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How decentralized companies can dominate Web3

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Decentralized autonomous organizations — known as a DAO for short — have become a mainstay of the crypto world.

The rationale behind DAO is to enable companies and organizations to fully function without the need for a hierarchical management structure. As this Cointelegraph guide explained, it’s like a vending machine delivering a snack in exchange for a bundle of coins — and then automatically using those funds to reorder stock. There’s no need for human involvement in keeping the machine running, as all of the processes it needs to function are pre-written into code.

Beyond this real-world example, the possibilities for DAO are endless. There’s just one issue: Some believe that the potential and promise that this technology offers aren’t being fully exploited. Many DApps only use DAO for governance purposes — enabling community members to submit proposals and cast votes.

A growing band of crypto enthusiasts believe that DAO will play a starring role as the world makes the shift to Web3 — paving the way for fully decentralized companies that can secure the same levels of significance and influence that centralized tech giants currently enjoy in the Web2 world. The rise of the value internet will require a new style of organization where decentralized apps are managed by community members.

But if this is going to be achieved, the DAO needs to evolve. Technical limitations need to be addressed and removed to achieve mass adoption.

Beyond voting

MetisDAO believes that decentralized autonomous organizations should provide far more than a voting mechanism for members of the community. Instead, it argues that the DAO should help manage their collaborations — enabling everyone to contribute to a project’s growth and receive incentives based on their hard work.

But at the moment, the structure of the DAO means that it’s ill-suited to large-scale applications. There’s a heavy reliance on smart contracts, and the programming language isn’t always ideal for executing complex business logic. The focus on voting is also impractical for a big, decentralized company, and can distract from the bigger picture. Major businesses don’t have board meetings every day to vote on operational matters — instead, they have a framework to ensure that daily operations are under control. DAO needs the same.

From a technical perspective, change is also required. Layer 1 solutions are marred by high gas costs, low levels of efficiency, and a lack of on-chain tools that can support the management of a DAO. Evolution is also needed to ensure that members of a community can trust each other easily.

Making decentralized companies happen

MetisDAO features a core mechanism for building trust and holding people accountable. Known as Optimistic Governance, this approach aims to unite community members through the use of staking bonds, which ensures that participants are financially committed and motivated to work in the best interests of a project. Collaborators who fail to fulfill promises could end up being penalized through a suite of pullback mechanisms.

Decentralized companies can be established in three simple steps — and the embedded trust mechanism means that they can collaborate with anyone. Over time, users can accumulate Reputation Power, a decentralized business credentials system that’s based on collaboration history recorded on the blockchain. This means every wallet address can be evaluated so users can ascertain whether they are trustworthy or not.

Metis is also a Layer 2 solution (by hard-forking Optimistic Rollup) that serves as a sidechain on top of the Ethereum mainchain. This paves the way for greatly increased scalability and dramatically lower gas costs. Most transactions end up happening in this sidechain, and are rolled up into one package when communication needs to be made with the mainchain. Better still, a plethora of microservices and tools can be developed and deployed through this infrastructure.

The project also offers more functions for DAO management — and already, community members have developed task management, knowledge management and event management. This is coupled with a simple interface that Web2 users will find easy to understand, and straightforward APIs that pave the way for integration with other DApps.

In time, Metis is hoping to ensure that the DAO can serve as more than a shell structure that doesn’t encourage value creation. Reform is needed for effective governance. Many projects are home to token holders who are determined to pursue arbitrage opportunities — people who have little to no intent of voting because they don’t care about what’s going on in the community.

Metis just finished its seed round fundraising and is set to officially launch in April — and private fundraising is scheduled to conclude in the same month. This will pave the way for integration with Web2, DeFi and NFT communities. Integrating with DeFi protocols will enable community members to operate and manage their funds collectively and avoid being exploited by whales. Metis tokens are going to be listed on exchanges before June, and a range of additional microservice tools will launch. And before the summer, decentralized companies will be able to launch their very own tokens.

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.



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DeFi summer 2.0? ‘Gen 2’ tokens on a tear amid wider market slump

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As some brand-name decentralized finance (DeFi) tokens sputter, a crop of new projects have emerged that are catching strong bids on the back of aggressive yield farming programs, generous airdrops, and significant technical advances. 

It’s a set of outlier projects pushing forward on both price and fundamentals that has led one crypto analyst, eGirl Capital’s mewny, to brand them as DeFi’s “Gen 2.”

Mewny, who in an interview with Cointelegraph pitched eGirl Capital as “an org that takes itself as a very serious joke,” says that Gen 2 tokens have garnered attention due to their well-cultivated communities and clever token distribution models — both of which lead to a “recursive” price-and-sentiment loop. 

“I think in terms of market interest it’s more about seeking novelty and narrative at this stage in the cycle. Fundamental analysis will be more important when the market cools off and utility is the only backstop to valuations. Hot narratives tend to trend around grassroots projects that have carved out a category for themselves in the market,” they said.

While investors might be eager to ape into these fast-rising new tokens, it’s worth asking what the projects are doing, whether they’re sustainable, and if not how much farther they have to run.

Pumpamentals or fundamentals?

The Gen 2 phenomena echoes the “DeFi summer” of last year, filled with “DeFi stimulus check” airdrops, fat farming APYs, and soaring token prices — as well as a harrowing spate of hacks, heists, and rugpulls. 

However, mewny says that there’s a population of investors that emerged from that period continuously looking for technical progress as opposed to shooting stars. 

“There are less quick “me too” projects in defi. An investor may think that those projects never attracted much liquidity in the first place but they overestimate the wisdom of the market if that’s the case. They did and do pull liquidity, especially from participants who felt priced out or late to the first movers.This has given the floor to legitimate projects that have not stopped building despite the market’s shift in focus. ”

One such Gen 2 riser pulling liquidity is Inverse Finance. After the launch of a yield farming program for a forthcoming synthetic stablecoin protocol, the Inverse Finance DAO narrowly voted to make the INV governance token tradable. As a result, the formerly valueless token airdrop of 80 INV is now priced at over $100,000, likely the most lucrative airdrop in Defi history. 

Another Gen 2 star is Alchemix — one of eGirl Capital’s first announced investments. Alchemix’s protocol also centers on a synthetic stablecoin, alUSD, but generates the stablecoin via collateral deposited into Yearn.Finance’s yield-bearing vaults. The result is a token-based stablecoin loan that pays for itself — a new model that mewny things could become a standard.

“eGirl thinks trading yield-bearing interest will be an important primitive in DeFi. Quantifying and valuing future yield unlocks a lot of usable value that can be reinvested in the market,” they said.

The wider markets appears to agree with eGirl’s thesis, as Alchemix recently announced that the protocol has eclipsed half a billion in total value locked:

Staying power?

By contrast, governance tokens for many of the top names in DeFi, such as Aave and Yearn.Finance, are in the red on a 30-day basis. But even with flagship names stalling out, DeFi’s closely-watched aggregate TVL figure is up on the month, rising over $8.4 billion to $56.8 billion per DeFi Llama — progress carried in part on the back of Gen 2 projects. 

The comparatively wrinkled, desiccated dinosaurs of DeFi may have some signs of life left in them, however. Multiple major projects have significant updates in the works, including Uniswap’s version 3, Sushiswap’s Bentobox lending platform, a liquidity mining proposal working through Aave’s governance process, and Balancer’s version 2.

These developments could mean that DeFi’s “Gen 2” phenomena is simply a temporary, intra-sector rotation, and that the “majors” are soon to roar back. It would be a predictable move in mewny’s view, who says “every defi protocol needs at least 1 bear market to prove technical soundness.”

What’s more, according to mewny some of the signs of market irrationality around both Gen 2 tokens as well as the wider DeFi space — such as triple and even quadruple-digit farming yields — may be gone sooner rather than later.

“I don’t think it’s sustainable for any project in regular market conditions. We are not in regular conditions at the moment. Speculators have propped up potentially unsustainable DeFi protocols for a while now.”