DAO means Decentralized Autonomous Organization.  

A DAO is a Smart Contract, or a set of Smart Contracts (computerized, autonomous, tamper-proof programmes) that evolve on a Blockchain.

To illustrate this simply, we need to look at how a so-called ‘Stock’ Company works which is centralized, because yes DAO are modeled on the same principle, but make some big changes which are much more interesting, including decentralization.

How does a ‘Stock Company’ work?

Let’s take the case of any Enterprise, based on generic information.

In this kind of Company, everything is based on a Vertical Organization, which means : 

• A CEO
• A Board of Directors
• Shareholders (who earn dividends based on the company’s profits)

The Board of Directors is mainly composed of shareholders, who have a large amount of Shares, which is normal you will say. The more a person invests in a company, the more shares he or she owns, and it is therefore understandable that this person should have a say in the decisions to be taken.

So concretely :

• You need to own a relatively large number of shares to be able to give your opinion
• You also need a relatively large number of shares to submit an idea
• Therefore, only the Board of Directors can submit ideas, and vote on them.

Depending on the type of company, a small number of people, or even a single person, may demand changes, or submit a vote.

Once the vote is authorized, it is submitted to the shareholders (with sufficient voting rights), the result of which is recorded internally and must be processed manually.

Since it is centrally managed, it keeps the company’s accounts and finances very secret, with only a few privileged people (board members) having access to this information. This can in rare cases lead to the manipulation of figures.

There is still far too much opacity about these kinds of companies.

How do DAO differ from these companies?

A ‘Stock’ Company is centralized. A DAO is by nature decentralized.

Firstly, it is a Horizontal Organization:

• No hierarchy, no CEO, no bosses … (no one person or organization can control the entity).
• The DAO is based on a Distributed Governance system. The exercise of power within the Organization is collective.
• The DAO is not owned by one or a few people, but by all the people who have participated in its creation/funding.
• Because the DAO is decentralized, it can operate in a Supranational framework.

Secondly:

• Each person who has invested in the DAO holds a number of Tokens in proportion to his investment (which is normal, you might say). Tokens, just like Shares, allow to earn dividends according to the revenues of the DAO.
• Any Token holder has voting power, whether it is 1 Token or 1,000,000 Tokens, everyone has the right to vote.
• What is similar to a classic Enterprise is that the more Tokens a person has, the more weight their vote has (which is again normal).

Thirdly:

• The principles and rules of the DAO are written on the Blockchain, so that once they are online it is impossible to change them, just as it is impossible to stop it.
• The DAO works through Smart Contracts 
• Once decisions are voted, they are automatically applied by a Smart Contract and are irreversible.

Fourth :

• Because the DAO is all its information is written on the Blockchain, and its operation is fully automated, all transactions are transparent and anyone can audit the organization and thus verify that everything is working well.

Fifth:

• Any Token holder can submit an idea or proposal to a Vote. Because of its decentralization, and the anonymity of the Token holders, once a vote is submitted to the community, no one can know if this request/proposal is issued by a single Token holder, or by the one who owns Millions. Thus the community studies this proposal from the point of view of its intrinsic value and independent of the status of the person who made it.

Conclusion 

Could we say that DAO are the future of business? Or maybe DAO are even company 2.0? I don’t know.

But what I do know is that DAO offer much more weight to the ‘Shareholders’ called ‘Token Holders‘, by offering them a decision-making power (in proportion to the Tokens held)

DAO are decentralized, open to all and evolve in a Supranational framework, whereas so-called ‘stock companies’ are limited to a jurisdiction, restricted by legal constraints, and limit the power of investors, only the largest investors have power/voting rights.

A company is owned by an individual, a group of individuals or possibly a State, whereas a DAO is owned by all members who participate in its financing.

DAO democratizes decision-making power, whereas companies have a Board of Directors with a small number of members (the elected) deciding on the future and the projects/proposals to be adopted.

DAO, operating through Smart Contracts, can exist and evolve in a world of “Trustlessness“, an environment where trust is no longer necessary, as created by the Blockchain. It is the same for Smart Contracts, they have been coded to define the rules of the organization and hold its treasury in such a way that it is impossible for anyone to touch that money without first submitting the proposal to a community vote.

And realistically, if we eliminate third party intervention, in the real world of centralisation 

• we have to bring in experts, 
• we have to manually request the release of funds, 
• the time needed to draw up a report, 
• and the delays/fees for the execution of the transfer orders by the bank

Decentralization makes all this automatic through Smart Contracts, transparent and auditable by everyone, thus saving a lot of money and time.

Christophe WILHELM

Bitcoin Meister

© Bitcoin Meister

[learn_press_profile]

Hello everyone! 

Many of you often wonder why we differentiate between Coins and Tokens, some of you even confuse the two denominations, calling ‘Tokens’ those which are ‘Coins’ and calling ‘Coins’ those which are actually ‘Tokens’. But both are Cryptocurrencies/Crypto Assets.

Let’s first recall what a Cryptocurrency is: Electronic/Virtual Currency built with Strong Cryptography. It is highly Secure and Immutable. And are based on Blockchain Technology.

One of the first Electronic Currencies that inspired our current Cryptocurrencies, was created by David Chaum in 1989, under the name DigiCash 

To understand this big difference between Coins & Tokens, just remember this:

• A COIN is a Cryptocurrency that operates and functions on a Blockchain of its own and thus each Blockchain is different!

Like for example: 

• Bitcoin (BTC) operates and functions on the Bitcoin Blockchain
• Ether (ETH) operates and functions on the Ethereum Blockchain
• Dogecoin (DOGE) operates and functions on the Dogecoin Blockchain
• Polkadot (DOT) operates and functions on the Polkadot Blockchain
• NEO (NEO) operates and functions on the NEO Blockchain
• TRON (TRX) operates and functions on the TRON Blockchain
• Note Blockchain (NBTC) operates and functions on the NOTE Blockchain

The second big difference is that the Coins are mostly Minable. Because Blockchains need Miners to maintain the Blockchain, secure it and validate transactions.

So on the contrary, Tokens work on a Blockchain that allows to create and Host them (while they belong to another Coin), such as: 

• the Ethereum Blockchain, with Tokens of type ERC-20 & Tokens of type ERC-721
• the NEO Blockchain, with Tokens of Type NEO-5
• the Tron blockchain, with Tokens of Type TRC-10

You can also create tokens on a multitude of other Blockchains such as: 

• Stellar
• QTUM
• Waves 
• Ethereum Classic
• CounterParty
• EOS
• Minter Network
• OMNI
• NEM …

Concerning the Coins, you have to think of them as a ‘Currency’ in their own right. Because they have the same characteristics as the Money Coins:

• Exchange intermediary/Money transfer (allows to buy online, or in store ..)
• Reserve of value (can be stored to be sold later, hoping to make a profit)
• Unit of account (allows to set a value with this currency)

“A currency is characterized by the confidence its users have, in its ability to serve as a medium of exchange.“

Let’s cite these examples: 

• Bitcoin (BTC), Pays transaction fees, rewards miners of the Bitcoin Blockchain
• Ether (ETH), Serves as fuel/gas for the platform, allows for the execution of Smart Contracts, transaction fees, as well as all Tokens created on the Ethereum Blockchain (Type ERC-20 & ERC-721) need ETH to be initiated, and pay for transaction fees as well as sending Tokens.
• Ripple (XRP), Pays Network Fees

Unlike TOKENS, which can eventually serve as a Unit of Account and “theoretically” a Reserve of Value, but do not include any of the other fundamental characteristics of the Currency.

The advantage of creating a Token, is to create a Cryptocurrency, without having to create a Blockchain (as well as a Coin), by using pre-established Scripts (ERC-20, NEO-5, TRC-10 …). So saving time and money

Generally issued during ICO/STO, there are various types of Tokens:

• Security Tokens
• Equity Tokens
• Utility tokens
• Payment Tokens.

Depending on the type of Token, you can enjoy premium or advanced options on dApps, you can own some shares of a Token issuing company (Security Tokens), or you can use a service, once it is developed after the ICO.

Some examples of Tokens are:

• Tether USDT (USDT)
• Binance Coin (BNB)
• Basic Attention Token (BAT)
• Spice Token (SPICE)
• Crypto Kitties
• NFT (Tokens Type ERC-721)

Conclusion

Coins, like Tokens, are Cryptocurrencies, they are : Fungible, Divisible, Portable and have a Limited Offer (for a very large majority of them)

• Coins are Native Units of a Blockchain, whose existence is essential to the survival of the Network.

• Tokens are non-Native Units of a Blockchain, which it (Blockchain) does not depend on it (Token) to function. Because they are created through an existing Blockchain, depending on a Coin. 

Some Blockchains need the Native Coin to create, and perform Token Transactions: 

• Ethereum Blockchain – ETH
• NEO Blockchain – Gas
• Minter Network Blockchain – BIP …

Remember also that a Cryptocurrency can appear as a Token first, and then migrate to its own Blockchain and become a Coin, such as Rapids Network and its Cryptocurrency Rapids (RPD)

See you soon

Christophe WILHELM

Bitcoin Meister

© Bitcoin Meister

Tokenization → Principle that consists in issuing assets in the form of Tokens, on a Blockchain, giving them a value recognized by its users.

Since the creation of the first Stock Exchange of Value in Venice, Italy in 1283 (governed by the State, and since 1315, took place the first auctions with Commercial Purpose). Passing by Bruges (Belgium) in the 13th century where people could exchange currencies from all over Europe, while fixing the future price of goods by anticipating the evolution of supply and demand. 

Continuing with the first Stock Company in 1732 in France, in Toulouse with the ‘Moulins de Bazacle‘ having issued 96 shares freely transferable at market price.

The world of finance as we know it is the result of nearly 1000 years of evolution and change. More recently in our history, it was in the 1990’s, when financial markets opted for a predominantly electronic operation.

And even more recently, the Blockchain, Cryptocurrencies as well as Smart Contracts, have once again radically changed the world of Finance, with the appearance of ICOs (Initial Coin Offering, which should rather be called ITO – Initial Token Offering), followed by STOs (Security Token Offering) → moving us into the era of Digitization of physical assets.

The appearance of Tokens (Digital representation of financial assets from the traditional legal and financial world), has enabled a new revolution in the world of finance, establishing alternative investments to the traditional financing systems. This model is particularly subtle and ingenious, allowing communities to govern themselves.

Tokenization is also a real innovation in the financing of start-ups and the financing of Disruptive projects.

The digitalization of assets enabled by Tokenization is the counterpart of the Digitalization of information enabled by the Internet → Clément Jeanneau.

Today, everything can be tokenized:

• Stocks 
• Bonds
• Commodities
• Real Estate – Houses – Whole buildings
• Works of Art
• Cars 
• Drinks
• Documents
• Identities
• Shares in an investment fund
• Debt instruments
• Digital goods of all types & all types of financial assets

Before going further, it is more than necessary to be comfortable with the specific terms of the Token world 

• Security: In reference to the SEC (Securities and Exchange Commission) standards that define whether a ‘Token’ is a ‘Financial Security’ or not.
• Security Token : Are assets directly created on the Blockchain, their purpose is essentially to raise funds, while benefiting from counterparties (Financial, legal rights …)
• Tokenized Securities : Are the representation of already existing Financial Securities (Work of Art, Real Estate …)

Tokenization is the secure and immutable association of a Token with an immaterial or physical object on a Blockchain. This Token is a unique digital identifier and can be quoted on Markets. Its price will then be subject to the law of Supply and Demand.

When we talk about intangible objects, we mean: Intangible Assets, non-tangible goods such as:

• A website
• A database
• A patent
• Intellectual property (copyright, brand name, trademark …)

As you can see, everything can be Tokenized, as long as the physical or immaterial object can be divisible, fractionalized, we will talk about Fungible Assets (money, 1 Kg of Banana, a plot …). On the contrary of Non-Fungible Assets, which cannot be divisible, and are thus unique and irreplaceable objects by another, such as the NFT (Non Fungible Tokens) in the world of Art.

A family jewel is Non-Fungible, a building can also be considered as ‘Non-Fungible’, because it has an individuality, it is unique, it occupies a geographical location of its own, and therefore cannot be replaced identically, even if it can also be split and be converted into several Tokens.

Tokens are all (without exception) issued on a Blockchain (or DLT – Distributed Ledger Technology), which allows:

• DECENTRALIZATION
• To be created by any Internet user
• The segmentation of the Asset, which reduces the barriers to entry of the investment
• To use the characteristics of the Blockchain. Non-falsifiable, recording in an immutable register → Traceability
• Transparency of data, as the Token is registered on a Blockchain which is by nature immutable and transparent. Thus avoiding reselling the same Tokens several times. → Fluidity of transactions
• Short settlement/delivery and exchange times, exchanges possible worldwide, 24/7
• Flexibility, because the Token is programmable, it can be customized (Information such as: ownership, class of Share, Reference Number, or also location, age, temperature …) without limit, by granting it rights, which will be defined at the time of its creation, but once it is registered on the Blockchain, it is no longer possible to modify it
• A better liquidity, ease of exchange on the markets, lower costs, and especially the drastic reduction of intermediaries
• A peer-to-peer exchange without duplication (like a Cryptocurrency), in a decentralized way on Internet
• The use of Smart Contracts, which will be in charge of automating tasks (dividend payments), transactions and regulatory compliance processes (KYC/AML)

Here are some examples to illustrate this.

               A real estate developer wants to build a shopping mall, but instead of soliciting a single Investor who contributes $100 Million, it is easier to find 2000 Investors who contribute $50,000. Each of these 2000 Investors buys 1 Token (or more) which will be expressed in ‘m²’, giving him a right of ownership, as well as a ‘passive’ income calculated on the number of Tokens held and on the rent paid by the shopkeepers of the shopping center (or other benefits, defined at the time of the creation of the Token)

               A Mansion, a Villa, a Manor can be split, and put for sale in the form of Tokens on a specific site, giving the possibility to each investor to become a co-owner of the property, and to make a financial profit, either on the rental of it, or on the proceeds of the resale of its Token(s), which also means the transfer of the property registered in the Token

               A Golf Club, the holders of Tokens (here we can illustrate the Utility Token (ICO) and Security Token (STO)), depending on the type of Token they hold, may entitle him to:

• Tariff reduction (ICO)
• Privileged access to the circuits (ICO)
• Enter the capital of the Company (STO)

               Being a co-owner of a luxury or classic car is one of the most profitable asset classes of the last decade.

               And why not participate in the financing of public infrastructures (hospitals, schools, highways …)

If we want to simplify the principle of Tokens as much as possible, let’s take the case of the game Monopoly, which has its own economy, and whose banknotes are not usable outside the game 

Or let’s take the principle of Casinos. In these places, everything works with a plastic ‘Currency/Token’, it is possible to buy and pay for everything with this ‘Currency’, as long as it stays within the establishment. And just like Tokens in the financial world, this Casino ‘Money’ will then be converted into Fiat Currency/Cash ($/€/¥/£ …) to be used elsewhere (and eventually exchanged for another ‘Money’ from another Casino)

Here are some concrete examples: Tokenization of: 

• Real Estate: Propy, RealT (which records the fastest real estate sale on the Ethereum Blockchain, a house sold in 10 days through 258 Investors)
• Immobilized parcelled: in France in 2019, a particular Hotel estimated at 6.5 Million €, was cut into Tokens on the Ethereum Blockchain, in other countries such as the USA, Germany practice this kind of thing. In Switzerland a project of $ 134 Million has also been Tokenized in Zurich, in order to be sold ‘brick by brick’.
• Commodities: Oil Coin, Ziyen Inc (Oil & Energy)
• Diamonds: Alrosa & Tencent & Everledger, D1 Coin
• Gold: Digix Global, VeraOne
• Art (I’m not talking about NFT platform here): Maecenas
• NFT (Non Fungible Tokens): OpenSea, Rarible, NBA Top Shot …
• National currencies: Tether
• Film industry: Breaker
• Energy: Efforce, WPO
• High-end wine: Signum Crypto Bank, in Switzerland, allows for alternative investments

The world of Tokens, and Tokenization has no limits, we are just at the beginning, and people’s imagination will develop this new field, in ways we cannot yet envision.

Whether it’s a local or an international parallel economy, I’m sure that the coming months and years will bring us some great innovations.

When we know that (according to a Credit Suisse report) the world’s wealth is close to $400,000 billion, we can assume that the Token and Tokenization boom is not going to stop.

The tokenization market is estimated at $1,800 billion in 2019, with KBV Research‘s vision of $5,800 billion by 2026.

Who hasn’t dreamed of becoming a co-owner of an expensive collector’s car, a luxury villa or a masterpiece?

Democratizing investments in real assets is: Everyone can become an investor and shareholder, without having to pay huge sums. This environment is no longer reserved for a restricted group of privileged people such as banks, investment funds, business angels, the ultra-rich, venture capitalists, etc.

It’s time for people to trust the Blockchain and the future of this Technology.

Internet will become in the long run, the largest Asset market in the world, just like internet became the largest Library in the World – Balaji Srinivasan

See you soon

Christophe WILHELM

Bitcoin Meister

© Bitcoin Meister