What is a DAO?
The acronym DAO, from the English Decentralized Autonomous Organization , refers to the Decentralized Autonomous Organizations. Basically, these are organisms that are totally controlled by computational algorithms. These algorithms are also known as smart contracts or smart contracts, which are the ones that determine the rules regarding how each party involved in the DAO must cooperate.
We are going to break down this concept by terms to better understand what it implies.
Organization: association of people regulated by a set of rules based on
of certain purposes.
Autonomous: who works on their own, independently of external agents.
Decentralized: it is not under the parameters of a central authority; functions and decision-making are dispersed and each of the members has the power to cast their vote.
DAO Development Services Thus, we can define a DAO as the system based on blockchain technology that works together to fulfill a mission; people have the ability to coordinate and govern themselves and have a voice and a vote in all decisions that concern the organization.
DAOs represent an important technological innovation. Being made up of pieces of computer code (also called digital language), they open the door to a new way of cooperation, in which decision-making can be managed by humans, machines and other smart contracts.
In this way, they offer the possibility of organizing the parts and decisions of a company in a more transparent, immutable, autonomous and secure way.
How does a DAO work?
DAOs have a series of mechanisms that guarantee their operation at all times. These mechanisms are the following:
Smart contracts . This is perhaps the most important characteristic of decentralized organizations. The smart contract is the one that establishes all the rules of the DAO, and also takes care of holding the treasury of the group. DAO Platform Development These rules can only be changed after a vote. Whenever someone wants to do something that does not comply with these rules or the logic of the code, the system will not allow it. These rules depend on a group that is the one that makes the decisions collectively.
Consensus protocol. This is what we mentioned earlier. No agent outside the group can modify the rules of that group. If an agent participates as an investor in these organizations, they will be able to participate in decision-making within that group.
Issuance of a token. This mechanism or means of exchange is what guarantees the economic sustainability of a DAO. This asset is the one that allows users the ability to have a voice and vote, and works as the mechanism of exchange and economic reward between the participants.
blockchain . It is the last mechanism that DAOs have and its purpose is to record everything that happens in the organization. Blockchain technology represents a chain of blocks that is configured as a distributed, shared and secure database. All information and transactions that occur within the decentralized organization are stored here.
These four elements work together to make the DAO function properly.
Practical example of a DAO
We can use different scenarios to show how a DAO could be used. In this case we are going to simulate a simple scenario: a family business. Put yourself in the situation that each member of the company has invested an amount necessary to start the company. Many times this can be a problem because one thinks that they can exercise control over another or creates controversy among the members of the organization.
To prevent these situations from happening, and so that each member of the company has the same power to make decisions and run the business, funding rules can be established with a DAO running on a blockchain like Ethereum. Through a smart contract, all members can deposit funds in the form of ethers or some other type of cryptocurrency or digital asset.
The funds would not be in the hands of a single person, but would belong to all the investors and somehow, they would be in the hands of no one. The smart contract locks them in, and only after collective decision-making could those funds be accessed. In this way they remain visible transparently, but no one can access them without prior consent.
As new expenses appear, new requests would be generated, and a budget would be decided among all the investors. All decisions that directly affect the company are established democratically, without external intermediaries or State authorities.
Although they have been created a few years ago, DAOs are becoming a technological tool that many already see as the future revolution that is yet to come. In this scenario where all the activities of society are managed by an external or state authority, decentralized organizations are seen as the final way in which people can have control over their wealth.
