Learning series: What is DAO?

Spinel Labs

0xC11B

August 30th, 2022

Learning Series

If you want to contribute to the world of Web3, understand DAOs, and how they work, this post will help you.

1/ What is DAO?

Definition

A DAO stands for a Decentralized Autonomous Organization that is an entity structure in which members participate in the management and decision-making through proposals.

There is no head of a DAO; instead, power is distributed across members who have voting authority.

2/ Type of DAO

According to Messari, there are 9 common types of DAO:
-Collector
-Grants
-Impact
-Investment
-Media
-Product
-Protocol
-Service
-Social/Community

Each type of DAO has its own uniqueness. We will talk about this in another post.

3/ How a DAO works

DAOs use smart contracts to simplify their transfers without any third party. All DAOs are explicit and public, DAO could be imagined as a decentralized company without authority distribution.

Benefits of DAOs

There are several reasons why an entity or collective group of individuals may want to pursue a DAO structure. Some of the benefits of this form of management include:

-Decentralization

Decisions impacting the organization are made by a collection of individuals as opposed to a central authority that is often vastly outnumbered by their peers. A DAO can decentralize authority across a vastly larger range of users.

-Participation

Members within an entity may feel more empowered and connected to the entity when they have a direct say and voting power on all matters. These individuals may not have strong voting power, but a DAO encourages token holders to cast votes, burn tokens, or use their tokens in ways they think is best for the entity.

-Publicity

Within a DAO, votes are cast via blockchain and made publicly viewable. This requires users to act in ways they feel are best, as their vote and their decisions will be made publicly viewable. This incentivizes actions that will benefit voters' reputations and discourage acts against the community.

-Community

The concept of a DAO encourages people from all over the world to seamlessly come together to build a single vision. With just an internet connection, tokenholders can interact with other owners wherever they may live.