What are DAOs? Decentralized Autonomous Organizations Explained
December 3, 2021
DAOs are an effective and safe way to work with like-minded folks around the globe.
Think of them like an internet-native business that’s collectively owned and managed by its members. They have built-in treasuries that no one has the authority to access without the approval of the group. Decisions are governed by proposals and voting to ensure everyone in the organization has a voice.
There’s no CEO who can authorize spending based on their own whims and no chance of a dodgy CFO manipulating the books. Everything is out in the open and the rules around spending are baked into the DAO via its code.
A comparison:
| DAO | A traditional organisation |
|---|---|
| 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 are a few examples of how you could use a DAO:
- A charity – you can accept membership and donations from anyone in the world and the group can decide how they want to spend donations.
- A freelancer network – you could create a network of contractors who pool their funds for office spaces and software subscriptions.
- 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.
Source: Learn Something New Newsletter
Go check out the “ Learn Something New ” Newsletter.
See Also
- Applications and Use Cases of Blockchain Technology
- What are Smart Contracts? How Do They Work? Smart Contracts Explained
- Invest In Web 3.0 By Buying These 5 Cryptocurrencies Now
- How Does Decentralized Finance Work?
- Decentralized(DeFi) vs Traditional Finance
