The best thing about digital currencies, which draw people admiration for them, is that they are decentralized. It means there can be no interference of central authority or any middleman to have control over it. But these decentralized currencies come divided into various nodes, networks, and even computers. Most of the time, it has been found that virtual currencies often use decentralized status for privacy and security, which are not to be found in standard currencies and transactions. Today we are bringing you a new concept about DAO and will let you know about the role of DAO in cryptocurrency.
In cryptocurrency news, it was reported that a group of developers was so impressed by decentralization of cryptocurrencies, that they came up with the idea of making a decentralized autonomous organization (DAO) in 2016. Now, it must have led to curiosity to know the role of DAO in cryptocurrency and its importance in it. So let us explore all about it.
What Do You Understand By DAO?
DAO stands for decentralization autonomous organization. It came to be a form of venture capital fund which was known to be based on open-source code. It didn’t find any essential need for management authority. But to make it fully decentralized, DAO was made unaffected from the outer authorities (state or nation), though it did need a base for its functioning, and it came to be on the Ethereum network.
What Brings The Need For DAO?
The role of DAO came into being in April 2016. All credit goes to tokens month-long crowd sale, which made more than $150 million fundraisings. The reason for bringing the need for DAO came when developers believed that by developing decision making power in the form of an automated system or crowdsourced process, it would become possible to remove the human flaws and even the manipulation of investor funds. Powered by Ether, DAO was created to make investors send their money anywhere, anonymously through money raising, investment, or even through donation.
What Led to the Downfall Of DAO
By reading an update from Ethereum news in May 2016, there came a report which stated that DAO ran a major percentage of ether tokens, which became an issue. During the same year, it came out another report from a newspaper, where it cautioned investors to stop voting on future investments, as there were many security loopholes. It faced another trouble in June in the same year when it became vulnerable to hackers attack. It is said, hackers almost made a profit of around 3.6 million ETH, which were worth $50 million during the time.
This heavy loss led to serious confrontation among the DAO investors with individuals with double opinion. Some suggested multiple ways to address the issue, whereas some even wanted DAO to get it broken completely. According to SEC report, it came out that DAO made a blunder by selling securities in token forms on Ethereum blockchain, which made it violating the U.S. securities law.
What Does the Future For DAO Look Like?
Since the previous year, there has been no such clarity, as it is supposed to be restored. With many persisting and concerning issues with security and legality, some investors are hoping DAO will eventually become eminent and will even become the best substitute for traditional businesses.
Conclusion
If you are familiar with cryptocurrencies, then it is must to know the role of DAO, and its features and functions. Well, in today’s blog, we gave you a useful description of it and also how it came into being, and for what purpose, it was made. Besides this, it did face some difficult times during previous years, which made a question mark on its existence by people, when it steeped miserably with security issues. But somehow, there are investors, who are still optimistic about its future and finds it promising to come into prominence. Besides this, they consider it a better alternative to traditional businesses.