What are DAOs? This is a common question and difficult to answer. Decentralized Autonomous Organizations (DAOs) are still relatively new and there is no single definition. This article will discuss the basics of Decentralized Autonomous Organisations (DAO), their potential future, and some examples of DAOs that have been successfully implemented across industries.

What are DAOs?

DAO stands for a digital entity that is independent and transparently operated using blockchain technology and smart contract. They can be used to run online voting systems or gambling platforms.

DAOs were initially envisioned as autonomous organizations without a central authority figure. Instead, smart contracts were ideally governed to run independent from human intervention. However, humans still have input in the contract writing process.

What is a DAO?

Effective DAOs are made up of three main components. The tooling available today revolves around these three elements.

  • Community: The collective that manages and controls the DAO. Tokens and/or NFTS can be used to represent voting rights within DAO.

  • Treasury:how a community coordinates and uses capital to reach its goals

  • Governance: How to regulate discussions, proposals and voting through an incentive structure

What are some examples?

There are many successful DAOs already out there. Some include its original meaning and purpose, while others have given it a new twist.

  • The LAO was created after the original investment DAO ran in to legal and technical problems. At the time of writing this article, more than 15,199 ETH had been raised for DAO. The LAO is a Delaware limited liability corporation where capital is pooled, and proceeds are shared in a similar manner to an investment syndicate and not a venture capital funds with a separate GP. The DAO’s attempt to define and legitimize what constitutes an investment DAO is fascinating.

  • AssangeDAO is a DAO with a single purpose that was created to raise ETH in support of Julian Assange’s defense fund. It also helps raise awareness and legal fees. They raised $53mn within a week with Vitalik Buterin, Ethereum’s chief cryptocurrency contributor. The unique DAO format has a single purpose and is very interesting due to its focus on one thing. If it fails, investors will get the funds back.

  • The One DAO is a group of anonymous people who bought the most expensive house in the world. The Club hosts parties, 21 rooms for DAO members and hosts crypto events throughout the year. This DAO’s venture into traditional real property assets is the most interesting part.

    What are the problems with DAOs

    There will always be problems with DAOs, as there are with any new technology. The current conversation is about centralization or decentralization in DAOs. This brings up the point that DAOs are not about tooling but the human organizational components. This also brings up the question of leadership. Leadership is still important to me.

    Discussions are ongoing about the optimal number and composition of DAO members. DAOs are a more flexible form of human capital engagement, so they should be open to more members. The theory is that a larger number of members will result in a greater network effect and capital-raising base for a DAO. However, members with too many members tend not to engage as much and there is a greater capital raising base for a DAO. One framework is the use Dunbar’s number, or approximately 150 members to drive the core.

    Why should I care?

    DAOs have been making an impact in the cryptospace and have caught the attention of many prominent figures. Here’s what experts have to say about DAOs, and how they will evolve in the future.

    • Aaron Wright : “DAOs, essentially, are subreddits with an account at a bank”

    • Yury Lifshits from SUPERDAO: “InvestmentDAOs are only 10% or less among all the new DAOs. The majority of new DAOs focus on building something and not investing/acquiring anything.”

    DAOs offer a better way for startups to be launched. Investors may be willing to pay higher valuations, token-holder-fueled marketing and crypto-based employment/payroll.

    What is the future for DAO?

    Although the future of DAOs remains uncertain, there is no doubt they can revolutionize business and governance. We can expect to see more DAOs created as more people learn about them and their benefits. It is important for individuals and businesses to think about how DAOs can be used in their particular sector or industry.