A decentralized autonomous organization (DAO) may not replace the traditional virtual currencies. However, they may disrupt the digital currency space. Their popularity is going up by leaps and bounds for launching businesses and Web3 projects.
Defining a DAO
It is an online entity that does not have a governing body or a leader to operate and exist. So, how do they run? People write codes on a blockchain, such as ETH (Ethereum) to run them. People using them operate and own them. The DAOS rewrite the guidelines on governance and leadership. The entity uses smart contracts to replace traditional hierarchical structures.
DAOs exist in various forms and have a common feature. They are decentralized, which means an individual does not decide the organization’s future. Instead, a collective group takes all decisions.
DAOs look promising because of their decentralization.
It means that there is no potential of manipulation or corruption by one entity in theory. Smart contracts instead of people implementing the organization’s terms and conditions. Thus, these organizations are efficient and flexible to change.
Operation of DAO
A decentralized autonomous organization is a set of smart contracts residing on the ETH blockchain. Such contracts interact with one another for forming the organization. Their code is such that any person can easily sue them.
Thus, its code is public so that anyone can see how it functions. Thus, transparency is one of its major features. As there is no central authority in a DAO, they are more efficient than traditional organizations. Another major feature of DAO is its autonomous nature, which means there is no need for any human intervention.