A DAO stands for Decentralized Autonomous Organization. It is a community-led entity that has no central governing body. It is an emerging form of the legal structure whose members share a common goal to act in the entity’s best interest.
DAO purpose and history 📖
DAOs became hugely famous because of their aim to diminish centralization in organizations. In traditional systems one or more people on the top only have the authority over all strategic decisions. In DAOs, authority is distributed among the people of the organization.
In 2016, a group of developers highly inspired by the concept of blockchain decentralization came up with the name Decentralized Autonomous Organization or DAO.
The concept was shared by BitShares founders in 2015 and then further refined by Ethereum’s Vitalik Buterin in 2016.
The first DAO was named ‘The DAO’. It was considered an anti-central authority organization created by developers for empowering employees and facilitating cryptocurrency transactions.
Popular DAOs and their tokens 🎫
To be a member of a DAO you have to purchase a token. The most famous example of DAO is MakerDAO and if you want to be a part of it you must have their token. Some other examples include:
- Curve DAO (CRV)
- BitDAO (BIT)
- Aragon (ANT)
The voting system in DAOs 🗳
DAOs work to decentralize decisions. These decisions are made when every member gets the right to vote with their DAO token.
This voting process is posted on the blockchain with pre-defined rules so that it can not be tampered with. Each user has to choose mutually-exclusive options. Voting power is distributed among token holders based on the number of tokens they hold.
For example, if User A holds 10 tokens and User B holds 5 tokens it means that User A will have twice the voting power of User B.
How to create a DAO ⛓
If you want to start a decentralized automonous organization of yours, there are some technical and non-technical steps to begin with and follow.
Non-technical steps
- Create a mission statement
- Build a community
- Discover governance
- Determine ownership
Technical steps
- Own an Ethereum Name Service domain
- Pay crypto for DAO creation
- Use your ENS domain to create and manage your decentralized autonomous organization
- Construct your DAOs rules, depending on the requirement of voting duration and percentage support
The best thing about DAOs is that they’re led by the community instead of a central authority. The community has a better chance to succeed when it takes informed decisions together, democratically. This can also lead to fewer conflicts that can be resolved by mutual understanding.
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