Intro to DAOs
Decentralized Autonomous Organizations or DAO is a new form of organization that’s shaping up new groups, from pooling venture capital to charities.
DAOs are entities running under open-source code and self-executing contracts, which are designed to not have a central authority and is a flat-based organization composed of members and contributors.
They may have an executive team driving the org but the policies decided upon are largely dependent on its members.
If you cannot yet wrap around the terms surrounding DAOs, here’s a comparison from the Ethereum Foundation of how a traditional org and a DAO works.
| DAO | A traditional organization |
|---|---|
| Usually flat, and fully democratized. | Usually hierarchical. |
| Voting required by members for any changes to be implemented. | Depending on structure, changes can be demanded from a sole party, or voting may be offered. |
| Votes tallied, and outcome implemented automatically without trusted intermediary. | If voting allowed, votes are tallied internally, and outcome of voting must be handled manually. |
| Services offered are handled automatically in a decentralized manner (for example distribution of philanthropic funds). | Requires human handling, or centrally controlled automation, prone to manipulation. |
| All activity is transparent and fully public. | Activity is typically private, and limited to the public. |
History
The first DAO was deployed on 2016, roughly a few years after the Ethereum blockchain was launched.
It was supposed to be the largest crowdfunded project at that time, with hopes of investing to new apps and technology projects that will be created under Ethereum.
A vulnerability was found and the pooled funds was drained by a mysterious hacker and a dilemma has ensued to protect the funds of the users.
Will they revert the transactions of the network or will they go on and preserve its full history and code?
Most users voted to revert the process and thus a hard fork was initiated. The ethereum network has split into two chains, with the new network as the surviving chain and the old network as the Ethereum Classic.
The next generation of DAOs started with the framework from MolochDAO. The autonomous organization launched in 2019 to pool funds and automatically give grants to projects that align with Ethereum.
Fast forward to today, DAOs are essential in managing large open-source projects in crypto with billions of dollars in cryptoassets under management.
Key Features of DAOs
- Formed by the core members and contributors with a singular purpose
- Transparent code that runs the whole organization
- No single entity or person is in charge and is usually flat in the hierarchy
- Every activity can be viewed online and onchain
So what are the different types of DAOs and how do you govern them?