DAO for dummies
Vatalik Buterin , one of the co-founders of Ethereum (ETH) defines DAO as : Virtual entity that has a certain set of members or shareholders who have the right to spend their entity’s fund and modify its code.
DAO’s (Decentralised Autonomous Organization) are being used for many purposes as an investment, charitable trust, fund-raising , or buying NFT’s without intermediaries. A good example could be; DAO can receive donations from across the world and the members have the full right to decide how their funds could be spent.
A simpler way to understand DAO is breaking into two parts -
DAO is a community — The first premise of DAO is building a community. When you join a DAO, it means that you join a community or organisation that uses the DAO based software to coordinate, make decisions and agree over an idea or decision.
DAO is a software — Another important aspect of a DAO is the use of smart contracts, to facilitate decentralised group decision making. There is no central point of control and members are allowed to join in by voting , using the DAO software.
Start with the Why
With all the hierarchy structure and centralised control which has time and again been a major hurdle in the decentralised ecosystem, limiting the growth of organisations and preventing the co-workers/ subordinates from feeling like part of a team. This is why we have seen an increase in demand of a decentralised organisation asupporting the community. A question to yourself could be -
How would you feel being a part of your organisation’s governance?
Should this not make you feel more important and valued within your organisation?
One of the most valuable advantages of DAOs is that every action a DAO takes after being launched needs to be approved by the community, making it very transparent ( verifiable on a ledger through a public blockchain) . Absence of hierarchy indicates that any stakeholder is capable of coming up with an innovative idea that the entire group will consider and improve upon. Any disputes can be effortlessly cracked through its voting system.
DAOs have a democratised organisation , meaning : all the members of a DAO need to vote for any changes to be implemented. The funding of DAOs is mainly based on crowdfunding that issues tokens. The governance of DAOs is based on community and its operations are fully transparent and global.
Since everyone shares the risk in the group, each one has a vested interest in making sure it operates as efficiently and ethically as possible.
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