This blockchain startup is building India’s first DAO, aims to give users decision-making powers
Decision-making across all startups, large organisations, and public entities have almost always been centralised.
This means founders, senior executives, and others from the leadership team with voting rights usually come together to make important business decisions for a particular firm.
In August this year, in a first-of-its-kind move among Indian startups, Bengaluru-based blockchain firm Polygon(previously Matic Network) announced it will build a decentralised autonomous organisation (DAO).
A DAO is essentially an organisation where certain decisions are taken by communities of users or participants, and votes or actions are represented by some form of a blockchain transaction.
Polygon is a protocol and a framework for building and connecting Ethereum-compatible blockchain networks. Forming a DAO for Polygon’s decentralised finance (DeFi) ecosystem is "the next logical step" to aiding collaboration between blockchain-based systems, believe the founders.
A DeFi ecosystem is a network of financial products and services that are decentralised, don’t rely on centralised entities like banks and governments, and make use of blockchain technology.
Multiple blockchain projects, such as SushiSwap, Curve and Aave, are already using Polygon as a scaling solution.
How DAOs are different from traditional organisations
In a video interaction with BlockchainStory, Sandeep Nailwal, Co-founder and COO, Polygon, says:
“So far, the prominent way for humans to interact and communicate has been through centralised institutions such as banks, companies, government bodies, etc, but this has given rise to a number of instances of malpractice and corruption. DAOs are a radical, paradigm shift where everyone in the organisation can participate in decision-making transparently on blockchain.”
He adds that a DAO is simply an entity or group of people where decision-making occurs using “pre codified smart contracts” and the process is “completely transparent.”
Polygon's aim is for the DeFi DAO to attract 100 million users, and for this community to have a say in its ongoing DeFi development.
The DAO initiative ties into Polygon’s ambitions to become an even bigger global project. It already has networks and users across the globe, with separate teams and blockchain projects built on Polygon together forming the Polygon ecosystem.
“Our DeFi ecosystem is pretty big, and we wanted all participants to come together through the DAO and work for its growth. In the future, we also plan to build sub-DAOs for other Polygon ecosystems and eventually link back to the larger Polygon DAO,” Sandeep added.
How Polygon’s DAO will work
At present, if Polygon wants to build and launch a new version of a certain solution, its development team and co-founders take the decision. This works the same way other founders and leadership make decisions in their own startups.
But when the Polygon DAO is implemented, its community will come together to decide and vote on whether to launch a new product or solution.
“Let’s say a DAO has some funds, and there is a prospect for funding a group of developers who are building an application for analysing blocks. The community can come together to vote and allow this. Another example is such a community deciding that whoever uses their platform in the next six months receives a certain reward,” Sandeep explains.
He also shares the example of EIP 1559 - a proposal to reform Ethereum’s fee mechanism which was approved by its community of miners and not by Ethereum’s leadership.
While Polygon’s DeFi ecosystem will have DAO features, the larger, overall part of decision-making at the startup will not immediately switch over to its community. The co-founders want to retain their decision-making power for a few years before eventually handing it over to the community.
Sandeep explains this is because network progress can become slow due to community-driven decision-making.
“We’ve seen some other projects with great communities endure slow decision-making, but, with multiple parties involved, this hampered growth. We want agility and quick decision-making for some time, but beyond that, everything will be handed over to the community. We call it progressive decentralisation,” he says.
The Polygon core team
Building DAOs in India
If Polygon can successfully implement DAO features in its DeFi ecosystem, it could send a message to other blockchain entrepreneurs in India that building a Web 3.0 ecosystem is possible and doable.
“Our contribution can be showing others how to build a Web 3.0 startup and taking it to an exponential growth phase through DAOs, and serve as an example for large Web 3.0 ecosystems to come. This can ensure India doesn’t stay behind other nations in this field of innovation,” he adds.
To execute on this vision across the industry, Sandeep calls for more clarity from the government in its stance on cryptocurrency and blockchain. Recently, the government indicated it could define crypto and compartmentalise them based on their use cases.
“Uncertainty is the primary issue right now. Everyone needs to realise blockchain projects don’t cater to only the Indian crowd. Everything is decentralised and online. As such, it takes only a few hours for entrepreneurs to fly to Singapore or Dubai and set up their business there,” Sandeep adds.
To learn more about Polygon and how it is solving Ethereum's scalability problems, refer to this article.