What is a Decentralized Autonomous Organization (DAO)?

“All animals are equal, but some are more equal.” An excerpt from George Orwell’s 1945 book Animal Farm.

To put it briefly for those who haven’t read it, the animals on a farm rise up and take over the management from the people and write seven commandments on the wall. With the manipulations of the pigs, something new always comes to the end of these orders. Like the quote above. Originally, it was written that all animals are equal.

Of course, my purpose is not to write a book summary. The reason I’m quoting this book is because in every community an elite minority (or a single person) somehow comes to power and governs in their own interests. When the history of humanity is examined, we can see the evolution of the forms of states. From absolute to constitutionalism and from there to republic.

In the past, the people living within the borders of the state were seen as the subjects of the king. Later, the idea that the people also had a right to govern came to the fore. The king’s unlimited powers had to be curtailed because he could not be held accountable for his decisions.

Thus, the concept of parliament emerged. The powers of the king were limited by the decisions taken by the representatives of the people. Then the republic came to the fore as the most sophisticated form of state. What I am trying to explain using the state example is that every organization (state, company, association, etc.) has a form and a form of management.

In today’s world, the democratic management style is at the forefront. The equal and liberal participation of the individuals forming the organization in the management is counted as the success of the organization. Why is that? Because the decisions taken by a single person should be audited, overseen and determined how much the organization protects its interests. Otherwise, it will be inevitable to put their own interests first.

Today, the form of a company is legally determined. Like a limited liability company, a joint stock company. Many things, such as the extent to which the partners of the company will take part in the management, and the liabilities arising from the debts arising, are subject to regulations.

The management of the company is left to the general assembly or the board of directors. A partner or shareholder determined by these boards manages the company on behalf of the board. Of course, the management is audited by some bodies, but the success of this person is seen as the success of the company, and his failure as the failure of the company.

Blockchain technology also challenges traditional organizational management by making these traditional management mechanisms democratic and egalitarian. Some will no longer be equal. How Does?

What is DAO?

DAO means a Decentralized Autonomous Organization that conducts its transactions through software in a more liberal and democratic way. The proof of this software is the blockchain. In other words, it means that any organization that operates on the blockchain is controlled by voting only by people within the organization, without being under the control of a specific manager, board of directors or institution. Of course, these people can obtain voting rights or management rights by holding a membership card, NFT or token determined by the organization.

Why is DAO Important?

As I explained in the introductory part of my article, anyone holding the shares of a company is not given the right to manage and direct the company due to some legal procedures. This right is generally vested in the board of directors or a CEO designated by the owner of the company.

Just like this, even the site you live in is managed by the site administrator and is subject to a certain legal regulation. The opinions of individuals are not so important. The main problem in such systems is that the decisions taken are open to manipulation, that is, they are directed towards personal interests.

This is where the importance of DAO comes into play. Since the DAO is not dependent on any legal norms or human factors, it can be said that the votes cast with the demonstrability of the blockchain prevent personal interests or fraud.

How is the DAO Administered?

The main idea is to create a secure voting system that is not controlled by any authority other than its own members. Thus, the organizational structure and suggestions for future projects can be created by the community members.

The basic rules of the community are written by the developers through smart contracts. Contracts written on the blockchain are stored indefinitely. NFT or tokens are used to determine an individual’s voting rights. These can be minted, purchased or airdropped.

How is the DAO Funded?

Funding strategy may vary depending on the purpose and structure of the DAO. NFT can be minted or sold. Or tokens can be sold for fiat or cryptocurrencies on exchanges. Resources can be raised by selling secondary items such as NFT badges. Since the people holding the NFT and tokens of the DAO will have a share in the events organized by the organization, everyone will gain.

The comments I get after giving this information are generally as follows; So how do these organizations arise? Who is preparing the roadmap? How will he manage himself? If there is a referrer, how is it autonomous? To answer such questions, it is necessary to know for what purpose a DAO was established.

Because project developers set the goals they want to achieve and they commit to have a say in management as much as others. They lay out their roadmap and leave the rest to smart contracts. Other individuals who will take part in this organization, by conducting project research, a consensus is achieved and they can direct the course of the project with their votes, depending on whether the project has tokens.

It should be noted that DAO is not a new phenomenon in the blockchain. As those interested in the subject know, the emergence of DAOs dates back to 2016 (The DAO). But the DAO economy and the diversity of projects have become more efficient thanks to DeFi. There are authors who see DAO as the governance mechanism of the future. In this respect, I am of the opinion that DAOs will be a rising trend.

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