May 02, 2022 DAO's Explained

By Samuel Ancer

By Sam Ancer

If you’re looking at the Web3 space at all, you may be familiar with the term Decentralised Autonomous Organisation (DAO). 

For those of you who aren’t, or if you need a refresher, a DAO is a structure for institutions that focuses on a less hierarchical format, and instead is run by a collective. 

Instead of a board, the organisation is run by algorithms that are protected on the blockchain, and mostly run with the use of smart contracts.

Smart contracts are algorithms that function when certain conditions, that are already established, are met. These contracts are supported by blockchain tech, meaning there is complete transparency, while also removing the need for third parties.

In a DAO decisions are made by the collective, who vote, with voting power being determined by the amount of tokens owned by the party. 

Usually membership is determined by the stake owned in whatever crypto token that the DAO uses. These can either be purchased using real world money, or can be gained by doing meaningful work for the organisation. Some DAO’s will give away tokens in airdrops or provide tokens in order to headhunt developers that they want on their team.

DAO can operate in a variety of ways, and often develop their own internal economies. Some operate on a barter system, while others work through a gift economy. This usually depends on the organisation’s mission statement.

DAO’s largely operate within the Decentralised Finance (DeFi) space. They often represent the organisational and governance elements of a DeFi agreement.

The intriguing thing about DAO’s beyond just being a compelling way to operate an organisation, is that it can operate in a way that unites people on seemingly opposite ends of the political spectrum.

Many libertarians value DAO’s as they offer an unregulated, and therefore free, way to operate an organisation. Communists value DAO’s because it offers a way for workers to earn more of the value they generate, and it offers a way for organisations to be run by the collective, without the need for management.

In fact many DAO’s operate within the OpenSource space. The Open Source Software DAO is one such example, the goal is to reward Open Source developers and works with GitHub.

You can get any number of DAO’s that operate based on a specific goal, and because of their use of smart contracts and blockchain technology they can operate more transparently and faster than traditional organisations.

While it is still a new idea these organisations have been operating well so far and could in fact be the future in both business and politics.