What is a DAO?

So, you click on this article, you are eagerly anticipating what a DAO is… and, I’m going to tell you. 

A DAO, or Decentralised Autonomous Organisation, is a management model used in the cryptocurrency community. The idea behind it is to establish an organisation that can function effectively without hierarchical management. 

No one explains this better than the CoinTelegraph:

Imagine a vending machine that not only takes money from you and gives you a snack in return but also uses that money to automatically re-order the goods. This machine also orders cleaning services and pays its rent all by itself. Moreover, as you put money into that machine, you and its other users have a say in what snacks it will order and how often should it be cleaned. It has no managers, all of those processes were pre-written into code.

Since Ethereum enabled smart contracts, DAOs have become part of the public realm. However, say an organisation wants DAO status? They will need to reach a standard, and they will need to follow steps. Steps include:

  1. A smart contract defines rules and standards that must be met and maintained
  2. The DAO enters a funding phase
  3. After funding, the DAO becomes fully autonomous
  4. All the rules and transactions within the DAO are automatically recorded in the blockchain

Because of this, you can be assured that DAOs are completely transparent, immutable and incorruptible.

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