Decentralized Autonomous Organization (DAO)
A DAO, or Decentralized Autonomous Organization, is an organization represented by rules encoded as a computer program that is transparent, controlled by organization members, and not influenced by a central authority. DAOs leverage blockchain technology to facilitate governance and decision-making in a decentralized manner.
What is a DAO?
DAOs operate on smart contracts, allowing for automated decision-making processes. Members of a DAO typically hold tokens that grant them voting rights, enabling them to influence proposals and changes within the organization. These organizations can serve various purposes, such as funding projects, managing assets, or creating decentralized applications.
How Does a DAO Work?
The functioning of a DAO can be summarized in several steps:
Formation: A DAO is created by developing smart contracts that define its rules, governance structure, and objectives.
Token Distribution: Members receive tokens that represent their stake in the organization and grant them voting rights.
Proposal System: Members can submit proposals for changes or initiatives within the DAO, which are then voted on by token holders.
Execution: If a proposal receives sufficient votes, the smart contract automatically executes the proposed changes, ensuring a transparent and trustless process.