DAO stands for a decentralized autonomous organization. In a world where decisions are usually made by one party with its own agenda, DAOs represent a breath of fresh air and hope for a better way to organize a project, fund or community. They help create a trustful and equal environment where decisions are made considering the opinions of everyone involved.
How do DAOs actually work?
DAOs are built on a blockchain, where rules of the organization are embedded in open-source code created through smart contracts, making those rules transparent. Every change and action made by a DAO participant is recorded on a blockchain, naturally making it available to everyone to see.
Image: blockchainhub.net via Cointelegraph
But if smart contracts are not coded properly, they are prone to “malfunctioning” – technical bugs or being exploited by bad actors. So make sure, as a DAO, to pay extra special attention to how you set it up and how your smart contracts function, for you and the rest of your members!
To become a DAO member, a user would need to buy the project’s cryptocurrency, which automatically gives them voting rights. The amount of the assets, locked in a voting contract, bought and held predetermines the weight of the vote. The voters might also be rewarded with more cryptocurrency for participating in the decision.
What are some of the popular examples of DAOs?
DAOs are becoming more and more popular, especially with the Web3 applications being on the rise. Examples of DAOs include Unicorn DAO, a community of artists promoting LGBTQ and female equity, and Friends with Benefits, a group of creators collaborating “to collectively share the Web3 future.”
Here’s a great explanation of the DAO concept we thought you would enjoy by Whiteboard Crypto.