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What is the Difference between DAO and Centralized Organizations

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  • The power of decision-making rests in the hands of people.
  • They run automatically with the help of smart contracts.

What is a DAO

DAO is a decentralized autonomous organization. The word decentralized itself explains to us that it is not controlled by a central authority. 

So you must be wondering who might be controlling these organizations. The answer is simple – its control is shared among volunteers. The number of volunteers who can share the responsibility determines the degree of decentralization. 

These people are the token holders. In simple terms, they can be called shareholders (for centralized organizations).

These token holders have the power to cast a vote. 

The Organizational Structure of a Centralized Organization

A centralized organization is one where all the decision-making power rests in the hands of a few people. The decision-making structure followed in these organizations is Top to bottom.

They follow a chain of command. Junior employees have to report to their bosses. The boss says to the divisional head, and the chain goes like this. 

The top of the organization contains a few people. These people are generally MDs, CEOs, and Investors. These people are responsible for significant decision-making in the organization.

The Organisational structure of a Centralised organization looks like this.

                                     Top Management

                                                    |

                                     Mid Management

                                                    |

                                     Lower Management

                                                    |

                                             Workers

The Organizational Structure of a Decentralized Organization

Dao works on smart contracts. The unique part about DAO is that it does not require any human intervention. They can work on their own with the help of smart contracts. 

DAO organizations require funding to function correctly. This funding is received from the investors. In return for funding, investors get tokens. And if someone becomes the token holder of the organization. He gains some voting rights.

The unique thing about DAO is that once a code is written, no matter how much contribution you are giving to the organization. You don’t have any authority to change anything in the organization. Any change can be made only with the permission of all the members of the organization. 

Differences Between DAO and a Centralized Organization

The structure of a centralized organization is like a pyramid. At the top of this pyramid lies top leaders who are responsible for all the major decisions in the organization.

Whereas in a Decentralised organization, each member can interact with the help of smart contracts and take part in the process of decision-making. With the help of voting.

Decentral organizations are Entirely autonomous. It means there is no human intervention in running these organizations. It runs automatically with the help of smart contracts. 

Whereas traditional firms follow a hierarchical system. This system is also called the organizational structure,

The power of decision-making rests in the hands of the token holders. These token holders are the people who make the major decisions in the organization.

Whereas in traditional firms, the decisions are taken by the top authorities.

All the activities that occur in decentralized organizations are 100% transparent. Hence chances of fraud are significantly reduced.

Whereas in the centralized organization, only the parts which are essential to report are reported in front of the law.

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