38. What is the SubDAO protocol, and how does it work?
Most DeFi protocols are bringing radical changes and transformations to the financial services sector. Undoubtedly, the popularity of DeFi services is growing, but SubDAO is not lagging. So, what is SubDAO, and why is it appearing on the tongues of blockchain and web3 enthusiasts?
What are the essential features of SubDAO and what, in fact, is its relationship to the base DAO? In today’s lesson, we will answer these questions in detail. Here is our brief guide to the world of SubDAO.
What is a DAO?
To make it simpler for you to understand how it works, and what the SubDAO protocol is all about, let’s pause for a moment on the definition of DAO.
DAO is an acronym for Decentralized Autonomous Organization, which is an organization managed by humans but executed by computers. A bit complicated, right? So let’s simplify it.
The DAO units are decentralized. This means that there is no single person who manages them. Instead, DAO is based on a democratic system in which everyone has a vote.
In the DAO ecosystem, humans don’t do any work. It’s the smart contracts that are responsible for everything. They operate as predetermined protocols. How? When you vote for a given smart contract, it will automatically perform a given task that has been “programmed” into it. No human intervention can change it. We wrote about how smart contracts work for you here [LINK – WHAT IS A SMART CONTRACT].
Given the above, we can confidently say that DAO is an excellent model for democracy and getting rid of human corruption. However – if this were really the case, no one would even think of creating a SubDAO protocol.
SubDAO – definition
This is a new approach, to solve operational problems, related to responsibility within DAO, while not sacrificing decentralization. In itself, the solution is somewhat reminiscent of a startup that, as it grows, begins to divide employees into different departments. You’ve probably already guessed that SubDAO, is a DAO inside a DAO.
It is worth noting at this point that SubDAO has its ownership structure, but is very much related to DAO itself in terms of its mission.
Simply put, SubDAO, also called GOV, is a multichain DAO protocol that helps manage digital assets. It consists of multiple functions, such as multiple signatures, voting, and decentralized functions.
The SubDAO protocol provides a general and widely used DAO tool in venture capital and digital asset management.
How does the SubDAO protocol work?
Decentralized Autonomous Organizations (DAOs) are gaining popularity as a form of governance for decision-making in the blockchain ecosystem. A DAO is fully decentralized and democratic. Unfortunately, despite this, DAO solutions are still somewhat fragmented and immature. Even at this stage of advancement, they lack the necessary tools to make a name for themselves in the cryptocurrency industry. Moreover – individual solutions, in DAO management, are still, especially financially, impossible for many companies. On the other hand – smaller companies will not adapt in this regard.
However, if someone is not familiar with blockchain, or cryptocurrencies the concept of DAO and the scope of its activities, will be something completely incomprehensible to such a person. That’s why here comes the idea of SubDAO. Developers working on this protocol, want to use it to provide a comprehensive toolchain DAO governance for any industry sector.
The proposed toolchain are simple to use, yet easy to operate. Their undeniable feature is the wide range of services they cover. The SubDAO protocols also eliminate the possibility of manipulation by one person, even unhealthily promoting democracy for all.
The main protocol of SubDAO is Venture Capital. It can make investment choices, raise funds while raising funds. And all this happens on blockchain. SubDAO users themselves can directly exchange DAO funds for swaps and NFT purchases. What’s more – make loans, or use the integrated third-party protocol.
To further understand how SubDAO works, recall the issues related to Layer 2 and Layer 1. If you have forgotten, take a peek here [LINK – WHAT IS Layer 1 AND Layer 0].
Layer 2 of any blockchain is built on top of Layer 1. Just as Polygon, for example, is built over Ethereum’s blockchain. In effect, Layer 2, takes advantage of Layer 1 and relieves it transactionally.
The same is true of SubDAO. It helps DAOs grow by developing its ecosystem. At the same time, it solves most of the problems faced by the DAO network.
What is a GOV token?
GOV is a management token in the SubDAO ecosystem. Holders of GOV can vote on all changes or other elements of the management and administration of the SubDAO protocol using it. The GOV token is available on major cryptocurrency exchanges.
What problems does SubDAO solve?
- It lowers the barrier to entry. If we don’t know what’s at stake, it’s probably money. With the use of SubDAO, the funds needed for collaboration are not as large as with a classic DAO. That’s why SubDAO is a great solution with insufficient budget. For a developer, joining a DAO may be difficult precisely because of financial capabilities. He will therefore benefit from the alternative.
- It’s a great place, for niche experts in the cryptocurrency industry. It’s a space where you’ll meet people with the same interests or specialities. When it comes to the SubDAO protocol, you are not competing with the big DAO itself. Remember, this SubDAO supports entire DAO entities in its operation.
SubDAO is a protocol designed to support larger DAO organizational units. It is not intended to defeat them, only to wrangle them in their daily activities or help them overcome problems.