As Web3 redefines the global economy, traditional corporate structures are giving way to Decentralized Autonomous Organizations (DAOs). By replacing centralized management with automated smart contracts, DAOs offer a borderless, highly transparent way to govern enterprises and raise capital. However, transitioning to a decentralized model comes with unique operational challenges.
From the perspective of an established blockchain development company, this article explores the strategic pros and cons of DAOs, their real-world enterprise applications, and how businesses can safely navigate this next-generation ecosystem.
What is DAO?
DAO is an abbreviation for Decentralized Autonomous Organization, which is translated as “autonomous decentralized organization” in Japanese.
Traditional organizations such as governments, local governments, and joint-stock companies have a centralized authority to make decisions, and generally have a hierarchy of command structure. Multiple departments are assigned under the CEO and directors, and the relationship between superiors and subordinates is clear within each department. Roles and authorities are also fixed, and it is not permissible to jump over them to do business – a structure completely different from the modern Web3 models built by a blockchain development company.
DAO, on the other hand, is an organization built on a blockchain and not controlled by a centralized entity, and is characterized by the fact that anyone can participate (= decentralized). All contracts, transactions, and rights building are automatically implemented by Ethereum smart contracts and recorded on the blockchain, making them extremely transparent and impartial.
Therefore, enterprises looking to build these structures must focus heavily on secure DAO development to ensure system integrity. Investors and other participants who sympathize with DAO projects purchase their own governance tokens and retain voting rights for decision-making. When making a decision, if the vote is in favor of more than half, it will be passed and then put into practice.
In addition, there is an incentive to get an economic return by getting other tokens, such as stablecoin, as well as governance tokens. Since smart contracts define operational rules, once deployed, there is no other way to change rules or decisions with voting decisions.
In the case of a joint-stock company, the CEO, directors, executive officers, etc., who actually operate the company, maintain an independent relationship with the shareholders. However, DAO can be said to be a next-generation new organization in which shareholders have management authority in the management of the company, in which the sympathizers of the project are directly involved in each business by holding the governance token.
According to a DeepDAO survey, in just nine months from January 2021, the funds managed by DAO have increased 40 times from about 44 billion yen to about 1.8 trillion. The number of DAO members and token holders in December of the same year also increased to 1.3 million, 130 times the number at the beginning of the year. To capture this rapid market growth efficiently, many companies are now leveraging blockchain development company to deploy their platforms quickly and securely.
Why is DAO Attracting Attention?
As mentioned above, the number of DAOs has skyrocketed, especially since the beginning of 2021. There are three main reasons for this.
First, DAO can be established on the blockchain by anyone, and it is possible to raise funds quickly. Normally, it takes a certain amount of preparation time to set up a company or obtain a loan from a bank. In that respect, DAO can be established 24 hours a day, 365 days a year, anytime, anywhere (without an office), and can start raising funds from all over the world at the same time, as the start of a process that can be accelerated by partnering with a reliable blockchain development company.
Second, if you participate in DAO and own your own tokens, if the significance of the project is evaluated by many investors and the price rises in the virtual currency market, you can increase your assets accordingly.
Third, with Ethereum’s smart contract, which is the base of DAO, it is possible to integrate with Metaverse, such as purchasing land in virtual space, performing virtual live, selling NFT, and monetizing it. 2021 is a year that deserves to be called the “first year of the Metaverse”, and expectations for a worldview of freely enjoying games using avatars in virtual space and conducting various economic activities are clearly expanding.
As a background to this, it cannot be overlooked that the dependence on the Internet has increased dramatically due to the influence of the Corona disaster, which has made it impossible to go out worldwide. The growing demand for tools that are more practical, exciting, and new than ever before, combined with the penetration of blockchain technology, has led to a rapid increase in the need for and attention to the Metaverse, forcing every top blockchain development company to continuously innovate its solutions.
Benefits of DAO
Highly Transparent and Fair
DAOs running on the blockchain are extremely transparent because all transactions are recorded and visualized throughout. This is not the case with centralized organizations such as ordinary companies and local governments. It is not uncommon for the details to be unclear, such as decisions being made in a closed room or new policies being set out for the convenience of the top management.
In addition, DAO maintains fairness in that anyone can participate and everyone with a governance token is entitled to vote, allowing them to participate in decision-making equally – an evolutionary structure that any professional blockchain development company can help enterprises deploy effectively.
No Need for Detailed Procedures
In DAO, all transactions are executed by smart contracts. Therefore, a person doesn’t need to create a contract or put a seal on each contract. Since there is no hierarchy like a general organization, there is no need to set up many departments unnecessarily, take extra care in human relationships, and do not have to worry about it. The organizational structure is simplified, and you can work in a stress-free environment.
You Can Expect a Big Return
Many DAOs have a limit on the number of unique tokens that can be issued, and as projects are approved and cryptocurrencies become more popular, the price of tokens will also increase. Token holders can expect great economic returns, as some can jump several to tens of times.
Disadvantages of DAO
It Takes Time to Make a Decision
While DAO has the advantage that all participants are involved in decision-making, it also has the disadvantage that it takes time to ask everyone, vote, and get results. This can be a big disadvantage in a business environment where speed is required. Even “Bitcoin,” which is said to be the first successful example, takes three months to make a decision. Therefore, it will not be quick from the usual business sense.
Decisions are not Always Correct
Anyone can participate in DAO, but conversely, it is unpredictable and difficult to prevent what kind of person or organization will participate. Therefore, depending on the members, the decisions made by DAO may not always be valid. Especially when the number of participants is small, it may be difficult to get a majority by voting, and once the opinions are divided, it may be difficult to make a decision, and the project itself may run into a deadlock.
Security Remains Uncertain
DAO cannot deny the risk of hacking, as all transactions are done on the blockchain. Especially when purchasing virtual currency on an exchange, if the exchange itself is hit by a cyber attack, it will not be possible to cash in, and all the invested assets may be wasted. As for DAO, the legislation has not caught up, so even if it is damaged, it is not always compensated, and this point is a disadvantage that cannot be overlooked, which is why working with an experienced blockchain development company to audit smart contracts is essential to minimize technical vulnerabilities.
DAO Example
PleasrDAO
PleasrDAO is a prime example of a DAO aimed at collecting high-value NFT art. Backed by a large number of prominent investors and protocol founders in the Web3 space, the organization made headlines globally after its successful multi-million yen bids for historic digital art pieces.
Furthermore, PleasrDAO has pioneered decentralized finance (DeFi) mechanisms by successfully raising funds using their acquired NFTs as collateral. Today, they continue to expand their operational scope by creating, curating, and fractionalizing NFT art – a complex ecosystem model that requires the technical execution of an elite blockchain development company to maintain secure liquidity pools and smart contracts.
Decentraland
Decentraland is a DAO platform where you can enjoy various games and economic activities in your own virtual space via an avatar. Users can use the token MANA to buy and sell “LAND”, which is the land in the virtual space.
You can freely build your own buildings and facilities in LAND. For example, you can build a gallery and display and sell NFT art in the facility. If you create a game center, you can invite players to hold battle tournaments, link with other NFT games, and sell those characters and items as NFTs. If you create a live house and hold a virtual live, you can monetize by selling admission fees and ticket prices.
At Decentraland, a large community in virtual space has been built and is already an autonomous organization that drives the Metaverse market, where investors around the world are looking to grow.
As evidence, MANA’s price has been sluggish and volatile since its release, but the situation changed completely in 2021. A large investor, called a whale, invested a large amount of money in MANA. Facebook changed the company name to “Meta”, and attention to the Metaverse increased at a stretch, and it was 9 yen on January 1st of the same year. However, it was 127 yen at the end of October. Furthermore, as of January 2, 2022, the price was 384 yen. It’s been about 40 times higher in just one year.
The Future of DAO
In April 2021, the state of Wyoming in the United States made a historic move by passing legislation that recognized DAOs as legal corporations. Just three months later, the “American CryptoFed DAO” became the first officially registered DAO corporation. This milestone provided a massive boost to the legal recognition, institutional credibility, and social trust of decentralized structures worldwide.
This legal validation added fuel to the 2021 NFT market boom. Platforms like Decentraland successfully built thriving ecosystems that attracted global users by forming strategic integrations with mainstream GameFi titles like Axie Infinity. Even traditional industry giants, such as the global auction house Sotheby’s, have established virtual galleries within the Metaverse. This growing demand for complex virtual infrastructures has driven global brands to collaborate with an experienced blockchain development company to ensure seamless deployment and smart contract security.
A prominent enterprise example is Japan’s Asobi System Co., Ltd., a leading talent and entertainment agency. By acquiring virtual real estate (LAND) in Decentraland, they launched “Meta Tokyo” – a digital cultural hub that represents the world’s first full-scale intersection of pop culture, entertainment, and the Metaverse.
On the technical front, while DAOs traditionally operate on Ethereum, volatile gas fees have historically hindered mass adoption. To solve this scalability bottleneck, Decentraland implemented a cross-chain bridge between MANA and the Polygon network, drastically lowering transaction barriers. As gas costs fall and younger, tech-native generations begin engaging with virtual talent and avatars, decentralized onboarding will accelerate, paving the way for mainstream adoption across all age groups.
Ultimately, the Metaverse and DAOs share an inseparable, symbiotic relationship within an industry projected to reach a staggering 100 trillion yen market size by 2030. To capitalize on the rapid appreciation of virtual assets and ride this technological wave, enterprises are increasingly leveraging blockchain development company models to develop scalable Web3 infrastructures quickly, securely, and cost-effectively.
Summary
The rapid evolution of DAOs and the Metaverse signals a permanent shift in how next-generation organizations operate, manage funds, and engage global communities. While the business advantages of absolute transparency and automated workflows are clear, the inherent technical risks, ranging from slow decentralized voting to catastrophic smart contract hacks, cannot be ignored at any cost. Moving an enterprise into the Web3 space requires meticulous planning and bulletproof code execution.
To turn these decentralized visions into secure realities, global businesses must rely on expert technical implementation rather than theory alone. As a trusted blockchain development company, Relipa houses a dedicated team of Web3 developers and smart contract engineers ready to build, audit, and scale your decentralized infrastructure securely.
Relipa Software
Relipa Co., Ltd. is a Vietnam-based software development company established in April 2016. After two years of growth, our Japanese branch – Relipa Japan – was officially founded in July 2018.
We provide services in MVP development, web and mobile application development, and blockchain solutions. With a team of over 100 professional IT engineers and experienced project managers, Relipa has become a reliable partner for many enterprises and has successfully delivered more than 500 projects for startups and businesses worldwide.
