What is a DAO?

A DAO (Decentralized Autonomous Organization) is a community-led entity with no central authority, fully autonomous and transparent, governed by smart contracts.

A DAO is an organization where the management rules are encoded in smart contracts and executed automatically. Decisions are made by community voting using governance tokens.

Unlike traditional companies with a CEO and hierarchy, a DAO belongs to its members. All financial transactions are recorded on the blockchain and can be audited by anyone.

Examples: MakerDAO (manages the DAI stablecoin), Uniswap (governs the decentralized exchange), ConstitutionDAO (attempted to buy the US Constitution).

🧒 Explain Like I'm 5

Imagine a group of people who want to spend money together on a common goal (like buying a pizza or a company). Instead of trusting one person with the wallet, the money is in a transparent safe (blockchain). The safe only opens if the majority votes 'Yes'. That's a DAO.

❓ Frequently Asked Questions

How do I join a DAO?

Usually, you need to purchase the DAO's governance token, which gives you the right to vote on proposals.

Is a DAO legal?

The legal status of DAOs varies by jurisdiction. Some places (like Wyoming, USA) recognize them as legal entities, while in others, their status is undefined.

What are the advantages of DAOs over traditional organizations?

DAOs offer transparency (all votes/transactions on-chain), global accessibility (no geographic restrictions), reduced bureaucracy, and community ownership. However, they face challenges with legal recognition and coordination at scale.

🔗 Related Terms

Prerequisites:

📚 Sources

1. DAO - Ethereum.org 🏆 Primary

2. Decentralized autonomous organization - Wikipedia 📖 Tertiary

3. MakerDAO - Governance Documentation 🏆 Primary

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🧒 Explain Like I'm 5

❓ Frequently Asked Questions

🔗 Related Terms

📚 Sources

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