The Future of DAOs: Beyond Traditional Corporations
Photo by Patrick Weissenberger on Unsplash
Decentralized Autonomous Organizations
First up on our list is a truly revolutionary concept within DeFi — Decentralized Autonomous Organizations, or DAOs. These digital-first entities operate without the traditional hierarchy seen in conventional companies. Instead of a CEO or a board making all the decisions, DAOs leverage blockchain technology to enable a community-governed approach. Members use tokens to vote on significant decisions, from governance to investment strategies, making it a democratic system by design.
What’s fascinating about DAOs is how they extend beyond just governance. They are foundational for initiatives like decentralized investment funds, charitable organizations, and even freelance networks. Each member not only has a stake but also a say, which can lead to more aligned incentives and potentially less conflict.
It’s a stark contrast to the often top-down, opaque decision-making processes we see in traditional corporate structures.
That’s a profound shift. With such autonomy comes a great deal of responsibility, and also challenges. For instance, coordination can be cumbersome without centralized leadership, and legal recognition remains complex. However, the potential benefits — like increased transparency and engagement from stakeholders — are driving more people to explore and adopt DAO structures. As this model matures, it could redefine organizational governance entirely.
Privacy and Zero-knowledge Proofs
Let’s delve into a topic that’s crucial for anyone active online today, but especially pertinent in the world of decentralized finance — privacy. DeFi is not just transforming how we manage and invest money; it’s also pioneering advanced privacy-preserving technologies. One such technology making waves is zero-knowledge proofs, or zk-SNARKs, which allow transaction data to be validated without revealing any sensitive information.
The acronym zk-SNARK stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge and refers to a proof construction where one can prove possession of certain information, e.g., a secret key, without revealing that information, and without any interaction between the prover and verifier.
That’s right. Zero-knowledge proofs are a game changer because they provide a way to prove ownership or correctness of certain data without exposing the data itself. For example, in a DeFi setting, you can prove that you have enough collateral for a loan without actually disclosing the amount or source of your assets.
This not only enhances privacy but also security, making it harder for bad actors to target your resources.
And the implications of this technology extend beyond individual transactions. They’re foundational for building more complex systems within DeFi platforms that respect user privacy while ensuring compliance and robust security. It’s a delicate balance, but one that’s essential as the ecosystem grows. Organizations are implementing zk-SNARKs to facilitate everything from private voting in DAOs to confidential automated trading strategies, ensuring that DeFi can be both open and opaque where necessary.
Moreover, the adoption of these technologies could have broader implications for the digital economy, potentially influencing how privacy is handled across the internet. As we see more integration of these technologies, the standard for privacy in digital transactions will likely be elevated, setting new benchmarks for what users expect from secure, decentralized services.
Real-World Asset Tokenization and Equity
Next, let’s talk about the merging of traditional finance with blockchain through Real-World Asset Tokenization. Imagine owning a fraction of a building or a piece of fine art through DeFi platforms. It’s not science fiction; it’s happening today, broadening investment opportunities and inclusivity.
Tangible introduces an innovative approach to the tokenization of real-world assets (RWAs). It creates Tangible Non-Fungible Tokens (TNFTs) from these assets, which can then serve as collateral in various DeFi projects. These TNFTs allow for the redemption of the physical assets they represent at any point.
Furthermore, Tangible has launched Real USD, the first stablecoin backed by tokenized, income-generating real estate. This development enables users to engage with tokenized and fractionalized RWAs through their NFT marketplace. Currently, the marketplace offers four types of assets: gold bars, wines, real estate, and watches, with prices listed in DAI.
In May 2023, SALT sat down with top financial leaders in New York to discuss their work aimed at transforming the future of financial service infrastructure through blockchain, crypto and tokenization
June Ou | Co-Founder & President at Figure
June Ou | Co-Founder & President at Figure speaks about Tokenization.
The way we look at it is, It’s a true digital asset. Meaning that there is no other way to trade it, sell it, or buy it unless it’s on the platform. If you do offline, it’s not a valid transaction. We always talk about truth versus trust.
[When] you have your asset on the blockchain, you have the truth and you have the provenance of that asset — a chain of evidence of where that asset has been, who owns it, who owned it before, and who owns it today. So you’ll never have a question about who owns which asset, which we all know happened in 2008.
- June Ou
Jason New | Co-Founder & Managing Partner of NovaWulf
We got involved in the Celsius bankruptcy and our proposal was, as the company emerges from chapter 11, to actually have their first truly natively issued equity on a blockchain. So, this is not a digital representation of an equity, that’s essentially listed elsewhere. This is an equity that's basically created and traded on a blockchain…Natively!
There are some things in the bankruptcy process that allow us to get there faster, and I think that hopefully people will look back and see this as a seminal event, where you actually have an equity that’s traded, registered and a public security but it’s traded on blockchain. It could be traded peer-to-peer eliminating multiple risk takers in the process.
Intel took the leap of faith of listing on the NASDAQ in the early 1970s. You’ll see more and more companies actually listing their equities directly on a blockchain, then allowing peer-to-peer 24/7 trading on a global basis. All without the need of a prime broker and a bunch of other intermediaries! (You have to do it on a registered exchange of course and you will need to build that infrastructure to further facilitate it.) We will look back in several years and people will be trading equities peer-to-peer on their telephones.
-Jason New
It’s clear that DeFi is not just about creating wealth but also about redefining it in a more equitable, efficient, and accessible way. The future of finance is here and now.
