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Decentralized Autonomous Organizations (DAO)
A decentralized autonomous organization (DAO) is founded upon and governed by a set of computer-defined rules and blockchain-based smart contracts.
What Are Decentralized Autonomous Organizations (DAO)?
DAOs operate thanks to a combination of various smart contracts, which allow participants to take an equal part in the decision-making processes inside the organization. Decisions made by the community of stakeholders include how the company will use funding and resources. In order for the plans and rules of the organization to be accepted, a percentage of the community needs to be in a consensus. This consensus is achieved through a decentralized, distributed blockchain, and each DAO determines the percentage required for a decision to pass.
The idea behind decentralized autonomous organizations is still undergoing heavy development, as this is a relatively new phenomenon in the business world. An important distinction that has to be pointed out is that DAOs cannot make products or develop code or hardware. However, DAOs can easily hire contractors to perform all these services once the community consensus has approved a hiring contract.
Decentralized autonomous organizations are designed to be completely transparent so that all financial operations performed by the company are visible to all shareholders and the DAO community. The smart contract and underlying code of the DAO are also publicly available. This high level of transparency is essential to the concept of a DAO. Just like the underlying motif behind cryptocurrencies, the idea of a DAO is to surpass the traditional centralized management of a company and create an absolutely transparent organization whose actions and finance are completely public.