whats a DAO?

DAO stands for Decentralized Autonomous Organization. It sound self-explanatory, and it is – mostly.

To understand DAOs better, you need a little background into cryptocurrency first . One of the important properties of cryptocurrencies is their decentralized nature. This is an important benefit because anyone with internet access can own any amount of tokens on any chain they wish. Bitcoin was the original, but so many others have innovated on top of Satoshi’s original design.

Ethereum was an important milestone in blockchain development because of its ability to execute software instructions in a virtual machine during the execution of a token transfer. This is important because it now means that transactions aren’t just coins moving between wallets. They can now include complex instructions like looking up spot prices, communicating with oracles, or anything else that engineers wish to code in. This broader concept of programmable transactions is now known as “programmable money”.

In 2016, developers took this programmable money idea and gave birth to a new construct: programmable organizations. 

So that’s what a DAO essentially is: an organization that functions and exists using software. I say usually, because in a broader sense, DAOs are not a new really a new idea. They already exist in a somewhat diluted form in virtual reality and computer games where people join factions and work towards a common goal. 

Using blockchain to create them is, however, new. 

Most DAOs require members to own their native token. This makes sense as you need some underlying transaction system that everyone participates with. Participation often means letting members vote on organizational change and the direction of the DAO. Fractional ownership (eg: NFTs) is one example where a DAO makes perfect sense.

For some organizational challenges, DAOs are great. They are one more step toward slaying moloch. A lot of the activities which normally come with friction inside organizations – voting, decision making, asset ownership, etc – are fully automated thanks to DAOs and the blockchain contracts they are built on. 

You can imagine that almost any group of people could form a DAO, and that’s actually the case. It’s essentially zero cost to set one up, depending on which blockchain you choose to create it on (ETH is known for high gas fees). You often don’t require any identity to participate in them either. All you need to do is own their native token – often through purchase.

There are so many different types of DAOs and innovation is just getting started. 

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