What is a DAO?
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What is a DAO?
A DAO, or Decentralized Autonomous Organization, is an organization that is governed by rules encoded as computer programs called on a blockchain network. Here's how a DAO typically works:
Smart Contract Rules: The core of a DAO is its smart contract, which defines the organizational rules, decision-making processes, and how the DAO's funds can be spent. These rules are immutable and transparent on the blockchain.
Token-based Voting: DAOs often have a native cryptocurrency token that represents governance rights. Token holders can vote on proposals or decisions put forth by the DAO, with voting power proportional to the number of tokens held.
Proposal Submission: Anyone can typically submit proposals for the DAO to consider, such as changes to the DAO's code, funding requests, or other governance decisions.
Voting Period: Once a proposal is submitted, there is a predetermined voting period during which token holders can cast their votes.
Execution of Approved Proposals: If a proposal passes the voting threshold (e.g., a majority or of votes), the DAO's smart contract automatically executes the approved action or change.
Funding and Treasuries: DAOs can have a shared treasury funded by token sales, fees, or other revenue sources. Approved proposals can request funds from this treasury for projects, hiring, or other expenses.
Transparency and Immutability: All DAO activities, including proposals, votes, and financial transactions, are recorded on the blockchain, providing transparency and an immutable ledger.
The key principles of a DAO are decentralized governance, autonomous execution of rules through smart contracts, and transparency of operations on the blockchain. This allows for collective decision-making and management without a centralized authority, enabling new forms of decentralized organizations and collaboration.
If we boil intelligence down to the decisions it makes being a function of its knowledge and alignment, along with ensuring voting is as fast and frictionless as possible, we can see that a DAO can facilitate much more than the traditional use cases such as funding or protocol governance.