What is DAO?
Essentially, many of us dream of organizational structures without hierarchical management. One of the best explanations of DAO was by an author of Cointelegraph:
“Imagine a vending machine that not only takes money from you and gives you a snack in return but also uses that money to automatically re-order the goods. This machine also orders cleaning services and pays its rent all by itself. Moreover, as you put money into that machine, you and its other users have a say in what snacks it will order and how often should it be cleaned. It has no managers, all of those processes were pre-written into code.”
Governed By Consensus
DAO, or a “Decentralized Autonomous Organization, is governed by its members through a consensus. Consensus refers to the majority of stakeholders agreeing upon deciding to move or withdraw funds. The organization’s management is according to rules written into a set of smart contracts. DOAs also require organizations to utilize tokens to reward activities within it. A DAO’s investor has the right to vote in the decision making process. For security purposes, a DAO should become independent and autonomous from its creator.
The idea of DAO arose out of the successful release of Bitcoin back in 2009. Inventors began to imagine a world without middle-men. Everything would take place autonomously. However, there are concerns that once created, the smart contract underpinning the DAO would be impossible to change. Say there was a bug in the contract, there would be no way to fix it. It’s why some are still wary of creating autonomous code that cannot be reversed.
DAO ist Not DAO
Beware: DAO, a type of organization, is not the same as “The DAO,” the name adopted by one of the first notable implementations on the Ethereum smart-contract network that failed miserably due to a mistake in its coding. Today’s popular DAOs include Digix and MakerDAO that exchange tokens for gold and USD. DAOStack is another operation system for collective intelligence that has allowed independent organization to unite and create launch operations, companies, and non-profits since its launch in 2018.
DAOs cannot build products, write code, or even develop any sort of software or hardware. DAOs, in general, are an efficient way of ensuring democracy by making use of cryptographic tech. Stakeholders get to vote to add rules, change existing rules, and so forth. The greatest benefit of a DAO is its efficient way of running an organization without the need of an intermediary, and without the associated inefficiencies that come with it. Applied to crowd sales or IPOs, ideas are able to get off the ground in the shortest amount of time with the most efficiency. In the future, DAOs will make business models that were previously impossible – possible, and hopefully lead us to the possibilities of all manners of technically “structured” organizations. This may include decentralized hedge funds, devolved governments, decentralized public utility providers, and more.