A Comprehensive Analysis About Financial Status of DAO: Why Do We Say That DAO Is The Future of The Blockchain?

Hillstone Finance
7 min readMar 25, 2022


Hillstone Finance

1. Revolution of DAO

When the entire blockchain industry was still in its infancy a few years ago, many people called out “decentralized governance” and even had rhetoric about replacing the traditional structure of company to the form of autonomous organization.

However, most of those who had vowed to change the traditional struture have been submerged in the flood of the market after a few years. Surprisingly, the concept of decenralized autonomous organization(DAO) has gradually accepted by the market instead.

With the retreating popularity of Chain Games and the Metaverse, many people have begun to change their target to DAO since 2022. There have been more than 300 DAO projects based on the Juicebox, the crowdfunding platform. And the total amount of fundraising by the 372 projects supported on Juicebox has reached 44,194 ETH until February this year.

You must know that Juicebox is a new platform that only launched in July last year. While Dao projects on this platform have absorbed more than one billion worth of cryptocurrency from the market in the short period of half a year after its launch. Therefore, we have to admit that the position of DAO has exceeded the imagination of most people through the data.

In order to understand why DAO is sought after by the market, we must first understand the essential difference between DAO and traditional organizations. Looking back on history, we could find that the concept of traditional organization has always revolved around a governance structure with clear levels and strict management, among which the most typical example is the company in modern society.

There is a very clear hierarchy in most companies. For example: President, CEO, CTO, CMO, Manager and Emloyee. These titles play different roles in the company structure and have feature of the higher the position, the greater the power of the character.

Under this traditional governance structure, the operation, development, planning, and even the owndership of benefit are controlled by the management only. The employees can only participate in company as workers. Although some employees may get a chance to have certain percentage equity of company in early-stage startups and theoretically become part of the management. It is limited for individual employees with smaller stakes to influence over the operation of the company.

Therefore, the form of social organization has been constantly innovating in the direction of more equlity and declassification in recent centuries. Some companies have even begun to introduce open and flat governance systems such as “Holacracy” in recent decades. Through this governance system, employees can form autonomous and symbiotic teams to accomplish tasks and achieve goals, which allows more employees to express their voices under company structure.

While the changes brought about by this governance system are still limited. As the ultimate power and responsibility for making major decisions of the entire company is still concentrated in a single person or a small group of people in the operation of an enterprise. Thus, issues such as how to determine the ownership, hierarchy, division of responsibilities and rights, and operating rules have not been properly resolved.

It was not until in recent years that blockchain technology has given birth to a decentralization revolution so that DAO began to appear, which truly provided a brand-new, decentralized governance structure for social organizations. This complete openess of governance structure provides an excellent solution to the problem of division of responsibilities and rights of the organization, which is one of the main reasons why DAO is sought after the market.

2. DAO+ Blockchain

DAO is originated in the field of blockchain, and for that reason, the governance of DAO seems to be more in line with “decentralized” principle compared with the traditional structure. But only when the “decentralized “ governance is applied to the project can the concept of “the equal right of the governance structure” advocated at the beginning of the DAO realized.

From the current point of view, most DAO organizations are similar to those “Purposive DAO” on Juicebox, which can only serve a certain goal, but cannot realize the long-term operation and governance of a financial system or an organization structure. In that case,Can DAO be truly applied to the governance of financial projects?

The answer is yes. In fact, many projects in the blockchian industry have declared that they will conduct ecological governance in the form of DAO in their white papers. But most development teams only keep the concept of DAO at the theoretical level, while only few projects can establish a logical and complete DAO governance structure, and apply it to the ecological governance of product.

In that way, how does it work when blockchian projects truly combined with DAO? Hillstone Finance, a decenralized platform of asset liquidity, has given a relatively complete answer right now.

Hillstone Finance named its ecological DAO the “Hillstone General Council (HGC)”, and build a relatively complete structure for the organization to participate in, comfirm rights, run governance, and even exit. The initial memebers of HGC are all contributors to the Hillstone ecosystem, including 10 institutional investors like Hillstone Finance Foundation.

In addition, all HGC members must deposit $HSF(Hillstone Ecological Governance Token) into Council Reserve to obtain HGC governance token $Pebble. The $HSF deposited by members will be used for the guarantee process of financial platforms such as Investor or HikePad operated by Hillstone Finance.

HGC members will recieve certain amount of stable token $HSD as compensation for reserving $HSF. When members successfully joined HGC, the value of $HSF and the compensation amount of $HSD will be closely related to the development of Hillstone Finance. Thus, all members of HGC will work together to seek higher development for the Hillstone ecosystem.

All members who are in the HGC will have the following permission :

  • 32% of the platform operation fee (6% of the fund) will be distributed to members according to the number of $Pebbles they owned in Council Reserve.
  • HGC members can vote on cases related to the operations of Hillstone Finance by applying to Council.
  • HGC members have voting rights based on the number of $Pebbles they own.
  • HGC members can be given “Impact Factor” to encourage the participation of specific institutions.

Furthermore, HGC has also established a Standing Committee Mechanism, which will select 100 Standing Committee bodies from HGC members. The selection criteria is that the ranking is determined by multiplying the total value of the “Impact Factor” by the amount of $Pebbles that member held. And the top 100 institutions will be elected as permanent governing bodies successfully so that are more privileged than others.

After becoming the permanent governing body of the Standing Committee, the company will have the following two major privileges:

  • Commodity registration can be applied with Investors or HikePad.
  • 45% of the operating fee can be divided eqully (excluding commodity operating agencies)

Since there are rights and rewards, there must be responsibilities and penalties. The permanent governing body of the committee may be dismissed when having the following situations:

  • When Standing Committee members were squeezed out of the top 100 rank of holding $Pebble
  • When a member is accused by the Hillstone General Council
  • When the Fund product failed to use (the withdrawal amount is less than 99% of the fundraising amount)

In addition, when the Standing Committee is dismissed due to accusation or fail to use the producet, the $HSF deposited will be 100% liquidated as a withrawal fee. And the sum will be used to make up for the loss of HGC or a supplementary fund for the development of community.

Overall, HGC is relatively complete in the design of the entire operation model, and even solves the most difficult problem of confirming the rights for the members under traditional structure. Therefore, we can believe that when more blockchain and financial projects start to build a governance mechanism like HGC, the future of DAO will not be far away.

3. What has Dao changed?

We cannot yet make a very precise definition of DAO as it is an emerging concept. But judging from most of the DAO projects currently on the market, we generally regard it as a decentralized autonomous organization.

Compared with the traditional structure of organization, the innovation of DAO is that its operation rules are written into the contract, which makes the operation of the organization more fair and transparent, so that will not be affected by the central organization.

It is like a company with no CEO, no employees, no entity, no jurisdiction, or no holders, but it still operates through a governance process of decentralized token.

Due to the immutability of blockchain technology, the rules written in the contract code in the DAO cannot be changed. It will function as expected until the DAO members vote to change them through a set process. The appearance of DAO has made many people believe that the future of work is not a company but a DAO.

So why is DAO so attractive? From the HGC mentioned above, the advantages of DAO should mainly focus on the following points:

  • High transparency

Since the balance sheet of DAO is stored on the public blockchain, it is completely transparent at all times, even down to every transaction. This also means that anyone in the DAO can view all actions and money flows, which greatly reduces the risk of corruption and censorship.

  • Easier to globalize

Currently, members of DAO have low barriers to entry and are not restricted by geographic location, so that DAO organizations are generally easier to achieve globalization than enterprises. At the same time, in order to attract more outstanding members, DAO may increase competitiveness through more transparent and member-friendly mechanisms.

  • Decision-making power

DAO allows everyone in the organization to vote on issues they care about and then changes the decision. Therefore, DAO will not ignore or exclude member’s opinions and will ensure that all votes are counted and displayed with a certain degree of transparency.

  • Immutability of rules

In a DAO, we can use code to ensure that the rules apply to everyone without exception. And a set of established rules within the DAO cannot be tampered without the consent of voters to ensure the fairness of governance and the efficiency, transparency of the DAO.

Compared with the Metaverse, NFT, Chain Games and other trackers where the popularity easy come and easy go quickly, the innovative ideas brought by DAO can promote the reform of traditional organization.

The development of social history is the evolutionary history of organizational forms, from slavery in feudal society to corporate system in democratic society, and then to the DAO in the blockchian era. And now, DAO is becoming the latest trend in social organization.



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