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Decentralized Autonomous Organization (DAO)
Decentralized Autonomous Organization (DAO)

A new type of organization for a new paradigm. Learn more about it

belo avatar
Written by belo
Updated over a week ago

Blockchain technology has arrived to put an end to intermediaries. A fundamental characteristic of this type of network is that there is no need for third parties to rely on when making transactions.

But is this unique to Bitcoin?

Absolutely not. The monetary application of blockchain is only one of many possible functions. Blockchains make it possible to establish new governance mechanisms, so that it is possible to ensure decision-making in organizations without central authority or hierarchy.

Decentralized Autonomous Organizations (DAO)

Coordinating the efforts of multiple people and institutions around a project or organization was not possible without knowing each other or establishing some kind of trust among its members. This changes with the emergence of DAOs.

A Decentralized Autonomous Organization (DAO) is an organization that has the ability to function autonomously, devoid of any central authority. Its processes are governed by smart contracts.

The rules governing its activity are decided through voting by stakeholders and are written in open source software. Usually, by holding a token, users have access to make decisions and vote on proposals. It is an incentive scheme that seeks to align the interests of the organization and its members at the same time, solving the coordination problem in the absence of authority or hierarchical structure.

A DAO does not belong to one jurisdiction or another. Its decentralized nature and autonomous operation makes it possible for it to exist across borders.

Let's think about it with Bitcoin, for example....

Bitcoin has preset rules, established in its open source software. Its operation does not depend on any state, company or central authority, it is autonomous. Coordination occurs through the consensus of the network nodes, which verify the validity of transactions and can make proposals for improvements to the protocol.

With the definition we have given and the characteristics of Bitcoin, we could classify it as the first fully functional DAO.

Currently, there are thousands of projects that work with this modality. The purposes are varied, as well as the level of autonomy and decentralization of each of them.

One of the most popular is MakerDAO, in charge of Maker governance.

Maker is a protocol that runs on top of the Ethereum network and allows the issuance of DAI, a dollar-linked stablecoin. The governance of the protocol is left in the hands of the MKR token holders, who can make relevant decisions around its operation, such as the level of collateralization behind the stablecoin, for example.

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