UNDERSTAND HOW UPBOX WORKS ACCESS UP ACADEMY
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WHAT IS A DECENTRALIZED AUTONOMOUS ORGANIZATION (DAO)?
A Decentralized Autonomous Organization (DAO) is an entity in which all members participate in decision-making, as there is no central authority. Although DAOs are often underpinned by blockchain technology and are generally secure, all online activity carries some risks. Learn more about DAOs, including their benefits and drawbacks. Then get a complete security app to protect your digital life, like the METAMASK WEB3 wallet.
WHAT IS THE MEANING OF DAO?
DAO stands for decentralized autonomous organization. A DAO decentralizes management processes using smart contracts and giving each member of the organization, according to particular rules, a vote on how it is managed. All votes are recorded on the blockchain, ensuring transparency. DAOs are often mentioned in the context of cryptocurrencies, but many different types of organizations could function as DAOs in the future.
Another name for a DAO is DAC (decentralized autonomous community). And these two types of organizations are different from distributed autonomous organizations, despite the similarity between the names.
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NO CENTRALIZED LEGAL ENTITIES (DECENTRALIZATION).
There is no organization or human authority involved in managing a DAO. The DAO operates on its own, so no member can interfere in the decision-making process. DAOs can only function according to the content of smart contracts, which are voted on by all members. This makes the DAO more democratic and, in theory, less likely to be corrupt than a conventional, centralized organization.
HOW IS A DAO FORMED?
Opening a digital DAO is much more complicated than writing a paper contract. To automate and apply smart contracts globally, a complete digital infrastructure needs to be created, funded and deployed on a blockchain. Below are the three essential steps required to open an online DAO:
SMART CONTRACT
FUNDRAISING
IMPLANTATION
SMART CONTRACT
To create a smart contract, a developer (or group of developers) creates one (or more) smart contracts that will govern the DAO. The smart contract contains the rules and conditions that define how the DAO will function with regards to decision-making, voting, and resource distribution.
FUNDRAISING
After the smart contract is created, the DAO needs to raise funds. Typically, this is done through the sale of tokens, which represent participation in the DAO. Members can buy and sell these tokens on cryptocurrency exchanges. These tokens can be used to vote on proposals and decisions within the DAO.
IMPLANTATION
After the smart contract and fundraising are completed, the DAO is deployed on the blockchain. It is at this moment that the DAO comes into “operation”. Interested parties can now register with the DAO, make transactions, participate in projects and make decisions about the organization.
