The ABCs of DAOs: What is a Decentralized Autonomous Organization?

Seeing headlines that investment in the Decentralized Autonomous Organization (DAO) world has increased by almost 30% in a single month is turning heads.

But what is a DAO? What is DAO business structure like? How can you get involved?

These are all excellent questions. Keep reading to find out the answers and get started with DAOs.

How Does Blockchain Work?

The blockchain is where DAOs live, but what is it? It’s, as the name says, a chain of blocks. Each block links to the previous one cryptographically and makes up part of the identity of the new block ahead of it. There are many kinds of blockchains, but Bitcoin and Ethereum are two of the most famous.

A DAO lives on an existing blockchain or one of its own origination. Some DAOs create fungible tokens while others create NFTs or non-fungible tokens.

One way to secure and operate DAOs on the blockchain is called blockchain biometrics. This helps to “automate” trust in a world where no one trusts anyone.

What Are NFTs?

NFTs are non-fungible tokens. This means that they can’t duplicate this token on the blockchain. This is the big difference between currency and non-currency.

For example, shells had value to our ancestors but some had more than others because not every shell is the same. Human beings are another example of something non-fungible but plentiful. There are many undisputed similarities between all humans, but we’re all individuals with our own strengths and weaknesses.

Applying this to the blockchain, many artists are using NFTs to generate millions of dollars in revenue like limited prints have been used for decades.

The Decentralized Autonomous Organization: What You Need to Know

Before we can talk about what a DAO is, we have to talk about what it needs.

  1. A set of rules to operate by
  2. A smart contract to encode them
  3. An outside force to perform tasks it can’t do by itself

These very basic rules allow it to operate without looping endlessly (and uselessly).

To have any real use, DAOs need funding. Sometimes this is done through ICOs, or through the investment of real estate or other assets. This gives power in the form of governance tokens — a right to vote.

Once the DAO meets these conditions, it becomes autonomous. The only voting occurs on where to spend its funds and how.

What Is a DAO?

DAO business structure is similar to a board of directors and shareholders. Directors have a majority share of the organization and receive more authority for directing the company in normal operation. Shareholders, though, also make decisions through mass decision-making on major issues.

A DAO’s code will determine what percentage of votes is required for a given action.

DAOs are an amazing tool for borrowing and lending, setting up charitable donations, and more — all without a middle-man or intermediary. This is why many people are jumping on the bandwagon.

DAOs take a given cryptocurrency in exchange for their own tokens. Those tokens have value on the open market but are generally used for investment or stability in an otherwise volatile market.

Others use it for actual institutional use to distribute authority in a company, rather than for economic advantage alone. Only our imaginations limit the possibilities of DAOs.

Now I Know My ABCs: Learning About DAOs

What do you think about the Decentralized Autonomous Organization? Most people find them confusing at first, then useful after they learn about them. Next, they realize that it’s the only real way to move forward as a society.

To move forward along with it, we have all the information you need on emerging tech, blockchain, and economic news. Keep browsing our articles to find out more!

Author: Razai