What Is DAO (Decentralized Autonomous Organization)?
Also known as: Decentralized Autonomous Organization
In short
A DAO (decentralized autonomous organization) is a blockchain-based form of organization whose rules are written into smart contracts and in which collective decisions are made not by central management but generally by a vote of governance token holders.
In a DAO, membership and voting rights are mostly determined by token ownership: one token usually means one vote, although some DAOs use delegation or different voting models. The organization's treasury is held in smart contracts, and funds can be spent only through accepted proposals. This way, decisions and spending can be tracked by anyone on the blockchain.
DAOs are set up for different purposes, from governing DeFi protocols to investment clubs, from donation communities to social groups. MakerDAO governs the risk parameters of the DAI stablecoin; Uniswap DAO governs the protocol treasury and fee settings through votes. The DAO, one of the early examples of the concept, was hit in 2016 by an attack in which a large amount of ETH was drained by exploiting a reentrancy vulnerability; this event led to Ethereum splitting in two through a hard fork and to the birth of Ethereum Classic.
The legal status of DAOs is unclear in many countries. Voter apathy, voting power concentrated among whales, and smart contract bugs are also known limitations of the model.
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