The impending whale movement will lead them to DAO-infested seas. What should the market do to meet the increasing expectations of this new generation of crypto investors?
Web3 has rapidly gained popularity in the marketplace, as demonstrated by the nearly $50 billion market capitalisation of Web3 tokens in recent times. One of Web3’s highly intriguing features is its ethos. It is an ecosystem without borders or intermediaries, accessible to anyone from anywhere at any time.
Nevertheless, there is one big problem: there is no system inside decentralised finance (DeFi) that is robust enough just to perform such large orders entirely decentralised, as the use of centralised exchanges violates the decentralised nature of the decentralised autonomous organisation, or DAO. Let’s examine the link among DAOs and decentralised exchanges (DEXs) and how a dedicated DEX may serve DAOs now and in the future.
Nourishing the group
While the prospect of Web3 has brought investors of all levels of income to the space, big investors, or whales, have developed as one of the most dominant sorts of crypto distributors.
Whales have typically been categorised as either important individual traders or organisations. DAOs have recently emerged as an important type of whale trader. These organisations, which operate totally democratically, have been performing huge order trades to produce types of passive income for DAO representatives.
However, there is one major issue: DeFi lacks the infrastructure to fulfil these huge purchases in a totally decentralised manner. They can, of course, use centralised exchanges and pay excessive fees, but doing so undermines the DAO’s decentralised structure.
DAOs need custom-built decentralised exchanges that can execute large order trades in a secure, cost-effective and decentralised way. Let’s unpack the relationship between DAOs and DEXs, and how a specialised DEX could benefit DAOs now and in the future.
The evolving DAO
Decentralised autonomous organisations are no more a conceptual model; they are now becoming widespread. And, like everything else in the blockchain space, they’re developing. Since their inception, DAOs and their application have undergone several modifications. The first DAO, misleadingly named The DAO, launched as a crowdfunding campaign in April 2016 and rapidly became one of the largest in history, generating more than $150 million in Ethereum (ETH).
Ever since, the organisations’ membership criteria and management hierarchies, and also the ways they generate value for their members, have developed. While initial DAOs were primarily used for fundraising, several have recently started non fungible token (NFT) initiatives or made important advances into the market, such as attempting to buy a first-edition print of the Constitution or sports teams utilising NFTs in different ways. Others have chosen a more conventional approach, offering membership revenue shares in exchange for DAO tokens.
Whale trading is becoming one of the fewer ways DAOs operate. Whales are powerful traders who have the potential to control the market with a single investment. They are typical organisations or funds that hold huge amounts of crypto, making them highly dominant in the market. And, like with conventional whales, they usually trade with other big traders, or counter-party, in order to generate income.
DEXs can be vital in providing the necessary infrastructure for DAOs to flourish in the middle of newly obtained traffic and property flows. Assets must be kept safe and protected from centralised entities, and only DEXs can provide the link.
As more DAOs emerge for the new generation of whale dealer, they will rely on DEXs that can handle huge orders in a secure and cost-effective way. While most large-order DeFi traders admit disadvantages such as temporary loss and high prices, DAOs and their whale-trading counterparts would certainly benefit from custom-built DEXs that use methods such as time-weighted average price (TWAP) to perform big orders with zero cost impact — entirely on-chain.
DAOs operating as whale traders have the ability to profoundly influence DeFi in the future. However, without a DEX to meet their objectives, DAOs may never fully realise their capacity and will continue to struggle from the current DeFi restrictions that hamper all whale traders.
Warning: Whales seem to be more common than they look.
Whales have evolved into a kind of trader that can encompass individuals, organisations, and even DAOs. Furthermore, DAOs have swiftly emerged as major actors in the whale trade. It is now clear that whales have moved from single dealers to massive groups of industry innovators.
Why are DAOs so successful at whale trading? For starters, they are extremely mission-driven. Unlike conventional traders who are motivated by a rapid profit, DAOs are driven by organisational objectives. This offers them a wide range of positions and makes them more willing to invest in risky deals that may turn out to be quite profitable.
Furthermore, DAOs are commonly more well-funded than individual traders.
When they feel the price is lower, they can invest their money and use them to buy large amounts of tokens. This allows them to profit significantly when the price suddenly rises.
DAOs are also more open in general than traditional trader organisations. They often freely post their trading strategies and results, building trust between people and enabling others to profit from their successes and failures.
As crypto is becoming more mainstream, ever more individual investors are becoming involved, and whales transitioning from conventional traders to DAOs is inevitable. Rather than dealing with large traders on their own, they are going to DAOs via governance votings to deal on their behalf. However, this transfer will not be without challenges since present facilities are not suitable for DAOs. In order for DAOs to flourish, DeFi platforms must start responding to their particular criteria.
Due to its remarkable incompatibility with traditional centralised financial systems, DAOs can provide a number of benefits to investors such as retail cryptocurrency traders. When dealing with large institutions, this mistrust is reinforced.
DAOs level the playing field by piecing together significant institutional advantages without the centralised component by pooling members’ resources and working together as a community.
The most significant difficulty that DAOs are now facing is an inadequate infrastructure to sustain their expansion. The most obvious example is that ConstitutionDAO must deposit all of the funds into one individual’s bank account in order to make the payment to Sotheby’s.
Such constraints make scaling DAOs challenging, and platforms must evolve to meet the rising demands of the DeFi market and DAO infrastructure. There is a slim possibility that DAOs will become a big force in the Web3 world when they discover their niche.
