What is a DAO? How does DAOs work?


What is a DAO?


DAO is an acronym for Decentralized Autonomous Organization, which means decentralized autonomous organization. Very large, multifunctional structures may come to mind at first, but a DAO can also be a single-area, subject-oriented formation. DAO carries the meanings of the three words that make up its name. It is decentralized, not managed by a single center. It is autonomous, all processes within the DAO run automatically as pre-programmed and can continue to be developed. An organization has components that come together for a particular subject or purpose.


How does DAO Works? 


A DAO is an autonomous and transparent body governed by the community, not a central authority. Using smart contracts, the rules agreed by the community are applied, voting is done, and the codes containing all these rules and operations are publicly available. Unlike hierarchical structures, each member of the DAO can control the operating protocol at some level, and it is in the interest of individuals if all rules benefit the entire DAO. These rules, which will form the protocol of the DAO, are recorded in the blockchain.


The governance and financial model within the DAO are also written in this protocol. The DAO has a cryptocurrency or token that it owns or chooses to use. Users who hold the DAO's native token also have a say in the governance model based on the amount they own.


The rules of the DAO are determined by a core team of community members using smart contracts. These smart contracts lay out the basic framework in which the DAO will operate. It is highly visible, verifiable, and publicly auditable so any potential member can fully understand how the protocol will work at every step.


Once these rules are formally written on the blockchain, the next step is about funding: the DAO needs to figure out how to get funding and ensure governance. This is typically achieved through token issuance, where the protocol sells tokens to raise funds and replenish the DAO treasury. In exchange for their fiat, token holders are given certain voting rights, usually in proportion to the amount they hold. Once the funding is complete, the DAO is ready for deployment.


What Makes DAOs Different?


A DAO's financial transactions and rules are recorded on a blockchain. This eliminates the need to involve a third party in a financial transaction, simplifying these transactions through smart contracts. The robustness of a DAO is a smart contract. The smart contract represents the organization's rules and holds the Organization's repository. Because DAOs are transparent and open to everyone, no one can edit the rules without realizing it. By far we are used to companies with legal status, a DAO can work perfectly without it as it can be structured as a general partnership.


Compared to traditional companies, DAOs have a democratized organization. All members of a DAO must vote for any change to be implemented (depending on the company's structure) rather than changes implemented by a single party. Funding for DAOs is primarily based on token issuing crowdfunding. The management of DAOs is based on the community, while the management of traditional companies is mostly based on managers, the Board of Directors, and activist investors. etc. The operations of DAOs are completely transparent and global, while the operations of traditional companies are private, only the organization knows what is going on and is not always global.


Popular DAO Projects


DAOhaus: DAOhaus is a no-code platform to start and run DAOs. Community-owned and operated by the community. If you're interested in starting your own DAO or exploring the vibrant landscape, look no further.


MakerDAO: If you would like to contribute to the protocol that introduced DAI, the world's first neutral stablecoin, you can participate in governance by voting on changes to the Maker protocol.


RaidGuild: This service-based DAO originates from the MetaCartel network and is deeply entrenched in the Web3 world. If you want to present your developer, marketing, or design skills to the guild, they are looking for quality talent to keep killing product demons.


Proof Of Humanity: This Sybil-proof human registry uses social verification and Kleros courts to distribute Universal Basic Income (UBI) tokens to verified people on the chain.


Opolis: This member-owned digital employment cooperative offers self-employed benefits and shared services.


BanklessDAO: Interested in spreading the word Web3 and educating audiences through content? You may be interested in this media-centric DAO.


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