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Integrating crypto solutions into traditional business models is a must
Disclosure: The views and opinions expressed herein are solely those of the author and do not represent the views and opinions of the crypto.news editorial.
The promise of blockchain technology extends beyond purely monetary and financial applications. Blockchain enables the creation of decentralized protocols that can revolutionize the way communities operate by imposing rules of interaction between different actors at the protocol level. This shift replaces social consensus with technical consensus, fostering social interactions based on protocols that encompass corporate and social governance.
Although we may not see states governed by decentralized autonomous organizations, or DAO, in the near future; however, functioning DAOs already operate crypto communities that set the rules for ecosystem operations. These configurations will inevitably influence the real world, leading to the emergence of “real world” businesses based on DAO models.
Currently, we can see the integration of cryptocurrency-inspired mechanisms into mainstream activities, which can be classified into three high-level groups:
1) Immutable ledger for record keeping and automated transactions
Blockchain can serve as an immutable ledger to facilitate recordkeeping and automate business transactions through smart contracts. A great example is real estate, where ownership can be tracked and verified on-chain and ownership rights can be tokenized as NFTs and transferred accordingly. Supply chain management and logistics also benefit from blockchain, making business flows tamper-proof and automated.
2) Tokenization
Tokenization allows you to represent any value that exists on the blockchain. Loyalty rewards programs, for example, can turn loyalty points into tokens distributed to users with each translation, creating a market for loyalty rewards and attracting more customers. Distributed collaboration networks, how decentralized physical infrastructure networks (DePIN) 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 making business decisions and creating business structures based on DAO-inspired ideas would represent a more holistic approach to applying blockchain technology to real-world business.
To illustrate, let’s consider a ride-sharing business based on the DAO approach. The ecosystem includes drivers, passengers, payment service providers and infrastructure providers. Payment and infrastructure providers maintain the network, manage payments and develop the underlying protocol. A smart contract manages driver-passenger matching and tracks the flow of the ride, with reputation scores recorded on-chain. The cash flow goes directly from passengers to drivers, increasing their profits, while a portion is directed to the infrastructure provider to support the network. Ecosystem governance tokens, earned by drivers and passengers as loyalty rewards, allow all actors to influence system parameters, balancing interests flexibly.
We at Waves, one of the first L1 blockchains launched in 2016, have always been interested in governance models. In 2022, we launched Power Protocol to advance blockchain governance.
However, the Waves ecosystem faces a stress test triggered by the failure of FTX and the depeg of the Luna stablecoin. Waves’ algorithmic stablecoin, USDN, failed to maintain its $1 peg, leading to a sell-off of the Waves token and starting a slow death spiral. Many products on Waves were dependent on USDN, causing a contagion effect. Despite personal efforts to mitigate losses, the only solution was to continue the development of the ecosystem by launching new products and creating value.
This is where the DAO model came in: the ecosystem financing process became completely decentralized. Waves DAO was launched, where validators from the Waves network and active community members decided how to spend part of the inflation earned by validators to further push the ecosystem and launch new products.
An important part of the Power Protocol is the slashing mechanic. Provides accountability for decision making. The DAO had established some KPIs before its launch; if the governance process leads to the achievement of these KPIs, decision makers are rewarded and their voting power increases; otherwise, they are cut off and their voting power is taken away. In my opinion, this is crucial for the real-world application of DAOs; the simple DAO models usually used in cryptocurrencies are actually worse than “off-chain” governance as they have no checks and balances against manipulation and abuse and usually only make weighted votes based on token balances, where the group of Holders with the largest number of tokens can have any proposal approved by the DAO.
In Waves’ DAO, the cut provided a higher level of accountability for DAO participants and made the DAO focus on its primary goal: funding the development process and advancing the ecosystem as a whole.
The Waves example shows 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.
Sasha Ivanov
Sasha Ivanov is the founder of Waves. Since 2013, he has focused on integrating blockchain technology into finance, launching several startups. In 2016, he founded Waves, which has grown into the vast 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 the Power Protocol in 2023, which moved all ecosystem projects to DAOs, enabling community governance. In 2024, Ivanov launched Units.Network, an interconnected blockchain ecosystem that fosters collaboration and innovation with cross-chain solutions, overcoming scalability challenges.