What is a DAO?
A Decentralized Autonomous Organization (DAO) is a group of people who come together without a central leader or company dictating any of the decisions. They are built on a blockchain using smart contracts (digital one-of-one agreements). You can think of it as a publicly-owned company that is governed by it’s investors. Instead of shares, they do have governance tokens which are cryptocurrencies.
DAOs allow us to work with like-minded folks around the globe without trusting a benevolent leader to manage the funds or operations. There is no CEO who can spend funds on a whim or CFO who can manipulate the books. Instead, blockchain-based rules baked into the code define how the organization works and how funds are spent.
| DAO | A traditional organization |
|---|---|
| Usually flat, and fully democratized. | Usually hierarchical. |
| Voting required by members for any changes to be implemented. | Depending on structure, changes can be demanded from a sole party, or voting may be offered. |
| Votes tallied, and outcome implemented automatically without trusted intermediary. | If voting allowed, votes are tallied internally, and outcome of voting must be handled manually. |
| Services offered are handled automatically in a decentralized manner (for example distribution of philanthropic funds). | Requires human handling, or centrally controlled automation, prone to manipulation. |
| All activity is transparent and fully public. | Activity is typically private, and limited to the public. |
DAO Examples
To help this make more sense, here's a few examples of how you could use a DAO:
- A charity – you could accept donations from anyone in the world and vote on which causes to fund.
- Collective ownership – you could purchase physical or digital assets and members can vote on how to use them.
- Ventures and grants – you could create a venture fund that pools investment capital and votes on ventures to back. Repaid money could later be redistributed amongst DAO-members.