What is a decentralized autonomous organization (DAO)?

What is a decentralized autonomous organization (DAO)?

By Jumble | Jumble | 3 May 2020

A decentralized autonomous organization (DAO) is an organization that operates by rules encoded in smart contracts and put on the blockchain. A DAO is decentralized because it is an online community. A DAO is an autonomous organization because:

  • the smart contracts are the set of rules that control the operations for the group members and their resources
  • the blockchain makes it immutable.

But with member consensus, the rules can be changed.

In a formal organization management structure, a central point monitors and coordinates the organization. But a DAO is decentralized, and all group members are equivalent. A DAO solves a problem from self-organized interactions between members. It uses a signaling system to help assemble the self-organized group. A good example of a signaling system is the tips a reader gives an author on Publish0x. This gives a signal to other readers about the author’s value.

A DAO uses its native token to show value for each group member. A DAO is a meritocratic system. The number of tokens a member has defines their status within the community. Members receive tokens based upon the value they have contributed as measured by the other members that they have interacted with.

To solve a problem or to make a decision about a new idea, members invest their tokens for those members and into their ideas. At the end, you receive a reward (that is more tokens) if the solution is correct or if the initiative is becomes good for the organization.

At this time, there are three companies that can help you assemble your DAO:

  1. Aragon
  2. Colony
  3. DAOstack

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