What Is DAO? Explained

DAO stands for Decentralized Autonomous Organization. It is a software that runs on a blockchain to offer its users a collective built-in model for management. It is an organization where rules are encoded as a computer program. And it is transparent, controlled by all its members, and has no interference from the government.

In a nutshell, DAOs are internet communities with bank account. It’s a group of people trying to do something with a shared fund that allows them to do that. It’s like giving a sub-Reddit a bank account, so they can do whatever they want. 

Problems DAOs Aim To Solve

People who believe in DAOs say that the way traditional companies work is bad for workers. There are 4 ways they justify themselves:

  • Misaligned incentives: You want to get paid as much as possible, but the company wants to pay you as little as possible. You are their margin. The less they can pay you, the more they can charge out for you, and the more profits the company ends up making.
  • Barriers to access: It’s hard to get into companies. You have to go through long interview processes and whatnot! And when you get in, it’s even harder to get out of the company. 
  • Bureaucracy: There is slow decision-making and lower morale in a traditional company. Due to hierarchy, it takes weeks for approvals, suggestions, and reviews to get done. And it is hard to get things done faster in such a company. 
  • No ownership: It’s hard to get wealthy on a salary. And when you work in a traditional company, you get no ownership of any asset or work you do. 

What DAOs Do?

DAOs fix all the problems mentioned above. It exists only to serve the interests of its members. 

  • Aligned incentives: Companies serve customers, DAOs serve their members to help them out in any way possible. DAOs won’t take away money from you like traditional companies.
  • Flexibility: In DAOs, people work like a lion and then rest as needed. And there is no need to ask for permission from anybody for that.
  • Autonomy: There are often few to no middlemen in the process. There is no bureaucracy, and quick-decision-making happens. 
  • Ownership: When you work with a DAO, you get ownership of your work.

For people in the crypto space, DAO is a pure form of democracy. But what does the future hold for DAOs? Some experts and analysts believe the organization will come to prominence, and perhaps it will even replace the traditionally structured businesses. 

Related Articles