A DAO, or decentralized autonomous organization, is an organization that runs on smart contracts – which are essentially a set of coded instructions that automatically execute when predetermined criteria are met. These smart contracts then specify the organization’s rules. Once the rules are live, it becomes impossible to change them until the entire group votes to do so. This group makes decisions together, and even the payments are only passed with votes. There are mainly three types of DAO membership models, and this blog takes an in-depth look at them. 

Membership Models for a DAO 

1. Token-Based Membership 

Token-based membership is one of the most prominent types of DAO membership. It’s a membership method where anyone who wishes to be a part of the DAO needs to buy tokens, replenishing DAO’s treasury. This membership also allows people with tokens to participate in the voting process, also making treasury management of DAO a collective responsibility of all members of the DAO, not having the burden on shoulders of a single person. This type of DAO membership can be seen as an incentive for people to purchase their own digital tokens, giving them access to the benefits of an organization like this one.

The tokens for such membership are distributed via permissionless decentralized exchanges. MakerDAO is a famous example of a token-based membership where anyone can buy voting power in the Maker protocol’s future. This way, the community can have a say in what happens with the Maker protocol, and everyone has an equal opportunity to participate.

2. Share-Based Membership

Share-based tokens DAOs are more permissioned than their counterparts. This means that any member can submit a proposal to join the DAO by offering value to the organization through tokens or work. The shareholders in this system represent the voting power and ownership. Members in DAOs who follow a share-based system are allowed to leave at any time with their shares. 

MolochDAO is an organization that funds Ethereum projects. It uses share-based membership, meaning that to become a member, you must first put forward a proposal that will be assessed for expertise and capital. This is to ensure that the organization only accepts members who are able to contribute and add value.

3. Reputation-Based Membership

In a reputation-based membership, such as DXDAO, users earn voting power through their participation in the DAO. This system ensures that everyone is participating and also that no one can simply buy their way into the organization. Holographic consensus is used to manage and coordinate funds so that everyone has an equal say regardless of how much money they have contributed. This system of governance makes it impossible for anyone to game the system or take advantage of others.

Final Words

DAO Memberships are essentially a platform where the entire community comes together and benefits from the profits made by the organization. It allows people to bond together since it doesn’t have any central governing authority. You also open your gates for some creative opportunities by buying some tokens. The different DAO membership models will help you understand this crypto movement with human collaboration/

Author Bio:

Akanksha Malik writes to share her knowledge on crypto trends, investments, and NFT opportunities with her readers so they can stay updated! She works as a digital strategist and content creator for Mesha — an online investing platform that serves as a club where investors from around the globe can meet new fellow investors, compete in money challenges, and invest in NFTs & crypto. Besides finance and fintech, Akanksha loves architecture and discovering cuisines of new places she travels to.