Web3 has caused a great deal of tension in the industry, as evidenced by the nearly $ 50 billion market value that Web3 tokens have grown in recent years. Web3’s ethics itself is one of its most appealing features. It is an ecosystem free of obstacles or intermediaries, welcome anyone anywhere and open anytime.
However, there is one huge problem: There is no Deficit Infrastructure infrastructure powerful enough to execute these large orders in a completely decentralized way, as the use of centralized exchanges conflicts with the decentralized nature of the decentralized independent institution, or DAO. Let’s address the relationship between DAOs and diversified exchanges (DEX) and how specialized DEX could benefit DAOs now and in the future.
To benefit the bellows
Although Web3’s promises have attracted merchants of all incomes to the space, large merchants, or whales, evolved into one of the most influential types of crypto merchants.
It is customary for whales to fall into one of two categories: large individual traders or units. Recently, DAOs have emerged as a new form of whale traders. These organizations operate in a fully democratic manner and have carried out large order transactions to generate passive income for DAO members.
But there’s one big problem: There’s no infrastructure within DeFi powerful enough to execute these large orders in a completely distributed way. Of course, they can use centralized exchanges and pay exorbitant fees, but the use of such centralized systems contradicts the decentralized nature of DAO.
DAOs need custom-built distributed exchanges that can execute large order transactions in a secure, cost-effective, and distributed manner. Let’s address the relationship between DAOs and DEXs, and how specialized DEX could benefit DAOs now and in the future.
Connected: How do you do DAO? Capability of DAO scale and other burning questions
The variable DAO
Distributed self-organization is no longer just a theoretical concept – it is becoming commonplace. And as with everything in the blockchain space, they are evolving. DAOs and their use cases have continued to achieve new iterations from the beginning. The first DAO, confusedly called The DAO, was launched in April 2016 as a crowdfunding campaign and became one of the largest in history, raising more than $ 150 million in Ether (ETH).
Since then, the organization has evolved in all areas, from membership requirements and leadership to how it creates value for its members. Although early DAOs were simple crowdfunding authorizations, some have since launched nonfungible token (NFT) projects or made a breakthrough in the mainstream, such as trying to buy the first version of the Constitution or sports teams using NFTs in various ways. Others have adopted a more traditional business model, offering members a revenue share in exchange for DAO tokens.
Increasingly, whaling is one of the lesser known ways in which DAOs operate. These whales are defined as large traders who can enter the market with a single trade. These are often organizations or funds that store large amounts of cryptography, which makes them very influential in the space. And as we have seen with traditional whales, they often trade with other big traders, or counterparties, to make a living.
DEX can play a key role in providing the infrastructure necessary for DAO to thrive in new traffic and asset flows. Assets need to be secure and non-centralized and only DEX can provide the connection.
As DAOs continue to introduce new types of whale traders, they will rely on DEX which can facilitate large orders in a safe and cost effective manner. While most large order DeFi traders accept negative factors such as permanent losses and excessive commissions, DAO and their whale trading companies would benefit immensely from custom-made DEXs that implement tools such as time-weighted average prices (TWAP) to execute large orders with no price effect – fully on the chain.
DAOs, which operate as whale traders, can continue to have a significant impact on DeFi. Without DEX to meet their needs, however, DAO could never fully realize its potential and continue to suffer from the current DeFi limitations that plague all whale dealers.
Caution: Whales are more common than they seem
Whales have become a group of traders who can include individuals, institutions or even DAOs. In fact, DAO has quickly become a major player in the whale trading game. It is now clear that the whales have evolved from lone wolf traders into a giant pod of industrial traders.
Why are DAOs so good at whaling? First of all, they are very project-driven. Unlike traditional merchants who are encouraged to make quick profits, DAOs are driven by their organizational goals. This gives them a long-term perspective and makes them more willing to take on risky trades that could prove to be very profitable.
Furthermore, DAOs are often better funded than individual traders. They can combine resources and use them to buy large quantities of tokens when they think the price is low. This allows them to make a significant profit when the price finally rises.
DAOs are also generally more transparent than traditional trade unions. They often publish their business plans and results openly, build trust among their members and allow others to learn from their successes and mistakes.
All of these factors have made DAOs very successful in whale trading – this is just the beginning for DAOs whales The question is: How will they do it? The solution is simple: a decentralized exchange built specifically for DAOs to carry out their large trades in a safe, cost-effective and diversified manner.
Connected: What is the role of a distributed independent organization in Web3?
As cryptocurrencies become commonplace, more and more retail investors are joining the fray and whales switching from traditional merchants to DAOs will become inevitable. Rather than face big traders on their own, they turn to DAOs to do business on their behalf with governance votes. However, this migration is not without its challenges, as the current infrastructure is not conducive to DAO. In order for DAOs to flourish, DeFi platforms must begin to meet their unique needs.
DAOs offer a variety of options for investors such as retail cryptocurrencies that are inherently incompatible with traditional centralized financial systems. This mistrust only increases in communication with large institutions. DAOs level the playing field by combining great institutional benefits without a central element by pooling members’ resources and coming together as a community.
The biggest challenge facing DAO right now is the lack of infrastructure to support its growth. The most obvious example of this is the fact that ConstitutionDAO has to deposit all the money in one person’s bank account to pay to Sotheby’s.
Such restrictions make it difficult for DAO to expand and platforms must be developed to meet the growing needs of the DeFi space and DAO infrastructure. It is unlikely that once the DAOs find a place, they will become big players in the world of Web3. This in turn will help to bring more liquidity and capital into the space. Let’s start this great move into Web3.
This article does not include investment advice or advice. Every investment and trading business involves risk and readers should do their own research when making a decision.
The views, thoughts and opinions expressed herein are the sole responsibility of the authors and do not necessarily reflect or represent the views and opinions of the Cointelegraph.
0xDorsal is the pseudonym co – founder of Integral, the world’s first DeFi element for large orders. Dorsal’s background as a hedge fund manager put him in a good position to help propel the transition from TradFi to DeFi. Dorsal has extensive experience as a leader in business development within DeFi. In addition to his work at Integral, Dorsal has a special interest in market design, liquidity, DAO and coordination.
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