What is a DAO?
If you’re new to crypto and you’re looking to get more involved, then you’ve probably started to explore the world of DAOs. If you’ve been in crypto for a while, you’ve probably joined and contributed to a few DAOs. So let’s all take a step back and make sure we’re all on the same page here. What exactly is a DAO?
We all know it stands for “decentralized autonomous organization”, but , beyond that there it gets murky. Why is that? Because it’s a broad tool and it’s really new.
History of DAOs
As with all things crypto, it basically started with Bitcoin. Although most people will never call Bitcoin a DAO, the network itself is run and governed by consensus on-chain and thus could be thought of as the original DAO. However, many people will consider “The DAO” the first true DAO. It was launched in 2016 and eventually led to a massive hack and subsequent chain split between ETH and ETC.
However unfortunate the outcome was for “The DAO”, it was the genesis of a revolutionary new way for people to work and organize. “The DAO” raised $150m in ETH from 11,000 people with the intent of pooling the funds and allowing the members to pick how the funds would be dispersed. Basically, like a big on-chain VC funding mechanism.
These primitives to this new organizational structure have evolved quite significantly since those early days. There are now a plethora of tools, guides, and other resources to help you along your journey now. However far the ecosystem has advanced, the general premise of The DAO continues to remain the same.
DAO — Decentralized Autonomous Organization
Let’s break it down as the acronym can be a little misleading here. First, “Decentralized” is very clear and it truly means that the organization is decentralized. This is done through some form of token distribution, which is used to incentivize the members of the organization. This decentralization allows for all kinds of really cool network effects and is what many consider to be so revolutionary about the concept.
Then, “Autonomous” is thrown in there and many people can get somewhat confused. A DAO isn’t truly autonomous as the name would imply. A DAO isn’t a button that you just push and it magically runs. A DAO requires significant amounts of human and external inputs on a continual basis to keep it running. In fact, a DAO is really only as strong as the community that supports it. Autonomous is used more so in that the organization autonomously exists on-chain and isn’t controlled by a central entity.
Lastly, “Organization” can also be somewhat confusing. Yes, most DAOs would like to be organized and work in an efficient manner. However, don’t go into a DAO expecting an organizational structure that most people are used to. Whereas traditional organizations tend to be hierarchical and permissioned, DAOs tend to be horizontal and un-permissioned. Don’t expect to have managers and bosses in a DAO, rather expect to have contributors and members.
Why DAO
The revolutionary aspect of DAOs is that it’s a new organizational method for humans to interact together on a much larger scale than traditional organizations. The flat horizontal organizational structure, along with permissionless accessibility, have very interesting advantages.
The horizontal organizational structure means that there are more nodes within the organizational network that can produce, interact, and ultimately drive value. This network effect should drastically increase the comparative potential output of DAOs. As any member can come up with the next great idea and/or push forward the next great initiative. Truly the leaders are the ones who know what to do next.
The permissionless accessibility of DAOs mean that members can instantly gain access to the DAO and start contributing in a wide array of fashions. The new member can join just to look around or they can become a partial investor/owner. The new member could start contributing immediately in whatever fashion they think could help the DAO. This allows DAOs to easily onboard new members and build communities much faster than traditional organizations.
So why should you join a DAO? Because it’s a more scalable version of traditional organizations. They inherently work for their members as the members are the owners. They have unlimited growth potential because they aren’t constrained like traditional organizations. Lastly, because they’re exciting. They’re at the forefront of a new technological and organizational revolution that is literally redefining the way people work.
DAOs are the future of work, get on board.