The use of DAOs and blockchains by non-profit institutions

Charlie Taylor


With the multiplication of blockchains, we see a growing movement of decentralization of institutions and processes. In theory, any institution can be structured and democratized in the form of a DAO, including NGOs and charities. In general, all modern legal institutions can be subdivided into two categories: for-profit and not-for-profit. In both cases, they have groups of people who take the necessary decisions and actions so that predetermined goals are achieved. Companies, for example, are made up of directorates and subdirectories with a multilevel hierarchical structure. Responsibilities are delegated vertically, downwards, while decisions remain the privilege of upper echelons and majority shareholders. The DAO changes this dynamic by removing the figure of “owners”, or “bosses”. DAOs, from the English term “Decentralized Autonomous Organization, are one of the most used tools in blockchain systems. You can learn more about how they work by clicking here. The specific structure of each DAO varies, and can be purely DAO or mixed, when associated with traditional corporations. In general, however, registrations are made online, on blockchain, and all members receive participation tokens when they register. These tokens grant voting rights, and all decisions are made based on the will of the majority. There are several areas in which DAOs are emerging as a viable alternative. The greatest prominence, however, is among non-profit and charitable organizations, which can take advantage of the democratic properties of these systems. Some examples are DiatomDAO, in favor of the oceans, KlimaDAO, in the fight against global climate change, Bloomeria, which uses NFTs to protect biodiversity, and The RegenNetwork, which seeks to align agricultural activities with more sustainable practices. And DAOs are not restricted to the environmental sector: they are also employed in social, humanitarian, anti-war causes, etc.

Benefits brought by the use of DAOs

The mission of NGOs and charities is complex. They need to draw attention to a specific problem, educate and make people aware of its importance, identify donors, establish solid donation networks, manage the flow of money and ensure transparency and reliability at all stages of these processes. unique and omnipotent solution to all these needs has not yet been created. However, the use of blockchains can solve some of them quite effectively. The biggest of all obstacles faced by NGOs is undoubtedly related to corruption. There are many such institutions in the world, and the general financial flow is very large, which always attracts malicious members. Most losses occur through intermediaries in the money flow, who subtract fractions of the money along the way. In other cases, however, the directors and authorities themselves end up getting involved in scandals of embezzlement, evasion and misuse of money, as was the case with Greenpeace in 2014. These occurrences end up tarnishing the reputation of NGOs and discouraging many people to practice philanthropy. So ensuring transparency and honesty ends up being the industry’s highest priority to the public. That’s where DAOs and blockchains come in. They allow all financial transactions to be permanently recorded, immutably and fully transparent, and to be traceable at any time. The parties can also operate directly, without the need for intermediaries for financial transactions and communications. There is also a reduction in operational costs and an increase in the speed of processes, as well as the possibility of donations in cryptocurrencies, factors that facilitate the integration of communities around international causes. The democratization of decisions is also crucial. By taking part in the voting, donors are assured of the allocation of funds and other internal procedures. They can be sure that the purpose of their donations is being praised within that group, eventually reaching the intended destination.

Obstacles

Because they belong to a legal institution, people who work in registered companies are protected in case of lawsuits. The company itself is responsible for the attitudes of its employees in cases of damage to third parties. In the case of DAOs, this does not happen. The founders create the DAO, and it simply exists on the blockchain, in the virtual world, without legal recognition from any government. Some exceptions are already emerging, as is the case of the state of Wyoming, in the USA, which already has specific regulations. Other examples should continue to appear in the near future, as the creation and improvement of blockchain and cryptocurrency laws advances in each country. Another issue is the tax release. In many countries, donations to charities entitle you to annual income tax deductions, which encourages many people to take part in the practice. In the case of DAOs, however, the lack of legal determinations prevents philanthropists from enjoying this benefit, at least for the time being. In addition, one should always be cautious when dealing with DAOs, as it is a new organizational model, under test. , and which is often subject to structural uncertainties and vulnerabilities. One is what will happen when a single individual becomes holding a large percentage of tokens, such as 60% or more. This could lead to even greater centralization than in private companies, with just one individual making all the decisions. Case-by-case solutions and adaptations are needed, which meet the needs of each community in question.

Conclusion

NGOs have been benefiting from blockchain technology for a long time, from making cryptocurrency donations available to selling NFTs for fundraising. DAOs have emerged as a powerful tool for organizing groups of people around causes that demand action. of recurrent decisions and inspection of financial flows, which is precisely the case with charities. They provide transparency and democratization, eliminate corruption loopholes, reduce costs and increase the speed of processes. Although there are still many difficulties and legal deficiencies in most countries, we should see an advance and consolidation of this sector in the coming years.

About the author

Alkudmani Fares holds a degree in Business Administration from Tishreen University, in Syria, with an MBA from Edinburgh Business School, Scotland. Brazilian naturalized. He serves as Business Development Manager Brazil at Kucoin.Want to invest in digital assets but don’t know where to start? Bitcoin Market offers the best and safest trading experience for anyone taking their first steps in the digital economy. Meet the MB!\r\n window.uolads.push({id: \”banner-970×250-area-1\” });\r\n \r\n

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