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Video Blog: What is a DAO (decentralized autonomous organization)?

Eric Beans CEO of HapPhi, Inc. discusses DAOs and why they are important as well as the big news of the day in the world of crypto/blockchain.

Written by
June 15, 2022


https://youtu.be/gdqcSu4r_KQ


Video Blog:  What is a DAO (decentralized autonomous organization)


Image Source: FreeImages‍

A DAO stands for decentralized autonomous organization. It’s a bit like an artificial intelligence, but with the ability to own assets and take actions in its own interests. Think of it as a computer program with its own bank account, which can invest that money and manage its assets without any human input. A DAO can be built on top of other software, such as Ethereum or another blockchain platform. In this article, we explain what a DAO is, why it’s useful, and examples of real-world DAOs.



What is a DAO?

A DAO stands for decentralized autonomous organization. It’s a type of organization that’s self-governing, with no central authority or management team. Instead, the organization is run by computer code, operated by a network of users. A DAO can hold assets, like money, and operate in its own interests, like a company. This makes it a hybrid organization that has elements of a company, a consortium, and a crowd-sourced project. It’s autonomous because it can make decisions autonomously, and it’s decentralized because it has no single management team or authority.


Why are DAOs important?

DAOs represent a new way of managing organizations, with no central leadership or top-down hierarchy. This could potentially solve some of the problems that have plagued organizations since their inception. Problems like misaligned incentives, difficulty in raising and distributing resources, transparency, and trust between stakeholders. Because a DAO doesn’t have a central management structure, there’s no one person or team that can misappropriate funds or make decisions without the consent of the rest of the organization. Instead, it is governed by a set of rules that are programmed into the organization. There are also no barriers to entry in that anyone can join the DAO, either as a member, or as a contributor if they want to improve the organization. You don’t need permission to join or be invited to the organization. You can just join and contribute toward its goals.


How do DAOs work?

Since a DAO is a computer program, it doesn’t have its own employees. Rather, it operates with a network of contributors who are rewarded for their work with the organization. Contributors might include developers, designers, marketers, or even people who provide administrative services or manage the organization’s finances. Because the organization is decentralized, there’s no specific location where it operates. Instead, the contributors are likely to be scattered around the world. They’re connected to the organization over the internet using platforms like Slack, Trello, Github, and Telegram. There are no barriers to joining the DAO, so as a contribution, you could write articles, manage social media, write code, design graphics, or perform any other function. You would then be rewarded with tokens or coins that can be spent within the DAO.


Real-world examples of DAOs

There are a number of DAOs operating in real-life. Daoism is the earliest example of the concept, dating back to the 8th century. More recently, we’ve seen the rise of crypto-collectives or DAOs, which are organizations that run on the blockchain. They’re decentralized and autonomous, and use cryptocurrencies as a token of membership or value exchange. BITNATION - This is a DAO that creates a decentralized world government. Users can join this collective and issue ID cards, marriage certificates, and birth certificates. They can also create smart contracts and choose jurisdictions for disputes where they can’t be resolved. REIDAO - This DAO runs a real estate fund that allows anyone to invest in a real estate company. The organization will then use this money to purchase and manage a portfolio of commercial real estate. CIVIC - This is an identity verification DAO. It gives users a digital identity that can be shared across websites or used to verify their identity when accessing government services. You’re rewarded for your participation and contribution.


Limitations of DAOs

The advantages of a DAO are that it’s a completely decentralized organization that’s self-governing, with no central authority. There are no barriers to entry and anyone can join as a contributor. There’s no one person who can misappropriate funds or make decisions without consent. However, a DAO is also a computer program that can be hacked and controlled by a single person. Because everything is run by computer code, there’s no room for nuance or human error. If the program has a bug or you introduce malicious code, there’s nothing to stop the AI from operating in its own interests and taking actions counter to the interests of the organization. There’s also the risk that organizations can become too decentralized and lose focus as contributors work on their own projects, rather than the mission of the organization.


Key takeaways

A DAO is a decentralized autonomous organization. It’s a new organizational structure that doesn’t have a central management team or authority. Instead, it’s run by computer code, and has no barriers to entry for contributors. In a DAO, everything is run by computer code, and there’s no room for nuance or human error. There are risks with this, including the fact that organizations can become too decentralized and lose focus as contributors work on their own projects, rather than the mission of the organization. Despite these limitations, there are a number of real-world DAOs that are revolutionizing how we work together as humans.

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