June 22, 2023

Web3 and Decentralized Autonomous Organization (DAO): Expert Guide

The number of decentralized autonomous organizations (DAOs) is growing as the world gets ready for Web3. DAOs give businesses, projects, and communities that use them a way to make their management more democratic. Members of a business that was born on the internet and is based on the blockchain can vote on organizational decisions by putting money into a specific project.

DAO can be compared to a company, management board, housing cooperative, or any other organization. It often issues “governance tokens,” and each DAO is actually a bit different.

What role do DAOs play in the Web3 landscape? What is Web3 and how is it going to impact our lives? Keep reading to find out.

What are DAOs?

Decentralized autonomous organizations (DAOs) are built from the ground up for the internet and are based on the blockchain. They are meant to give organizations, initiatives, and communities a new, more democratic way to manage themselves, where any member can vote on organizational decisions.

How DAOs operate

DAO founders generate a new coin known as a “governance token”. They distribute these tokens to users, funders, and other stakeholders.

Each token gives the organization a certain amount of voting power and has a price on the secondary market, where it can be bought and sold at any time. Then it’s just something that pretends to be a DAO, it’s not “D” decentralized, so it’s not a DAO.

Tokens in DAO can also be non-transferable, not available for purchase on the market, and assigned, for example, by voting by current DAO participants.

Even though this method is often seen as a way to spread power out, evidence from governance tokens shows that DAO ownership is very centralized.

What are decentralized autonomous organizations for?

A DAO gives its members the right to vote and lets investors send, receive, and hold currency instantly and anonymously around the world.

For years, automated methods have been seen as a way to get rid of problems caused by people, like having to deal with time-consuming and difficult bureaucratic procedures.

The main goal of a DAO is to help people settle these kinds of disagreements and get them to focus on work and other, more rewarding parts of the company. There is no need for conventional central administration with a DAO because it is more prone to errors and manipulation by people.

What can a DAO accomplish in terms of real-world applications?

Since there’s no hierarchical administration, the organization can have several applications. A DAO can be useful for more than just the traditional role of crowdfunding, which is to replace venture capital companies. It can also be used to motivate and reward independent freelance experts with the money that is expected to be raised across the business.

Using a DAO, charities may have their given cash vetted and safeguarded. The building of a DAO as an on-chain network of digital assets is another thing that has been improved recently. Parcels of land that are represented by NFTs, for instance, can be owned by the DAO as a whole or by an individual.

What are Web3, decentralized networks, and decentralized data?

Web3 and blockchain technology

Blockchain technology gives us a safe, reliable, and shared ledger that we can use to track and keep an eye on digital transactions. DAO decentralization is compatible with blockchain’s distributed consensus, ensuring data agreement across nodes in a shared system or achieving an agreement on a proposal.

DAOs rely on technical transparency and decentralized collaboration to maintain independence and impartiality. In this way, the interests of the whole community can be put first, not just those of a few powerful people or institutions.

The idea and structure of the DAO also make it easier for members to stop manipulation and cut down on the bureaucratic barriers that are common in most organizations. The Ethereum blockchain is what powers the majority of DAOs. Its system of distributed consensus is safe and well-known enough for businesses to rely on it.

DAO groups that operate on the internet should not be confused with The DAO, the first of its kind. This project based on Ethereum didn’t work out, so the Ethereum network was split into two parts: Ethereum Classic (ETC) and Ethereum (ETH). Users exploited a weakness in The DAO code in June 2016, while Ethereum was still in its infancy and far from a secure network. They stole one-third of The DAO’s money, around 3.6 million Ether worth $50 million at the time.

Web3 and decentralized data network

In a Web3 tech stack, peer-to-peer solutions are used similarly to how a database is used in a traditional tech stack. However, they’re replicated over a number of nodes in a decentralized network, making them more dependable.

Is it feasible for a database to be completely decentralized? Blockchain technology is not the same as a database; it does store some data, but it is mostly transactional information. If you need to store or transmit any form of data, you’ll need a database.

While blockchain may provide complete trustless decentralization, applications still require off-chain data storage. This means that if you require database-style storage, you won’t be completely decentralized, but this trade-off may be worthwhile in the end.

DAOs: Web3 and decentralized blockchain technology

The network design of DAOs perfectly complements the Web3 foundation, igniting a new creative economy and the future of labor.

DAOs can already be considered Web3 if we believe decentralization to be a key component of the next internet era. Decentralized Finance, for example, employs DAOs to enable platforms to become totally decentralized. Decentralized exchanges like Uniswap and SushiSwap are good examples of DAOs taking part in Web3.

Web3 gave birth to NFTs, decentralized autonomous organizations (DAOs), and the metaverse, all of which may be grouped together. They have things in common, like giving users self-rule and ownership of their assets by using cryptocurrencies, community governance, and unconventional ways to raise money that don’t involve traditional venture capitalists.

What is Web3?

Tim Berners-Lee who created the WWW or World Wide Web, originally called Web3 the Semantic Web. He envisioned an intelligent, self-sufficient, and open internet that used AI and machine learning to act as a “global brain” and analyze information conceptually and contextually.

This idealized version didn’t materialize because of technical limitations, such as how expensive and difficult it is to translate human language into machine-readable language.

But Web3 is here –  and here are its key characteristics:

  • The semantic web is envisioned as an online technology advancement that allows individuals to create, share, and link content through search and analysis.
  • Machine learning and artificial intelligence are used to develop Web3, which will become smarter and more responsive to user requests. These concepts are combined with Natural Language Processing (NLP).
  • Web3 also links different devices and apps in the Internet of Things (IoT) systems.
  • It allows users to engage in public or private without exposing them to risks via a third party, resulting in “trustless” data.
  • It facilitates involvement without obtaining permission from a ruling authority.
  • Privacy and digital infrastructure are key – Web3 uses zero-knowledge proofs and secures personal data.

The dangers of centralizing data

Despite extraordinary technological advancements over the last 30 years, many of the systems that support how we exchange and handle data are out of date.

In the healthcare industry, it’s still common for hospitals to store patient information in centralized systems. This means that sensitive patient information may be stored on PCs and spreadsheets that aren’t safe. In the past few years, huge data breaches have been caused by the fact that personal information is stored on centralized social media platforms.

Today, technology and online interactions underlie the fabric of the daily lives of people around the world. Businesses should strive to keep such data secure and private. Without proper safeguards in place, centralized systems may become risky repositories of sensitive data.

How can decentralization safeguard data privacy?

As individuals use the internet to do business, interact, and communicate, more safeguards must be put in place to guarantee that their privacy is maintained and that they have control over the information they disclose online.

We may move toward decentralized identification solutions in the future to keep our data private and safe. They support end-to-end blockchain technology, which makes it possible for private information to be sent and received securely and gives users full control over their data. Unlike centralized solutions, decentralized systems ensure that private data stays immutable, safe, and potentially shared when specified people choose to release information.

Going forward, this technology must be used by any system that needs to store a lot of data, whether it’s in healthcare, banking, or the media.

Existing centralized solutions can’t protect user information and guarantee privacy and data security at the same time. To fix these problems, organizations need to spend money on decentralized solutions to keep their most personal information safe.

Digital identity solutions and decentralized data platforms are important in the fight to keep user data safe, and they must be used to build a more secure and long-lasting data-driven ecosystem.

Data security through encryption

Data can be effectively safeguarded with zero-knowledge encryption using unique user keys. Administrators and developers don’t know about them and can’t use them, so only the user can get to their encrypted data.

Zero-knowledge proofs verify the truth of a proposition without revealing the underlying information. Unlike other common kinds of encryption, such as end-to-end models used in private messaging applications, which enable only users and senders to see information, zero-knowledge cryptography allows information to be private and usable at the same time.

This type of encryption is well adapted to Web3 identity verification since it protects individuals as well as the many systems that organizations want to maintain safely.

Web3 pros and cons

Cons of Web3

Web3 is powered by several technologies, such as blockchain, AI, and machine learning. It makes use of semantic data, 3D visuals, and other technologies. Less sophisticated devices are unlikely to be able to support Web3, nevertheless, those commonly used today should easily handle it.

Web3 might be difficult for novices to understand and for regulators to capture. Some experts believe that decentralization will make monitoring and regulating Web3 more difficult. As a result, we may witness an increase in cybercrime.

Other limitations concern security. Since Web3 is so big and connected, anyone can get to the public and private information that is posted online. Reputation management will become more important than ever.

As Web3-based websites and applications gain popularity, existing firms will face more pressure to modernize. There will be a lot of pressure on companies to improve their digital services so they can keep their captive customers.

Pros of Web3

Full data ownership

Tech giants control and exploit user-generated data in Web 2.0. End users will have complete control of the data they utilize in blockchain-powered Web3. For example, users will be able to pick what information they wish to share with businesses and advertising agencies in order to earn money.

Additionally, there won’t be a single body in charge of overseeing Web3. As a consequence, decentralized apps (dApps) will not be banned or limited in any way.

No intermediaries

Web3 will connect businesses directly with customers via blockchain technology. Even though laws and rules will still be needed to keep things fair, there will be a shift away from centralized organizations and toward trustless, decentralized networks.


Users will be able to trace their data and see the source code of the platforms they choose to use thanks to the decentralized web. All stakeholders will be constantly aware of the value and commerce with which they are involved. You won’t rely on a middleman to obtain this information.

Effective information access

Web3 will allow you to search for information more effectively. When you search for anything on a search engine, it will provide more relevant results than the most popular pages that people click on. The semantic web will aid in improving the interconnectedness of online data.

Websites will be able to figure out what you like, so you can have a more personalized internet experience. Online apps will keep track of what we do and how we use the internet so they can adapt to our device, location, and other things.

How Web3 could affect our lives

Web3 has already arrived. Even though it may not be as exciting as the entertainment industry makes it out to be, it is important to understand how Web3 use cases will change the technology world.

Web3 will completely change how we use the Internet and how our personal information is handled.

Web3 solutions

Decentralized Finance DeFi

DeFi is known as the Web3 foundation. Decentralized Finance applications are hosted on blockchain networks and implemented using smart contracts. Decentralized apps (dApps) encompass almost all aspects of traditional finance without the involvement of banks or market makers.

People can get automated loans from dApps if they put collateral into smart contracts upfront. When they have blockchain backing, they can tokenize commodities like gold and silver as well as fiat currencies.

This means that consumers in underdeveloped countries may enter high-finance investing without the necessity of a stock exchange in their own country. Apart from the previously stated P2E games, DeFi and novel DeFi assets may transform consumers into market makers.

Artificial intelligence

Incorporating machine learning and artificial intelligence into blockchain technology will ultimately alter the Web3 experience and improve user autonomy. Web recommendation engines that can comprehend user preferences and propose more tailored results are powered by AI algorithms.

Natural language processing (NLP) and machine learning are being used to make automated chatbots for customer service questions, support transactions, and personalized suggestions. AI-powered bots can deliver real-time customer care and increase overall user happiness.

Furthermore, artificial intelligence (AI) may evaluate user behavior and give practical suggestions regarding how to enhance a website or service. By using these technologies, developers, and organizations may be able to give customers a better, safer, and more personalized experience.

Thanks to AI, people who use Web3 can now get more accurate information more quickly and easily. AI is enabling Web3 users to make more educated decisions and better understand decentralized platforms, which is critical in the DeFi arena.

For example, machine learning algorithms can be used to give users customized user interfaces and suggest relevant content based on what they’ve done in the past. NLP and semantic skills allow computers to understand data in a way that is similar to how humans do, so they can get more accurate results in less time. AI-powered recommendation engines can scan enormous volumes of user data and generate individual prediction models. This enables more personalized user navigation and experiences.

Smart contracts

Smart contracts self-execute, opening the door to asset buying, selling, and trading. They also allow currency, token, and property exchanges. Smart contracts are based on the blockchain, so all transactions are transparent. These agreements are programmable and digital. Programmability equips them with unique incentive systems, regulations, and punishments.

These decentralized contracts enable internet transactions without middlemen (trustlessness). They are autonomous, accurate, uninterrupted, and cost-effective.

Smart contracts can construct DAOs (decentralized autonomous organizations), organizing many users without a corporation. Web3 contracts promote a new economy that will differ from the existing one, which is still built on Web 2.0 ideals and centralized authority. Smart contracts will expand global user potential.

The future of Web3 and DAOs

Web3 tries to do what the internet hasn’t been able to do so far: promote open services that are run by decentralized protocols instead of centralized apps that are run by IT giants. Web3-based open services enable permissionless entrance, maximize value, and ensure verifiability. These services are significantly more robust, fair, and ethical.

Users don’t just use digital platforms in exchange for monthly fees and personal information. Instead, they run and manage the protocols themselves. Participants are actual network stakeholders, not merely customers or goods abused by economic pressures.

In this case, tokens or coins show who has access to, control over, and ownership of decentralized networks. In Web2 you’re the product; in Web3, you’re the owner. We may anticipate that DAOs will make it easier for people to enter Web3 in the near future.

Are you looking for experts who could help you build a blockchain application? Get in touch with us; we have almost a decade of experience in this space and a handful of amazing projects under our belt.

June 22, 2023