What are DAOs?
Breaking down a Decentralized Autonomous Organization into its three components.
TL;DR
A Decentralized Autonomous Organization (DAO) is a blockchain-based community with a shared balance sheet.
Decentralized implies the organization is built on blockchain infrastructure that is online, global, and un-censorable.
Autonomous implies the organization is self-governing and unregulated, although this does not mean a DAO is lawless.
Organization implies the coordination and collaboration of people around a shared mission. Technology aside, DAOs are no different from traditional organizations.
DAOs serve similar purposes to traditional organizations, but are typically more accessible, transparent, and have lower barriers to entry than corporations and traditional organizations.
Introduction to a DAOs
A DAO stands for a Decentralized Autonomous Organization. Essentially, it’s a community with a shared crypto-wallet.
Decentralized implies the organization is built on blockchain infrastructure that is online, global, and un-censorable.
It runs on a permission-less blockchain that cannot be overtaken by another party.
Unlike businesses, power is not concentrated around traditional stakeholders such as executives or shareholders.
Autonomous implies the organization is self-governing and unregulated, although this does not mean a DAO is lawless.
DAOs can program and enforce their own rules and regulations through software.
The blessing of a government department is not needed, even as it relates to traditional use cases involve commerce and payments.
Organization implies the coordination and collaboration of people around a shared mission. Technology aside, DAOs are no different from traditional organizations.
Membership in DAOs are determined by ownership of a crypto token, issued from a blockchain like Ethereum.
Tokens can grant access to membership, resources, content, voting rights, and other benefits.
Examples of DAOs
ConstitutionDAO was an organization that raised money to purchase on of the last original copies of the United States Constitution in a Sotheby’s auction. The group raised $47 million USD from over a thousand people.
Olympus DAO is a decentralized finance (DeFi) DAO that aims to create a free-floating reserve currency. It has over $700 million USD in its treasury balance. Their mission is to “[build] a community-owned decentralized financial infrastructure to bring more stability and transparency to the world.”
Why are DAOs important?
DAOs serve similar purposes to traditional organizations, but are typically more transparent, accessible, and have lower entry barriers than corporations and traditional organizations.
Benefits of DAOs:
More transparent — all actions and funding are viewable by anyone, reducing the risk of censorship and corruption.
More accessible — anyone can easily join a DAO.
Anonymity — DAO members can build up a track record without revealing their identity.
I imagine we’ll start to see an influx of DAOs forming — some which have more legitimate objectives, and others, which are ‘meme’ projects, purely existing for fun and experimental purposes.
Further Reading
A beginner’s guide to DAOs — Linda Xie
Decentralized autonomous organizations (DAOs) — Ethereum.org
DAOs: Understanding the Basics — Winston & Strawn LLP