For decades, one of the most serious issues with traditional organisations has been the principal-agent problem. This dilemma arises when an individual or entity acts in their own best interests while disregarding moral values, and these decisions have an impact on other stakeholders. When an individual or entity holds a significant number of board seats, for example, they automatically get greater influence than other members. The notion of DAO, which stands for Decentralized Autonomous Organization and is managed by a set of rules defined in smart contracts, was inspired by the fact that digital currencies are decentralised and cannot be controlled by a single body. The members of this organisation are in charge of it.
Because all of a DAO’s actions are recorded on the blockchain, all of its financial records, choices, and any other decision-making elements are transparent. DAOs are typically formed to bring together like-minded people; there is no CEO or manager, and all decisions are made with the permission of the group. DAOs have a treasury that is unavailable to anyone who does not have the group’s consent.
Decentralized: The DAO is decentralized because it works on a decentralized infrastructure, which is a public, permissionless blockchain that cannot be seized by a government or another entity. Because it is not organized hierarchically around executives or stockholders, and it does not consolidate power around them, the DAO is decentralized. A distributed governance structure is required by a DAO, which means that power is exercised collectively throughout the business. DAOs’ uniqueness resides in their capacity to coordinate a huge number of people while avoiding the heaviness of hierarchical organizations.
Autonomous: The most important aspect of DAOs is that their operational rules are programmed, which means that they are applied and enforced automatically when the software’s requirements are met. This sets them apart from traditional organizations, whose rules are suggestions that must be interpreted and followed. Consider an organization whose members want to use a commission of experts to allocate funding to specific projects. In a typical organization, once the experts have offered their opinions, employees must complete a series of tasks, ranging from preparing the commission minutes to submitting the money transfer instructions to the bank, in order to release the funds. As a result of the commission’s approval, monies are transferred immediately in the case of a DAO. Nothing can stop it, not internal stakeholders, not third parties like banks, and not even the government.
Organization: The term “DAO” plainly refers to something else than a traditional “organization” — a social gathering that draws people together and works toward a common goal. Vitalik defines it as “an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do.”
The first DAO to declare itself as such was “The DAO,” which was founded in 2016 to fund Ethereum development projects. The use of a DAO rather than a foundation or venture capital was in keeping with the Ethereum community’s decentralized ideal. Indeed, The DAO was an investment fund in which participants made their own decisions rather than delegating them to specialized managers.
Today, there are many:
🌐 Developer DAO: dOrg, Gitcoin
🌐 Investor DAO: PieDAO, Stacker Ventures
🌐 Legal DAO: The LAO
🌐 NFT-focused DAO: BeetsDAO, Flamingo DAO
🌐 Room sharing DAO: Dtravel
🌐 Social Network DAO: HIVE
We believe that by using blockchain as a coordination tool, we can create a more inclusive model in which anybody can join and projects benefit from both capital and a large community of supporters.