What is a DAO: How Decentralized Projects Run Governance and Distribute Profits

A DAO allows investors to share in play to earn returns without direct involvement with the games.

A DAO, or a Decentralized Autonomous Organization, is an informal, open-entry organization. The only condition to enter a DAO is to own a specific crypto token or another asset, giving all participants skin in the game. 

Buying into a DAO can result in various privileges, including the ability to vote on the future of the project and to receive passive income. A DAO will also include some form of automated decision-making based on smart contracts and predetermined ways of working to avoid the human factor. 

Each DAO created for blockchain projects is a variation of the original Ethereum DAO, created in 2016. This DAO became notorious for holding a large-scale token sale, which ended up being exploited and stealing significant ETH funds. 

But afterward, new projects like Maker DAO improved their automation and continued to serve as distributed, self-governed vehicles, usually with the goal of decentralized finance operations. 

DAO and Play to Earn

Play to earn games often have the financial structure of fintech startups. For that reason, many play to earn games have adopted some form of DAO structure, to glean voting from all token owners about the future of the game. Token rewards are one of the key elements of a working play to earn economy. Some games decide on tokenomics through their centralized team; others open voting and use DAO participation. 

For play to earn games, DAO participation sometimes hinges on owning NFT from exclusive collections, thus limiting the right to vote. Almost all gaming DAO have varied structures, and may require additional research before joining through initial investment.

DAO and Play to Earn Scholarships

Because a DAO is a tool to redistribute income, it is often used for guilds, or organizations acting as scholarship providers for games. A DAO is capable of raising funds to buy valuable game assets, then lend them to players and share in the gains. A DAO can decide which games to choose for gains, or which NFT collections to buy.

Some of the leading guild DAO include: 

Investing in DAO Tokens

The price of DAO tokens indirectly reflects the success of the organization in raising funds and achieving returns. DAO tokens are just like other digital assets that can be held and traded, and give exposure to a DAO without the need to participate. 

Top DAO tokens include UniSwap (UNI), Aave (AAVE) and Maker (MKR). Some assets may also add a DAO to their organization or become defined as DAO tokens. The total market cap of DAO tokens is above $21B, with new game-related assets to be added. 

Play to earn tokens may also take up DAO functions, as may be the case with Axie Infinity.

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