Insights

If you’ve been anywhere near web3, you’ve probably heard the term DAO, or decentralized autonomous organization. A DAO is an organization whose operations are automated and governed by one or more smart contracts. DAO’s have treasuries and can own digital property, just like an organization in real life. Members of a DAO are those who hold that DAO’s token, and members are granted voting rights and potentially other privileges, depending on the DAO. Buying and holding a DAO’s token is often likened to being a shareholder in a company, and while that is true, there are so many other ways the structure of a DAO can be utilized. 

What is the history of DAOs?

Ideas similar to the concept of a DAO have existed for a few decades–early thinkers whose research formed the foundation for blockchain technology were interested in privacy, cyber security, and decentralization. But the modern concept of a DAO first began to pick up traction after the launch of Bitcoin, according to the article “Decentralized Autonomous Organization,” published by the Internet Policy Review. Online, those interested in decentralized finance began talking about “decentralized autonomous corporations,” and specifically, Vitalik Buterin, one of the founders of Ethereum and someone who was very involved in Bitcoin communities, discussed them.

The decentralized autonomous corporation was originally conceived as a new means of corporate governance. Theoretically, these corporations could exist without corruption because their operations would be automated – eliminating the need for middlemen – and because their transactions would be publicly auditable on the blockchain. From there, the idea evolved. 

"A $Rare Type of Bull" by Piano and the Fox on SuperRare

With the launch of Ethereum and more widespread adoption of smart contracts, the structure of a decentralized autonomous corporation began being applied to organizations that were not intended to behave as corporations. The name decentralized autonomous organization came into usage to reflect the more expansive possibilities of decentralized governance on-chain.  

One of the earliest DAOs on Ethereum failed, resulting in a permanent change to the Ethereum blockchain, but efforts since have been successful.

How are DAOs used?

"Block 1920000 - The DAO fork" by hexc6 on SuperRare

DAOs have become ways for projects, artists, and platforms to reward their fans and communities. They’ve become ways to govern communities without the presence of a centralized seat of power. DAOs have allowed people to raise and distribute funds for good causes, like Ukraine DAO and Iran DAO, and for people to even decentralize the concept of art collection, creation, and ownership. 

The possibilities for future use cases are near endless. In any situation where a group of people need to organize around a set of ideas or goals, a DAO can be used to automated decision making processes through smart contracts, lowering overhead costs and reducing the risk of corruption.