What is a DAO?

What is a DAO?#

In its most basic form, a DAO is a magic internet community that allows members to coordinate funds and resources. DAO stands for Decentralized Autonomous Organization. Without getting into the semantics of the term DAO, it is a community of people making decisions together in a decentralized manner, made autonomous through their software underpinnings. A DAO can be thought of as a tool that can be leveraged by communities and organizations of different types.

What is a DAO for?#

Whether referring to a group of people using DAO software, or the software itself, the purpose of the DAO is to facilitate coordination. The main point is the organization, and keeping that group of stakeholders moving toward a goal. DAO software works in service of this goal, and any group using the software is using it to reduce coordination failure. And DAO software is really good at reducing coordination failure.

DAOs are exceptional at doing this because they allow for collective ownership over the organization. Decision-making that was previously very difficult to maintain at scale is now achievable. This collective mindset can have a huge impact on everything from a club, to a corporation, and DAO software is responsible for solidifying collective ownership.

Let's break down what a DAO looks like 👇

A DAO is people#

At DAOhaus we are committed the concept of “community first” development, so naturally we’re going to start by talking about the people. DAO software works in service of communities of people, and DAOs give those communities coordination superpowers.

So, when you hear someone say “you should join a DAO” what they mean is that you should join a community, team, or project that is using DAO software to coordinate decisions.

A DAO is software#

DAO software uses Web3 smart contracts to facilitate decentralized decision making among a group of participants. At the core of a DAO is the organization’s bank, sometimes referred to as a treasury. The bank is a critical element to the DAO software stack, as it allows for members to comingle and co-manage funds in a semi-trustless manner.

Decisions need to be made about what to do with the money in the bank, but also about membership, and really anything the group wants to coordinate around. So, DAO software also has built in mechanisms to help with this. Members are voted in (or added when the DAO is launched) and the software allows members of a DAO (or even non-members) to submit proposals, and the other members to vote on those proposals.

It’s simple software, so all of this can be done with just a few clicks. And it’s Web3, so there is no central point of control for any of this software or the associated records of votes. So, when someone says “maybe you should use a DAO” what they mean is that your organization, or team, or project might benefit from the use of DAO software for coordination purposes.