What is a DAO in Crypto? (Decentralized Autonomous Organization)

What is a DAO? You probably know how a vending machine works

It acts as the middleman for your food cravings you pay the machine and it gives you whatever snack you bought this advanced technological box the vending machine still needs humans to run it though.

There needs to be humans who pay the electric bill there needs to be a human who checks it when it’s low then when it is low there needs to be someone who orders more of the product then after the product arrives someone still has to restock the machine and even more so someone has to collect the money and maybe replace some quarters.

So, even though this is a technological box designed to help people without needing a human it still requires humans. we are going to explain what a dao is how they work and we’re going to include a few examples of where they might be useful. Let’s dig in first off

What is a DAO ?

What is a DAO

Dao is an acronym that stands for decentralized autonomous organization this means it is roughly an organization run by code agreed upon by the people who started the dao smart contracts which if you don’t know what a smart contract is you should definitely read our article on it but smart contracts can do just about anything. If you’re smart enough to program them To do so this means instead of asking for a raise from your boss we’re trying to decide who to hire from a list of applicants a smart contract will simply do these tasks making the whole organization self-sustainable or autonomous.

For examples the vending machine example that we used during the intro if a vending machine was a dao then every part of the process where a human was needed would simply be replaced with code or at least code version of humans robots basically we would make sure that the vending machine could automatically check its own stock and when it was low we would make sure that it could send its server the information of what products needed restock then when the stock arrived a robot would restock the machine with a new product and at this point in time also take the cash out to deposit to a bank somewhere in reality this doesn’t seem possible.

but it is essentially how a dao works speaking of that do you know how big companies like apple or netflix or walmart they all have board meetings and at these board meetings shareholders of the companies will meet together and they get to vote and make decisions for the company and then the CEOS of this company get to make sure that the decisions are actually followed through using the chain of command in that company instead once a decision is made the code of a platform is changed. So that the entire company so to say is changed immediately.

Now the purpose of this is so that computers and code will perform much of the decisions and simple routine operations that a company like apple or netflix or walmart requires to function now you may be wondering code can’t improve itself and you’d be wrong but at least you’d be on the right track of where this article is going dao can continually improve and grow just like people because their shareholders can submit and then even vote on changes to them.

Usually in the world of crypto a dao may launch with a few million tokens every token is a vote and whoever holds the most tokens can have the largest votes this gives the tokens a price and it also gives them a use it also allows the dao to improve make changes and evolve as the world evolves.

Now this includes actually hiring voting on a salary and then technically even employing certain developers within the autonomous organization it would then just pay them with cryptocurrency.

In the case of a vending machine we can say if that vending machine made any profits it would redistribute all of those profits to the shareholders through its native dao token now there are many ways this could happen but any token holder would supposedly get an increase in value.

If the vending machine dial made a profit. so this potential profit along with voting rights makes holding a dao token much more valuable than any other useless token you might see on the subreddit crypto moonshots.

Benefits of DAO

Dao is trustless and this is probably the biggest benefit of a DAO in fact you do not need to trust any CEO or manager or leader with your decision making skills the program or the whole organization will continue no matter if a major developer stops working on the project or even if the funding goes away another

They cannot be shut down in the case of major corporations the CIA or the FBI or any major government service can technically step in and be like we’re shutting you down or even give us all the information you have on this guy and if you’re in the united states you’d be forced to comply in a dao the only way they could make this happen is if they had a very large amount of tokens and then submitted a proposal to be voted on and then went through the voting process fairly.

In other words a government cannot skip the line and

the last benefit of a dao is that it is open source daos are also open source which means that their code is out there for anyone to look at and even improve upon open source projects are usually much more reliable simply because other programmers can help the main developers find some bugs in their code and then even propose ways to fix them.

Downsides of DAO

Downsides of them the first downside is that they are vulnerable to attacks since anyone can look at the code it also means attackers can look at it if these attackers know intimately how the code works they can then reverse engineer the attacks and even test the code before deploying it to make sure that their code works. if it does the dao could be attacked.

Downside that we have found is that there’s no business secrets so research and development is usually corporate information that corporations have spent a lot of money and time on without any significant return.

Now they do this in hopes that one day it’ll pay off and the payoff will be big because no other company has their advantage.

In a dao though business secrets are

difficult to keep secret since the code

is all open source

and really anyone can look at how the

dao is set up so far

Few Real Life Example of Dao

  • Maker dao
  • Aragon
  • Metacartel
  • Gitcoin
  • Dash
  • The DAO

The DAO so now we’re gonna go over the story of the dao which we think is something that you should know probably the most important and most famous dao is one called The DAO the dao is a venture capitalist fund created in 2016 that was well known for its failure in fact around 20 000 investors pooled around $150 million into this project in short the account of the dao was actually hacked and $50 million worth of ethereum was lost due to the attackers.

Now this is actually why we have ethereum an ethereum classic. Ethereum classic is actually the original blockchain that still has the money hacked however developers took the blockchain realized that it wasn’t right for someone tosteal $50 million and then also realized they could make a new blockchain where the money was given back and this is how we have ethereum today.


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