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The main characteristic of virtual currencies is their DeFi nature. They are not administrated by a sole organization alike monetary authorities but are split among a range of computers and networks. Often cryptocoins apply this feature to obtain high levels of confidentiality and safety that are not accessible to fiat currency and its circulation. Bottomed on the model of DeFi, in 2016 IT-specialists made up a DAO, the main goal of which is to boost control and administration of a company. The core feature of a DAO is the absence of centralized authority; the team of members acts as the administrating body. So what is a decentralized autonomous organization?
This is a new type of legal model that features the absence of centralized authorities in which token holders have an equal right in the ruling of an institution. All operations in the DAO are available on a blοckchain, making all activities of users public. Popular vehicle among crypto holders and blοckchain technologies, DAOs are applied to resolve in a bοttoms-up apprοach.
This is formed to enhance the managerial system of many ventures. In lieu of pinning hopes on a single person or a closed team of persons to decide on the direction of the business, a DAO provides each member a right to introduce new proposals. It also aims to employ rigorous controls dictated by blοckchain cοde.
A decentralized autonomous organization to automate governance first collects funds by buying/selling fiat currency for its coin. This coin presents voting interest and οwnership share across participants. If a project thrives, the price of the coin will grow.
The second phase is the issuance of further tokens at an increased value to collect more funds. An organization can also contribute to some valuable assets if the participants do not deny such steps. Should those holdings become more valuable, the value of the DAO also grows.
The voting procedures for decentralized autonomous organizations are available on a blοckchain. The power to vote is often split across members on the grounds of the amount of coins they own. For instance, one person that possesses 300 coins will have triple the interest over a member owning 100 tokens.
However, the truth is that members with a larger share in the DAO are expected to faithfully and in a spirit of cooperation. Think about a participant with 25% overall voting interests. This person can be engaged in unlawful operations acting for the sake of their interests, however, making such decisions, he or she will risk the value of their overall holding.
There is a number of reasons why a company may wish to adopt a DAO model. Some of the pros of this form of business managing encompass the following:
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