What is Tao (decentralized autonomous organization)?

Tao (English. DAO-Decentralized Autonomous Organization) is a decentralized autonomous organization that is controlled using smart contracts.

There is no traditional hierarchy in Tao. They work transparently, according to the rules prescribed in the code. In essence, Tao is similar to existing forms of organizations.

Like Tao, traditional companies organize groups of people around certain goals. Shareholders vote for the board of directors, the council chooses managers, and they already make tactical and operational decisions. But such companies have a hierarchical structure and are controlled on the principle of “from top to bottom”, and Tao is a much less branched structure and allow any participant to make proposals.

Holders of Native Tokens of Tao vote according to proposals designed to benefit the entire community. Some Tao practice quadratic voting, which limits the influence of the largest holders of tokens. This contrasts with modern corporations that are controlled in the interests of the largest shareholders.

Typically, Tao has cash reserves (Treasury) that allow the realization of ideas for which the community voted.

Most of the ATO activity is focused on the coordination of decisions on the use of cash reserve. This concept is similar to the one in which the corporations reinvest profit for the development of the main business and the fulfillment of obligations to shareholders.

How Tao arose?

The concept of Tao (the first name is decentralized autonomous corporations, DAC) was born in 2013. The key principles of DAC were the decentralization of companies, the tokenization of their shares and the openness of operations with a publicly checked code. Over time, the community improved the idea and adapted it to any organization of people with the motive for making profit or without it. This is the concept of modern Tao.

Blockchain can be considered as a basic infrastructure for building a Tao. In other words, a decentralized autonomous organization is an application deployed on top of the existing network. Some consider Bitcoin the first rudimentary Tao with open source, where miners and developers support the integrity of the system.

Ethereum is still the most popular blockchain for launching Tao, however, the development of alternative L1 networks like SOLANA and NEAR can change the situation in the future.

In 2016, one of the first in the history of Tao called The DAO on Ethereum was launched. Investors invested more than 14% of all circulating at the moment ETH.

The DAO goal was to create a venture fund controlled by a community that would invest in projects based on voting. However, only three months later, the hackers hacked The Dao and stole ETH for $ 60 million.

Although this experiment with Tao was unsuccessful, he opened the door for the development of distributed communities.

How Tao works?

Tao is a combination of code rules. A set of rules attached to the management structure and built into the code. This concept is implemented using smart contracts and provides a control mechanism.

To make a decision on any proposal, the community has a vote using native tokens. In most cases, a model is working in DAO, in which the strength of the participant’s voice depends on the number of tokens.

The voting process itself can take place both on specially created Tao services, and on separate platforms like Tally or Snapshot. Using Snapshot can save time on the formation of additional voting methods.

Members of the Tao work together, starting from the rules prescribed in the smart contract, and the common goal. All rules are transparent.

Membership in Tao can be divided into two categories:

one. Tokens -based membership.

TOA tokens are freely addressed on decentralized exchanges and are mainly used to control. Each token gives the right to vote.

Users can receive TOO tokens in exchange for the provision of the services of the organization itself. An example of such a situation was the AIRPROP from Uniswap for early users.

2. Promotion membership.

Tao, based on shares, are not necessarily open to all comers. Instead, they often check potential participants before allowing them to join, and require making a certain contribution (for example, in ETH or DAI). One of these organizations can be called molochdao.

What are the advantages of Tao?

  • Lack of a clear hierarchy. In Tao, each interested party can participate in the vote and decision making.
  • Transparency. The history of decisions is available to everyone.
  • Openness. Almost everyone who has Internet access can become the holders of Token Tao and thereby get the right to make decisions.
  • The concept of Tao allows people to interact with each other to achieve a common goal without the need to trust.

What disadvantages have Tao?

  • Regulation. At the moment, there is no clear regulation against Tao.
  • Hacker attacks. Such decentralized structures are subject to attacks.
  • Speed ​​and disagreement. The absence of a clear hierarchy can cause the split of the community and a slowdown in the decision -making process.

What are the Tao?

  1. A crypto project can be considered Tao, provided that tokens holders have the right to vote and determine the development paths. For example, Olympus Dao, Maker Dao, 1inch.
  2. Investment/venture Tao. Allow you to collectively invest in assets and projects.
  3. Projects whose activities are aimed at investing or collecting NFT. For example, Pleasrdao.
  4. Tao for grant financing. For example, Molochdao.
  5. Information decentralized autonomous organizations. For example, Banklessdao. Organizations of this type in theory are able to create an alternative to Google Search, as well as to verify information for its quality.
  6. Educational Tao. Odyssey Dao is an example of an organization that believes that training in the basics of Web3 should be accessible to all.
  7. Tao, focused on socially significant initiatives. Such organizations invest in socially useful projects and help them achieve their goals faster. Seed Club is one of these organizations.
  8. Analytical Tao. Platforms that collect and analyze quantitative, qualitative data on decentralized autonomous organizations. For example, Deepdao.
  9. Legal Tao. Lexdao is a community of legal engineers, which helps to combine the right and smart contracts.

The classification from Deepdao mentioned Tao, focused on the production and trade of material assets, and also separately means tools for managing processes in Tao: votes, distribution of reserves and other activities.

What are the prospects of Tao?

According to the latest Messari report, one of the trends of the crypto industry in 2022 will be Tao. Perhaps during the year we will witness the restructuring of such organizations, the appearance of subsidiaries and a new distribution of roles between participants. Autonomous decentralized organizations are waiting for an improvement in cooperation tools that will allow the community to get rid of passivity and become more effective. Operating systems (DAO Tools) for Tao will help them in this.

Tao meet official recognition. In April 2021, a law recognized as decentralized autonomous organizations with a new form of the company was adopted in Wioming. A few months later, the first Tao was approved. But in November 2021, the SEC suspended the registration of tokens of the first legally recognized organization, saying that it provided to potential investors “misleading information”.

In 2021, a wave of investment Tao arose, in which tokens holders could invest their funds in NFT, Web3 projects, cryptocurrencies or other Tao. An example of such an organization is Pleasrdao, originally created to purchase the work of the artist PPLPLEASR. Subsequently, she collected an impressive collection of NFT: the original DOGE https://gagarin.news/ meme, the only copy of the Wu-Tang Clan album “Once Upon a Time in Shaolin” and the first NFT of Edward Snowden.