Opinion Embracing Cryptocurrency Solutions is Imperative for Traditional Business Models

Disclaimer: The opinions expressed in this article are solely those of the author and do not represent the views and opinions of the editorial team at crypto.news.

Blockchain technology holds the potential to go beyond its applications in finance and money. It enables the creation of decentralized protocols that can revolutionize how communities function by enforcing rules of interaction at the protocol level. This shift from social consensus to technical consensus paves the way for protocol-based social interactions that encompass both business and societal governance.

While it may take some time before we see states governed by decentralized autonomous organizations (DAOs), functioning DAOs already exist within crypto communities that establish rules for ecosystem operations. These DAOs will inevitably have an impact on the real world, leading to the emergence of “real-world” businesses based on DAO models.

Currently, we are witnessing the integration of crypto-inspired mechanics into traditional businesses, which can be broadly categorized into three groups:

1) Immutable ledger for record-keeping and automated transactions
Blockchain can serve as an unchangeable ledger that facilitates record-keeping and automates business transactions through smart contracts. For example, in the real estate industry, ownership can be tracked and verified on the blockchain, and property rights can be tokenized as non-fungible tokens (NFTs) and transferred accordingly. Supply chain management and logistics also benefit from blockchain technology, making business flows tamper-proof and automated.

2) Tokenization
Tokenization allows any existing value to be represented on the blockchain. Loyalty rewards programs, for instance, can convert loyalty points into tokens that are distributed to users with each transaction, creating a market for loyalty rewards and attracting more customers. Distributed collaboration networks, such as decentralized physical infrastructure networks (DePINs) and AI networks, reward participants with tokens that can be used within the ecosystem, creating a self-sustaining economy.

3) Distributed governance
Implementing a distributed governance approach to make business decisions and build business structures based on DAO-inspired ideas would be a more comprehensive way of applying blockchain technology to real-world businesses.

To illustrate this, let’s consider a ride-sharing business based on the DAO approach. The ecosystem includes drivers, passengers, payment providers, and infrastructure providers. Payment and infrastructure providers maintain the network, handle payments, and develop the underlying protocol. A smart contract manages driver-passenger matching and tracks the ride flow, with reputation scores recorded on the blockchain. Cash flows directly from passengers to drivers, increasing driver profits, while a portion is routed to the infrastructure provider to sustain the network. Ecosystem governance tokens, earned by drivers and passengers as loyalty rewards, allow all participants to influence system parameters, ensuring a flexible balance of interests.

At Waves, one of the first Layer 1 blockchains launched in 2016, we have always been interested in governance models. In 202, we introduced Power Protocol to advance blockchain governance.

However, the Waves ecosystem faced a stress test triggered by the bankruptcy of FTX and the depegging of the Luna stablecoin. Waves’ algorithmic stablecoin USDN failed to maintain its $1 peg, leading to a sell-off of the Waves token and initiating a slow death spiral. Many products on Waves relied on USDN, causing a contagion effect. Despite efforts to mitigate losses, the only solution was to continue ecosystem development by launching new products and creating value.

This is where the DAO model came into play—the ecosystem funding process became fully decentralized. Waves DAO was launched, allowing Waves network validators and active community members to decide how to allocate part of the inflation earned by validators to further propel the ecosystem and launch new products.

An important aspect of Power Protocol is its slashing mechanics, which provide accountability for the decision-making process. The DAO had established certain key performance indicators (KPIs) before its launch. If the governance process leads to meeting those KPIs, decision-makers are rewarded and their voting power is increased. Otherwise, they are penalized with a reduction in voting power. In my opinion, this is crucial for the real-world application of DAOs. Simple DAO models commonly used in crypto are actually inferior to “off-chain” governance since they lack checks and balances against manipulation and abuse, often relying solely on weighted voting based on token balances, where the group with the most tokens can approve any proposal.

In Waves’ DAO, slashing provided a higher level of accountability for participants and ensured that the DAO focused on its main goal—funding the development process and propelling the ecosystem forward as a whole.

The Waves example demonstrates that DAO models can succeed where centralized models fail. Properly implemented decentralized governance can be more robust and resilient than centralized counterparts. This approach is not limited to blockchain but can transform any business model by making governance more inclusive, setting clear KPIs, and optimizing cash flows.

Read more:
Stirring up a revolution in emerging economies using DAOs | Opinion
Sasha Ivanov
Sasha Ivanov is the founder of Waves. Since 2013, he has been dedicated to integrating blockchain technology into finance and has launched several startups. In 2016, he founded Waves, which has grown into the expansive Waves Tech ecosystem. Sasha has consistently introduced groundbreaking innovations, including the Ride smart contract language within Waves, pioneering decentralized finance solutions, and advanced crypto finance management tools. His leadership also led to the development of Power Protocol in 2023, which shifted all ecosystem projects to DAOs, enabling community governance. In 2024, Ivanov launched Units.Network, an interconnected blockchain ecosystem promoting collaboration and innovation with cross-chain solutions to overcome scalability challenges.