DAOs and the DAO, these are organizations without a sole leader, run on computer code by smart contracts written onto the Ethereum blockchain. The code defines the rules and structure of the organization, meaning no few individuals need to have centralized control.
DAOs can be used for governance systems, commercial activity, charitable causes, or a whole host of other purposes.
What Is A DAO?
DAO stands for “Decentralized Autonomous Organization.” In simple terms, DAOs are organizations that exist entirely on a blockchain and are governed by its protocols. This allows for two or more entities in a DAO to interact with each other in a fully decentralized and automated fashion. Some uses for DAOs including sharing data, raising funds for investing, and voting — and there are certainly more.
Running A DAO With Ethereum
Ethereum DAOs operate similarly to the way crowdfunding works: when they are launched, their creators issue tokens to the public, and anybody who is interested can buy them as a shareholding investment. Those holding tokens can then suggest projects and ideas that other members can vote on as potential investments. They can also vote for ideas proposed by other token holders.
Being decentralized, DAOs have no digital or physical headquarters: no single server or office building serves as their hub. Instead, DAOs comprise a global network of nodes and members that all work together.
What’s unique about the DAO
Because they’re decentralized, Ethereum DAOs operate in a fully democratic, non-hierarchical fashion. No single member makes decisions on their own, and responsibilities are distributed across the entire system. Decentralization also means that there’s no single point of failure. Accordingly, the DAO network is very resistant to attacks.
Every member of a blockchain can see its current transactions, as well as its history, making DAOs inherently transparent. This helps to ensure that the features and operations specified for each DAO are implemented as they should be. For example, if the majority of token holders vote to fund a specific initiative, transparency helps to ensure that the project gets funded. Because every vote is publicly accounted for, attempts to manipulate or obfuscate the voting process are easily traceable.