Dear valued readers,
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The Curses of Centralization — Decentralized Podcast
We're about to start a new week. Last week I talked about DAO after the Carbon Model , but I don't think I finished the topic completely. So, this week I'll tell you a little more about DAO.
Last week we mentioned that they are self-governing and that the members' goal is the good of the system. We added that you can contribute to the system you are in, and in return you can earn governance tokens , increasing your voting rights in decision-making.
Let's delve into the details. DAO, which stands for " Decentralized Autonomous Organization ," refers to an organization focused on transparency and entirely governed by its members . The system's rules and decisions are implemented through smart contracts. Members' voting power plays a role in decision-making. Transparency is ensured by the actions taken being recorded on the blockchain, making them visible to anyone who wishes to see them.
Decentralized and Autonomous
How does the system work?
As we mentioned in our previous newsletter, the more effort you put in, the more voting power you have. You increase your voting rights by continuously serving or investing in the system you're a part of. Then someone proposes a sensible improvement to the system, saying, "If we do this, we'll be much better off." After summarizing their idea well, everyone votes on it, and the idea is either accepted or rejected as a result of the vote. The system is that simple, really.
One of the ways the system maintains its own security lies in human nature . As your responsibilities increase, your behavior changes and matures accordingly. While you might think your stake grows as your voting power increases, the degree to which those decisions bind you also increases as your influence in decision-making grows. Therefore, you need to make the best decision.
The fate of the company is in your hands.
Let's make it more understandable by illustrating it concretely. Let's say you're involved in a DAO (Development Agency) game company , and you provide software support. You come up with an idea for a feature that could benefit the company, and you explain it to everyone, convincing them to support it. The vote wins, and the company gives you a budget and the opportunity to implement your idea. If you fulfill your promises, you continue your life as a valuable member and shareholder of the company. However, if you neglect your promises and only partially fulfill them, failing to satisfy other members and investors, your votes are withdrawn. The support you received ends, and you miss the chance to advance the company and generate profit for yourself and all members.
Decentralized and Autonomous
With this system, each member company acts like its owner , and naturally, everyone does their best when making decisions. However, there are certainly some problems with this system; systems where everything runs perfectly and no problems ever arise are probably not something we encounter very often. While we are not trying to say that DAOs are flawed, there are some points to consider. We will discuss the advantages and disadvantages in our newsletter, which will be published next week.
So how can you get involved?
If you want to participate in a DAO (Development Agency), you should first research projects that match your interests. After thorough research, carefully examine the aims of the DAOs that catch your eye . Check what rights are offered to members and how proposals are voted on . If it aligns with your expectations, you can become part of the community you desire, whether as an investor or a freelancer.
So what kinds of DAOs will you encounter?
To give some examples, we can start with SharkDAO . The purpose of this community is defined as investing in certain NFTs through funds provided by individual investors . These purchases are made by pooling the efforts of investors , aiming for higher profits.
Another example is RaidGuild , which aims to develop projects. This DAO, a Web3 initiative , helps entrepreneurs take their products to the top.
Another example, known as DAOhaus , actually aims at DAO creation and sustainability. This system is one of the doors you can knock on if you want to create your own DAO .
In the case of BanklessDAO , the goal is to promote Web3 and educate people about it .
Now let's take a look at some of this week's developments.
The Deputy Governor of the Bank of England likened DeFi protocols to driverless cars. He also shared that the Bank of England plans to introduce regulations regarding cryptocurrencies and related payment systems in 2023.
The founder of FTX apologized to former employees and investors.
"I will try to make up for what I did, even if it means dealing with it for the rest of my life."
We hope former employees and investors can forgive him.
Last week, we focused on the reasons behind the scandals, as you may recall. We discussed how centralized systems can harm us and touched upon the decentralized philosophy that underpinned the cryptocurrency world . So why are centralized systems so popular? Of course, we're not the only ones asking these questions. Many people currently focused on the crypto world are questioning the same thing.
the focus on decentralized finance might increase because problems stem from conscious or unconscious errors in centralized systems . While we've seen many innovations on this path since the 2008 financial crisis, the fact that we're still grappling with the problems of centralization 14 years later shows us that some things can't happen overnight, and perhaps we're resorting to excuses and taking the easy way out.
Are we making a mistake somewhere while learning about these systems?
Many people jump into the cryptocurrency market without understanding the reasons behind the creation and workings of crypto systems . Unfortunately, this can lead to unpleasant consequences due to insufficiently scrutinized actions. We recommend you read the reviews on this topic, including those from the New York Times . Even if you don't, we will continue to share them with you, don't worry.
"Winter and Ice Age in Crypto ," as this winter season has been ongoing for some time. The bull market two years ago, when Bitcoin was trading around $69,000, isn't actually that long ago. As Bitget Global Head Gracy Chen stated, this period actually provides us with the low costs needed for new projects – a truly unique opportunity!
Most companies are founded during a bear market.
I think you've heard before that bear markets are periods for project development. As some economists, including Erkan Öz, whom we can consider a crypto enthusiast, have said, these periods also bring unmissable opportunities to learn and put our ideas into practice.
Coinfirm CEO Mihaescu argues that harsh market conditions are actually an opportunity for good ideas to emerge. Useless ideas cannot survive in a bear market; harsh conditions act as a filter. One benefit of this market is that it somewhat reduces people's unrealistic expectations . You know, sometimes people enter these markets expecting to get rich overnight, but these expectations never create a mindset that yields returns in the long term.
It's best to keep your expectations realistic and your mind healthy.
Thomas Lee , a leading Wall Street strategist , believes that despite the stagnant atmosphere we've experienced this year, the cryptocurrency markets will rise. The strategist, who has made accurate predictions about Bitcoin in the past, thought Bitcoin would reach the $200,000 mark . He added that one potential negative factor that could hinder this rise is a possible security breach . Hopefully, he will be proven right without any such breach occurring.
That was this week's events; we hope you have a peaceful and wonderful day and that it inspires you on your other days.
If you'd like to connect us with people who might be interested and enjoy reading our content, you can use our link: bit.ly/merkezsizbulten
See you next week,
Decentralized Bulletin
Originally published on Medium on November 28, 2022. English translation of “Merkeziyetsiz ve Otonom”.