value-generating DAOs are significant, DAOs nonetheless represent a potentially world-changing new form of corporate governance. As the legal gray areas surrounding DAOs are clarified, an increasing number of organizations may look to adopt DAO platforms to automate certain aspects of their core business activities. And while the ever-increasing complexity of modern day business models means that DAO stakeholders will need to adapt their systems accordingly, the goal of establishing transparent and self-governing organizations is becoming more of a reality.

Application of Decentralized Autonomous Organization to EpiK Protocol

EpiK Protocol utilizes Decentralized Autonomous Organization in their governance model for a decentralized governance structure. EpiK Protocol Decentralized Autonomous Organization has four parts:
* Proposal
* Voting
* Rulings
* Awards.

In the case of the rulings, arbitration is applied where Voters can change their minds about any proposal within the 5-day voting period, and voting rights are determined based on the votes cast by voters in the most recent vote during the voting period.

Users can start a proposal, though the cost of each proposal is priced at 99 EPK, which will be annihilated directly to avoid too many worthless ideas from clogging up community governance resources.

Basically, Domain Expert is a key player in the economics industry. EpiK Protocol Decentralized Autonomous Organization divides their proposals into three types, namely referendum proposal, storage ecology proposal and knowledge ecology proposal.

Each proposal has a five-day voting period. Two proposals with the same template can not exist at the same moment in order to prevent causing unneeded disruption to the community. Furthermore, at any given time, the total number of pending proposals cannot exceed five.

Basically, each of the above mentioned types of Decentralized Autonomous Organization are assigned to just a proposal and the criteria are determined by the scope of each of the proposal’s impact as users to constrained to a specific proposal based on the impact.
Also, the voting trend js different for each proposals.

To avoid a proposition becoming effective without proper discussion, EpiK DAO developed two arbitration conditions for it to become effective.

The first criterion is that each proposal must earn more than 33% of genuine ballot votes, and the second is that the choice with the most votes must receive more than 50% of all votes cast.

For more information, visit:

Website: www.epik-protocol.io
Twitter: www.twitter.com/EpiKProtocol



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