At the heart of DAOs are smart contracts, self-executing agreements that operate on a blockchain. It’s a computer code that automatically completes programmed functions if predetermined conditions or terms are met.
Image source: Theblockchaintest.com
In this article, we delve into the role of smart contract platforms in DAO operations. We explore popular platforms, highlight their features, and explain how to choose one.
This introduction will provide a beginner-friendly overview of smart contracts, how smart contract platforms work, and their role in Decentralized Autonomous Organizations (DAOs).
- What are smart contracts? These are digital agreements that are stored and executed on a blockchain. They are self-executing (not controlled by users) and operate automatically when specific conditions defined within the contract’s code are met.
- What are smart contract platforms? These decentralized digital platforms are a foundation for deploying decentralized applications (DApps) on the blockchain. These platforms enable the creation and execution of tamper-proof programs known as smart contracts.
- How do smart contract platforms work? Developers write the code for smart contracts using programming languages specifically tailored for the platform, such as Solidity for Ethereum or Rust for Solana. Users interact with smart contracts by sending transactions to the contract’s address, triggering the execution of predefined functions or actions.
Most popular smart contracts for DAOs
First, let’s clarify the common types of smart contracts used by DAO projects and what they offer.
Stats show that Etherium is the most popular blockchain platform technology used by many DAOs, but there are others, e.g., Binance Smart Chain, Solana, and Fantom (Research done based on a pool of 550 DAOs, source).
Ethereum, the pioneer of smart contract platforms, has contributed to DAOs’ growth and significantly shaped the decentralized landscape.
Here’s an overview of the Ethereum blockchain system:
- Ethereum is an open-source blockchain platform that enables the creation of decentralized applications (DApps) and the execution of smart contracts.
- Ethereum’s native cryptocurrency, Ether (ETH), fuels executing transactions and running smart contracts on the network. ETH is also used to get funding for different projects.
- Ethereum’s smart contracts are written in a programming language called Solidity, which allows developers to define the rules and logic of their applications.
- Smart contracts on Ethereum are executed by the Ethereum Virtual Machine (EVM), a runtime environment designed to process and validate transactions.
Prominent DAOs built on Ethereum
Ethereum has been a breeding ground for innovative and influential DAOs. Here are some notable examples:
- MakerDAO: Known for its stablecoin, Dai, MakerDAO operates as a decentralized lending platform, allowing users to generate Dai by locking collateral.
- Aave: A decentralized lending and borrowing protocol enables users to lend and borrow various digital assets.
» Interesting read: Discover the biggest DAO hack
Binance Smart Chain (BSC) is a blockchain platform developed by the cryptocurrency exchange Binance.
Here’s an overview of the BSC blockchain system:
- BSC is a parallel blockchain to Binance Chain, providing developers with a more programmable and flexible environment.
- It utilizes a delegated proof-of-stake (DPoS) consensus mechanism, offering faster transaction confirmation times and lower fees than Ethereum.
- Smart contracts on BSC are written in Solidity, the same programming language used in Ethereum.
- Binance Smart Chain is compatible with the Ethereum Virtual Machine (EVM), enabling developers to deploy existing Ethereum smart contracts onto BSC quickly.
- Unlike Ethereum, BSC generally offers lower transaction fees, making it more cost-effective for small-scale transactions within DAOs.
Examples of projects built on BSC
Binance Smart Chain has attracted several notable DAOs in its ecosystem:
- PancakeSwap: A popular decentralized exchange (DEX) on BSC, PancakeSwap allows users to swap tokens and participate in yield farming.
- Venus: A decentralized lending and borrowing platform on BSC, Venus enables users to earn interest on their digital assets by supplying them as collateral.
Solana is a high-performance blockchain platform designed for decentralized applications and crypto-native solutions.
Here’s an overview of the Solana blockchain system:
- Solana leverages a unique combination of technologies, including a proof-of-history (PoH) consensus mechanism and a high-speed networking stack, to achieve high throughput and low latency.
- It aims to provide a scalable infrastructure capable of processing thousands of transactions per second.
- Solana uses the Rust programming language and a custom programming model called Solana Program Library (SPL) for developing smart contracts.
- Smart contracts on Solana are executed through Solana’s runtime called Solana Runtime for Native Execution (SolRNE).
Examples of projects built on Solana
Solana has seen the emergence of various exciting DAO projects:
- Raydium: A decentralized exchange and automated market maker on Solana, Raydium allows users to trade tokens and provide liquidity.
- Mango Markets: A decentralized trading platform on Solana, enabling users to trade tokens and earn yield.
Fantom is a fast, scalable, secure blockchain platform for decentralized applications and enterprise-level solutions.
Here’s an overview of the Fantom blockchain system:
- Fantom utilizes a directed acyclic graph (DAG) consensus mechanism called Lachesis, which enables high throughput and low transaction confirmation times.
- It aims to provide a reliable infrastructure for applications that require high-speed and cost-effective transactions.
- Smart contracts on Fantom are written in Solidity, making it easy for Ethereum developers to port their projects to the Fantom ecosystem.
- Fantom Virtual Machine (FVM) executes smart contracts on the network.
Example of projects built on Fantom
Fantom has attracted several notable DAO projects:
- SpiritSwap: A decentralized exchange (DEX) allows users to swap tokens and provide liquidity while earning rewards.
- Scream crypto: A yield farming protocol on Fantom enables users to earn rewards by staking their tokens.
MultiversX, formerly Elrond, is a high-performance blockchain platform that aims to provide fast and cost-effective solutions for decentralized applications.
Here’s an overview of the MultiversX blockchain system:
- MultiversX employs a secure proof-of-stake (PoS) consensus mechanism called Adaptive State Sharding, which enables parallel processing and scalability.
- It focuses on providing a user-friendly experience and seamless integration with existing systems.
- Smart contracts on MultiversX are written in Rust and utilize the Elrond Standard Token (ESDT) as the base token standard.
Examples of projects built on MultiversX
MultiversX has witnessed the growth of several noteworthy DAO projects:
- Xexchange (Maiar): A digital wallet and ecosystem built on MultiversX.
- ZoidPay: A crypto liquidity platform enabling instant card issuance for purchases at any merchant & driving adoption to web 3.0 financial services.
Polygon, formerly Matic Network, is a layer-2 scaling solution for Ethereum, providing an ecosystem for building and deploying scalable decentralized applications.
Here’s an overview of the Polygon platform:
- Polygon offers a framework for creating interconnected blockchain networks, providing scalability while leveraging Ethereum’s security and compatibility.
- It addresses Ethereum’s scalability limitations and high transaction fees by enabling fast and cost-effective transactions.
- Smart contracts on Polygon are written in Solidity, making it compatible with Ethereum’s existing codebase and developer tools.
- Polygon bridges Ethereum, allowing easy migration of Ethereum-based smart contracts to the Polygon network.
Examples of projects built on Polygon
Polygon has attracted various influential DAO projects in its ecosystem:
- Aavegotchi: A decentralized finance (DeFi) project on Polygon that combines NFTs (non-fungible tokens) with yield farming mechanics, allowing users to interact with digital collectibles.
- QuickSwap: A decentralized exchange (DEX) on Polygon, providing users with fast and low-cost token swaps and liquidity provision opportunities.
Neo, often called “Chinese Ethereum,” is a blockchain platform that aims to enable a smart economy by combining digital assets, digital identity, and smart contracts.
Here’s an overview of the NEO platform:
- Neo was launched in 2014 as AntShares and rebranded to Neo in 2017, positioning itself as a scalable platform for building decentralized applications.
- It focuses on regulatory compliance, digital identity, and providing an environment for developers to create robust smart contracts.
- Smart contracts on Neo are written in various programming languages, including C#, Java, and Python, offering flexibility for developers.
- NeoVM (Neo Virtual Machine) executes smart contracts on the Neo network.
Examples of projects built on Neo
Neo has seen the emergence of notable DAO projects in its ecosystem:
- Flamingo Finance: Flamingo Finance is a decentralized finance protocol on Neo, offering various DeFi services such as liquidity provision, yield farming, and asset swapping.
- Nash: Nash is a decentralized exchange on Neo that aims to provide a non-custodial and user-friendly trading experience for digital assets.
Other Smart Contract Platforms
More platforms are available on the market today, and some are at the early stage of development.
- Cardano is a blockchain platform that aims to provide a secure and sustainable infrastructure for developing decentralized applications and smart contracts.
- Avalanche is a scalable blockchain platform that prioritizes speed and high throughput, enabling the creation of decentralized applications and smart contracts.
- Tezos is a self-amending blockchain platform that aims to provide a governance model allowing on-chain decision-making and the platform’s evolution.
Choosing a smart contract platform for a DAO
When selecting a smart contract, there are several key considerations to keep in mind:
- Scalability: Evaluate the platform’s ability to handle transactions to support the needs of the DAO. Look for solutions that offer scalability mechanisms like layer 2 solutions or sharding to accommodate future growth.
- Security and auditing: Prioritize platforms with robust security measures, including code audits, bug bounties, and a track record of promptly addressing vulnerabilities.
- Governance mechanisms: Assess the governance model of the platform to ensure it aligns with the DAO’s governance requirements.
- Cross-chain compatibility: Consider whether the platform supports interoperability and cross-chain features with other blockchains, allowing the DAO to interact with various ecosystems.
- Developer ecosystem and tooling: Evaluate the platform’s developer ecosystem, including the availability of programming languages, development tools, and documentation.
- Community support and adoption: Consider the level of community support and adoption, as a strong community can provide valuable resources, partnerships, and collaboration opportunities.
Note: It’s crucial to conduct thorough research and stay updated on the latest developments in the crypto space to ensure accurate information for your article.
In conclusion, smart contract platforms are crucial in enabling the functionality and operations of decentralized autonomous organizations (DAOs).
Ethereum, as the pioneer in the space, has established itself as a dominant platform for building DAOs, offering a robust ecosystem and widespread adoption. However, other platforms have emerged as strong contenders, each bringing unique features and advantages.