Seriously, what is DAO?
So. Let’s talk about DAO, baby.
Another day, another phenomenon fighting for position in the crypto space. But what does it actually mean?
Take my hand and follow me DAOn the rabbit hole.
What is a DAO?
Well, it stands for Decentralised Autonomous Organisation. Let’s break it down further. Decentralised means not controlled or owned by a single entity or individual. Autonomous refers to freedom from certain jurisdictions or limitations. And an organisation is a group of people, um, organised around a common purpose. There. Sorted. See you next time.
But what does it actually mean to put these three terms next to each other? Well, it’s helpful to think about DAOs in terms of community organisation. They enable thousands of people around the globe to come together, make their own rules and decisions and the whole thing is encoded on a Blockchain.
In a world in which people are increasingly looking for people like themselves online, a DAO makes perfect sense. Like beards? Me too. Luckily for us there are umpteen digital communities we can make contact with and become part of that also like beards. Oh hell yeah. DAOs go one step further. They allow you to own a piece of that community. It’s not a million miles away from an NFT.
They allow you to own a piece of that community.
DAOs are built on smart contracts which establish the rules. Stakeholders are given voting rights and access is usually granted through ownership of a token.
What’s the point?
They’re pretty useful. As an Internet-native phenomenon, they solve a lot of the issues associated with traditional organisations. Instead of reliance on mutual trust between two or more human parties (especially shareholders), DAOs just rely on code. Said code is available to view publicly and can be tested multiple times before launch. Everything a DAO does post-launch is subject to community approval. No proposals are passed until a majority has reached agreement. It all sounds pretty utopian, doesn’t it?
DAOs have no hierarchy and any stakeholder can submit an idea for discussion. When internal disputes arise, they’re easily settled through a vote.
There are DAO charities accepting donations and memberships from all over the world. Group members can decide how best to spend money and organise fundraising events. DAO freelancer networks collate contractors who can pool their funds to pay for things like office spaces and software.
Bright Moments Gallery is a DAO that hosts NFT art galleries (imagine trying to explain that sentence to someone 10 years ago). They do live minting of NFTs and are pioneering the concept of bringing together multiple NFT galleries from around the world all under one DAO.
There really is a DAO for everything.
Where do they come from?
Bitcoin (BTC), with its programmed rules, autonomous function and consensus coordination, is thought to be the first proper DAO. And that’s not including The DAO, which launched in 2016 as a kind of precursor. It was designed to act as a venture capital fund and raised $150 million in Ethereum (ETH). Not bad going.
It was all going very smoothly until a hacker exploited a bug in the smart contracts and made off with $60 million worth of ETH.
After a lot of umm’ing and ahh’ing in the ETH community it was decided a ‘hard fork’ was the best response. The network’s history was rolled back to the time before the attack and the stolen funds were reallocated to a smart contract. But not before the ETH community was permanently splintered.
What does the future hold?
After DeFi and NFTs, it’s reasonable to assume that DAOs might be similarly bound for stardom. After all, they have the potential to completely change the way corporations are governed. Fans are even suggesting D2D cooperation could be the new B2B. DAOs can grow at an amazing rate and aren’t exclusionary. And we’re only just getting started.
they have the potential to completely change the way corporations are governed.