- DAOs are Organizations that work on rules based on codes.
- They are owned and governed by their community members.
What is DAO?
DAO stands for (Decentralized Autonomous Organizations) and they do not have a single point of control. They are run by different people throughout the world. This eliminates the risk of censorship and concentration of power. Autonomous clearly means that its decisions are not influenced by any entity or person it has the right to make decisions in its favour. It is an organization because it is collectively owned by enthusiastic community members who support the functioning of the organization.
There is no CEO in DAO and there is no CFO because the rules of how the DAO will function are decided according to the blockchain-based rules. Which are embedded into the codes of the organization. Most of the DAOs have their own governance system which they follow to take important decisions regarding the organization. But one thing that is common in all the DAOs is that all the decisions are taken collectively by the voting system.
Difference Between DAO and a Traditional Organization
- Organizational Structure
The organizational structure of DAO is mostly flat which means there is no one above or below a person in the organization. This is very different from the traditional organizational structure because it follows a hierarchical structure. There are often different levels in these organizations for example the top level consists of the board of directors, CEO and CFOs who have all the power in the organization. While DAOs are flat and democratic.
- Decision making
All the major decision-making power in DAO rests in the hands of the community of DAO. These community participants are also the owner of the organization they not only contribute to the organization but can also take part in the governance. They are able to take part in the governance with the help of voting. To implement a major change in the organization voting is conducted which is transparent there are two ways of voting followed which are on-chain voting and off-chain voting. Decisions are taken on the basis of the results of this voting. Whereas in traditional organizations top authorities are responsible for all the decisions. They have the ultimate authority to make all the decisions.
The first funding is often provided by the founders of the organization later as the organization grows different financial institutions and investors provide funding for the further development of the business. So for traditional organizations, the main sources of funding are founders and investors. This is not the case with DAO as they get funding from the community members who buy the token of the organization which provides them funding. This is how the people become owners as well as workers of the organization.
DAOs are a crucial part of the decentralized ecosystem because most of the decentralized applications are built as DAOs. Currently, the majority of the DAOs are built on the Ethereum network. This is because it provides the best platform with all the facilities and required infrastructure. Another reason is that Ethereum has a huge user base. The top DAOs that are built on the Ethereum blockchain are Developer DAO, BuidlGuidl, VectorDAO, and Syndicate DAO.