Decentralized Autonomous Cooperative in Nepal, Is it possible with blockchain?
Published: 2024-05-17 08:18:19

#### Disclaimer
_The information provided in this article about blockchain and cryptocurrency is intended for educational purposes only and should not be used as legal advice. Please note that cryptocurrency trading and mining are illegal in Nepal as per the Nepal Rastra Bank's regulations. Engaging in such activities can lead to significant legal consequences, including potential imprisonment._

## Introduction

Imagine a future where Nepal's cooperatives, free from fraud and mismanagement, thriving in an environment of complete transparency and efficiency. For too long, cooperative scams have eroded the sector, leading to devastating financial losses for hardworking members. But, what if there was a way to not only restore this trust but also propel cooperatives into a new era of innovation and fairness?


Enter the world of blockchain technology and Decentralized Autonomous Organizations (DAOs). By harnessing the power of decentralization, transparency, and automated governance, cooperatives in Nepal can transform their operations, ensuring that every transaction is transparent, every decision is democratic, and every member's voice is heard. 

## 1. Define the DAO Structure and Governance

### Governance Model:

**Token-Based Voting:** Issue tokens to members representing their stake and voting power. Each member’s voting power can be proportional to their contributions or set equally, depending on the cooperative’s principles.
**Proposals and Voting:** Establish mechanisms for submitting proposals and voting. Smart contracts on the blockchain can automate proposal submission, voting processes, and implementation of decisions based on the outcomes.

## 2. Develop Smart Contracts

### Automated Rules and Agreements:

**Membership Rules:** Smart contracts can enforce rules about membership, such as entry and exit conditions, member contributions, and distribution of benefits.
**Decision-Making:** Implement smart contracts to manage voting processes, ensuring transparency and immutability of decisions.
**Distribution of Profits:** Automate the distribution of profits or dividends to members based on predefined rules encoded in smart contracts.

## 3. Choose a Blockchain Platform

### Blockchain Selection:

**Ethereum:** Popular for its smart contract capabilities and large developer community.
**Solana:** Another option with different advantages like lower fees or higher transaction speeds.

## 4. Token Issuance

### Create Tokens:

**Utility Tokens:** Represent membership and voting rights.
**Governance Tokens:** Used specifically for voting on proposals and governance issues.

## 5. Implement Decentralized Identity (DID)

### Member Verification:

Use decentralized identity solutions to verify and manage member identities while maintaining privacy and security.

## 6. Develop a User Interface

### User-Friendly Access:

Create a decentralized application (**dApp**) to provide members with an intuitive interface to interact with the DAO, including submitting proposals, voting, and tracking decisions.

## 7. Integrate Financial Management

### Decentralized Finance (DeFi):

Utilize DeFi solutions for managing cooperative finances, such as liquidity pools, decentralized lending, and borrowing, and automated financial reporting.

## 8. Educate Members

### Training and Onboarding:

Educate members about how the DAO operates, how to use the dApp, and the importance of secure practices like managing private keys and understanding smart contract functions.

## 9. Transition Plan

### Phased Implementation:

Gradually transition from the traditional cooperative model to a DAO. Start with simple governance tasks and progressively move more functions onto the blockchain.

## Example Workflow

### Proposal Submission:

- A member submits a proposal via the dApp.
- The proposal is recorded on the blockchain.

### Voting Process:

- Members are notified of the new proposal.
- Voting tokens are used to cast votes through the dApp.
- Votes are recorded and verified on the blockchain.

### Automated Execution:

- Once voting ends, the smart contract automatically executes the decision, such as releasing funds, altering membership rules, or initiating a project.

### Profit Distribution:

- Profits are distributed automatically based on smart contract rules, ensuring transparency and fairness.

## Benefits
**Transparency:** All actions and decisions are recorded on the blockchain, providing a transparent and immutable record.
**Decentralization:** Reduces the risk of central authority abuse and aligns with cooperative principles of democratic control.
**Efficiency:** Automates processes, reducing administrative overhead and human error.
**Global Access**: Facilitates participation from members across different geographical locations.

## Challenges
**Technical Complexity:** Requires significant technical expertise to set up and maintain.
**Regulatory Compliance:** Must navigate legal and regulatory requirements, which can vary by jurisdiction.
**Member Adoption:** Ensuring all members are comfortable and capable of using the new system.

By carefully planning and executing these steps, a cooperative in Nepal can successfully transition to a DAO, leveraging blockchain technology to enhance transparency, efficiency, and member engagement. This transformation addresses the critical issues of mismanagement and fraud, restoring trust and integrity in the cooperative model. By modernizing their operations, cooperatives can uphold the principles of democratic control and community benefit, ensuring that members interests are protected and promoted.