What is a DAO?

By: Yash, Zeneca

A DAO, or Decentralized Autonomous Organization, is a new type of organization or group that runs on blockchain technology. It’s like a virtual club or company where members can make decisions together without a central authority, like a boss or president, in charge.

How traditional companies work

Traditional companies unleash innovation by making it possible for people to come together and contribute talent & capital to achieve a common goal.

Today, LLCs are the go-to option to start a new company. LLCs have completely changed the world, but it’s time to take it one step further. Most companies are:

• Hierarchical: A few people set the company vision and plan at the top.
• Restricted: Employees must follow orders – not much room for creativity.
• Exclusive: Must be hired to contribute in a meaningful way.

How are DAOs different?

A DAOs main purpose is to rally a group of people to achieve a shared goal using crypto native tools (e.g., smart contracts). Most DAOs are:

• Decentralized: No c-suite or hierarchical leadership.
• Autonomous: Smart contracts offload manual labor such as distributing capital.
• Organization: A group of people with a shared mission abides by a set of rules.

DAOs let people worldwide contribute to a project, pool funds, and build the next big thing.

DAOs have both advantages and disadvantages compared to companies:

• Advantages include letting more people contribute, participate in decisions, and own the upside, as well as radical transparency of funds (everything is usually conducted via a public blockchain).
  
  
• Disadvantages include having to coordinate a community in a decentralized manner. There’s a reason companies are formed in a hierarchical way, and it can be hard for DAOs to “get stuff done”. Nevertheless they represent an exciting alternative structure for companies and organizations.

In our next section, we’ll cover: “How does web3 help creators?”

Learn more:

• DAO learning path (ZenAcademy)
• A Beginner’s Guide to DAOs (Linda Xie)
• DAO Landscape (Cooper Turley)
• DAO 101 (Yash Bora)