What is a DAO and what is it for

Many people have heard of DAO, but not everyone knows what it is for and what benefits the community. A DAO is a decentralised, autonomous organisation and is a form of legal structure.

A DAO has no central governing body, so each member has one common goal and works hard to ensure that everything is done in the best interests of the entity.

The DAO in crypto has gained popularity thanks to crypto-enthusiasts and blockchain. The organisation operates on a bottom-up governance principle.

What is a DAO

As can be understood, the idea of creating a DAO came to the developers’ minds due to digital assets. As we know, cryptocurrency is decentralised. It turns out that crypto cannot be managed by one person or institution alone, just like a government or central bank. Instead, everything is distributed among a grid of computers. Digital assets typically use decentralised status for enhanced privacy and security that traditional currencies often lack.

Thus, decentralisation inspired a group of developers who decided to come up with the idea of a decentralised autonomous organisation.

The peculiarity of a DAO is that the organisation has no centralised authority. Everything is managed collectively by a group of leaders and participants.

The benefits of DAOs

There are certain reasons why a group of individuals or a company will want to use a DAO structure, to give an example of some of them:

  • Decentralisation. This is probably the main and most significant benefit. When a company or organisation needs to make a decision, usually one person (the CEO) or a small group of people (the board of directors) makes the decision and the rest of the organisation may not like their decision. In a DAO, this problem is solved by allowing a much larger number of users to make decisions.
  • Participation. Anyone who is somehow connected to the organisation can feel their importance and necessity. Every member of an entity has a voice and can influence the decision collectively.
  • Publicity. If a company is in a DAO, every vote goes on the blockchain where it becomes public. This allows users to make a decision as they see fit. In addition, publicity forces members to consider their actions, as good decisions are publicly available and can benefit voters.
  • Community. The DAO concept encourages people from all over the world to come together to build a unified vision. With just an internet connection, token holders interact with their ‘peers’ wherever they live.

Among other things, different DAOs have their own tokens. Today the most popular among them is Uniswap.

In the crypto industry, DAOs are growing rapidly and attracting quite a bit of attention. In the spring of 2021, the state of Wyoming released a bill that makes it now possible to register a DAO and receive the same rights as an LLC.