What is a DAO?
DAOs, a concept that was first used in 2013, are a new kind of organization that offer decentralization (or the lack of a central decision making and enforcing node), transparency, and autonomous governance. This means that governance of the organization is conducted by the agents in it rather than by a small, elect group.
- There is no centralized control or information point in the DAO: no individual shareholder or founder can single-handedly dictate the fate of the organization.
- Unless the DAO chooses so, there is no boss or managerial class and hierarchy is flexible.
- The members of the organization allocate resources by conducting a vote and curating different proposals for what work should be done.
- There is complete transparency of every transaction. DAOs run on top of public blockchains - every action the DAO performs leaves a trail that can be verified.
- The agents in the DAO make decisions about the direction and activities of the organization.
- There should be no directives from the “top” or “a central node of power and authority” or explicit coordination.
Bitcoin is the world's first DAO. The Bitcoin DAO doesn't own any shared resource itself - besides the ledger - but it operates in total autonomy and has many distributed agents including miners, users and nodes.
DAOs offer a new way to escape the centralization and top down hierarchy that has become suboptimal for governing organizations. In the digital age, organizations need speed, agility and transparency and to make decisions which leverage the power of collective intelligence and creativity. The use of Web3 and Dapps (like Alchemy) specifically built for DAOs mean that decentralization is built into the operating system of the organization. Agents in the DAO decide the protocols for decision-making directly on the blockchain, and rely on smart contracts — usually executed on the Ethereum network — to be the arbiter that tallies votes and carries out the decisions made by agents.
We’re still in the early stage of DAOs but thanks to the work of many new startups and individuals, we’re making progress on building out key the infrastructure needed to set up and run DAOs. Any DAO that forms today will be adding to the start of an important new operating system for future organizations.
Before we start with chapter one of this guide, let’s elaborate on several important concepts that DAOs can use to govern themselves, "Holographic consensus" and collaborative budgeting and funding.