Understanding Decentralized Autonomous Organizations (DAOs)
With the widespread adoption of blockchain technology, a new type of organization has gained popularity known as a Decentralized Autonomous Organization (DAO).
A DAO is a company or organization governed in a decentralized manner through smart contracts on a blockchain.
The fundamental idea behind DAOs is to allow a large community of contributors to participate in the organization’s governance and future development.
Decentralized Decision-Making
DAOs operate through a combination of smart contracts that give participants an equal say in decision-making processes within the organization.
Community stakeholders make decisions regarding the allocation of funding and resources.
For a decision to be accepted, it requires consensus among a percentage of the community.
This consensus is achieved through a decentralized, distributed blockchain, and each DAO determines the required percentage for decision approval.
Ethereum Smart Contracts
While Bitcoin was initially seen as a project that approached the concept of a DAO, the introduction of the Ethereum blockchain with its smart contract capabilities propelled the development of DAOs and brought them closer to the goal of complete transparency and community governance.
Evolving Landscape
Decentralized autonomous organizations are still in the early stages of development, representing a relatively new phenomenon in the business world.
It’s important to note that DAOs do not create products or develop code or hardware.
However, DAOs can easily engage contractors to perform these services once the community consensus approves a hiring contract.
Exploring the Synergy
Decentralized applications (DApps) play a significant role within DAO activities.
DApps are software products developed using smart contracts, and DAOs can be considered a form of decentralized application.
While some DApps focus on money management functions, DAOs serve as decentralized platforms for communal decision-making.